2018-CGS-29: Mains Revision-17: Secondary Sector of Economy

ZED being implemented by quality council of India ensures both capacity building and handholding of MSMEs together with assessment and rating of MSMEs in line with the global best practices and benchmarking. This can aid India in becoming part of the global supply chain and to emerge as manufacturing hub of the world. [THBL]

Champion Service Sectors

The Union Cabinet has approved the proposal of the Department of Commerce to give focused attention to 12 identified Champion Services Sectors for promoting their development and realizing their potential.

12 Champion sectors include

  • Information Technology & Information Technology enabled Services (IT & ITeS)
  • Tourism and Hospitality Services
  • Medical Value Travel
  • Transport and Logistics Services
  • Accounting and Finance Services
  • Audio Visual Services
  • Legal Services
  • Communication Services
  • Construction and Related Engineering Services,
  • Environmental Services
  • Financial Services
  • Education Services

Significance of the move

  • Ministries/Departments concerned with these sectors to utilize available draft sectoral plans to finalize and implement Action Plans for identified CSS.
  • Government will set up dedicated fund of Rs. 5000 crores to support initiatives for sectoral Action Plans of the Champion Sectors.
  • These Action Plans will develop vision for each of these identified Champion Sectors by year 2022 and enumerate steps that need to be taken to achieve the vision.
  • It will enhance competitiveness of country’s service sectors through implementation of focused and monitored Action Plans.
  • It will promote GDP growth, create more jobs and promote exports to global markets.
  • Competitive services sector will also add to competitiveness of manufacturing sector as well.

The share of India’s services sector in global services exports was 3.3% in 2015 compared to 3.1% in 2014. Based on this initiative, a goal of 4.2 % has been envisaged for 2022. Its share in Gross Value Added (GVA) was about 53% in 2015-16 (61 % including construction services).[ET]

Protectionism and Indian Enterprises

India must create more opportunities for its large population of young people to earn adequate incomes in a dignified way. It is the underlying aspiration of Make in India wherein the government aims to generate 100 million employments.

Does India need to adopt the strategy of protectionism?

It is said that Indian enterprises need protection to grow because

  • Countries like Japan, Taiwan, Korea, and China stimulated “make in” their countries with industrial policies that nurtured the growth of their own enterprises. They provided their enterprises with assistance and shielded them from stronger competitors abroad until they had built comparable strengths. This aided them in becoming part of global supply chain.
  • China joined Information Technology Agreement (ITA) only after its industries were able to compete effectively. This aided in building the capability of industries in China. ITA completely eliminates tariffs on IT products covered by the Agreement. As a result imports of electronic goods into India soared, especially from China, equaling imports of petroleum products.
  • There is a large gap between the capabilities India presently has and the capabilities it needs to compete with International players. India has huge gaps in the skills of its people. It also has large gaps in the management capabilities of its small enterprises.
  • Shields are easier to provide. The process of building enterprise capabilities which is time consuming task. Hence India must provide a protective shield for its enterprises.

Protectionism is not the way out for India:

  • But the LPG reforms were a necessity for India in 1991 due to balance of payment crisis. The path of globalisation which India has traversed is a one way road which India cannot reverse.
  • When viewed under larger sphere globalisation not protectionism is in the interests of India. Hence India must lay more emphasis on building capacity rather than striving for protectionism to build its industries.
  • India economy is led by service sector which demands breaking down of barriers. Therefore the Indian industrial sector must grow utilizing the benefits out of robust service sector and capacity building rather than route of protectionism. [Mint]

New classification of MSMEs

The union government has proposed the changes in the mechanism which provides for classification of MSMEs. The new mechanism will be based on the criteria of annual turnover rather than the current model of investments in plant and machineries.

New classification proposed

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