India should look at outward investments in agriculture and rare earth elements to meet domestic demand as well as specific interventions for encouraging innovation-led manufacturing, revisiting regulations to reduce import dependence in certain sectors, states a study by Export Import Bank of India (Exim Bank).
According to the study, the recent performance of the manufacturing sector in India is indicative of an underlying inertia, with the share of manufacturing in India’s gross value added declining to 15.1 per cent in 2019-20, as compared to 18.4 per cent in 2010-11, despite growing consumption demand in the country.
This weakness in the domestic manufacturing sector has translated into greater dependence on imports to meet the growing domestic demand over the years, said Exim Bank.
According to Exim Bank study, in sectors like agriculture and rare earth elements, there is a greater need for strategies that enable collaborative arrangements and encourage outward investments into partner countries for meeting domestic requirements.
Securing rare earth elements is important for India to enter high-tech manufacturing.
In the case of technology-intensive sectors the strategies are focused on creating domestic capacities for reducing import dependence.
The study titled ‘Self-Reliant India: Approach and Strategic Sectors to Focus’, identifies select sectors for import substitution and enhancing domestic production including electronics, defence equipment, machinery, chemicals and allied sectors, pharmaceuticals, and select agricultural products.
The study has also included sectors such as auto components, and iron and steel where, though there is overall trade surplus for India, but in some sub-categories, there is trade deficit, particularly with China
These sectors account for more than $186 billion of imports by India, with a share of nearly 39 per cent in overall imports and 50 per cent in the non-oil imports by India.
Some of the other strategies suggested by the study include: specific interventions for encouraging innovation-led manufacturing, addressing deficiencies in tax and duty structures, encouraging joint ventures, revisiting government regulations and programmes, among others.