Flexible labour laws soon: PM

To boost the manufacturing sector's growth to 12%.

Prime Minister Manmohan Singh today said his government was making a big push in manufacturing, designed to boost the sector's growth to 12 per cent with the help of supportive macroeconomic environment including a flexible labour policy and lower transaction costs.

"I do recognise the need for greater labour market flexibility. We have been handicapped by a lack of political consensus, but I have not lost hope. We will be able to impart a measure of flexibility to the labour market," Singh said at the inauguration of Confederation of Indian Industry's two-day Annual Session in New Delhi.

In an interview to The McKinsey Quarterly last August, the Prime Minister had admitted that the "extreme rigidities" in India's labour market were not consistent with the country's goals.

Today's gathering, which included some of the biggest names of Indian industry, gave him a standing ovation.

The Prime Minister said he was aware of the high cost incurred by the industry in transactions with the government and that there was enormous scope for reduction.

Expressing confidence that the country could not only sustain the current economic growth of about 8 per cent but also "realistically" hope for 10 per cent, the Prime Minister said the development ought to be broad-based, with investments in social and economic infrastructure and human capabilities.

"Our endeavour will be to create a policy framework that can deliver an annual rate of growth of manufacturing output of at least 12 per cent," Singh said.

The Prime Minister has constituted a high-level committee on manufacturing, which he will chair, to review the implementation of policies formulated under the National Manufacturing Initiative.

The new committee, which includes senior ministers, will facilitate better coordination among various wings of the government and speed up decision-making.

Asia's third-largest economy, India's economy has grown at about 8 per cent for the last three years. According to estimates, it has grown at 8.1 per cent in 2005-06.

The manufacturing sector grew 9.5 per cent in February this year, against 8.8 per cent in January and 5.9 per cent in December last year. It accounts for almost 17 per cent of the economy. Of China's economy, manufacturing constitutes 40 per cent.

The Prime Minister's thrust on manufacturing stems from his belief that it can create jobs. "Only the manufacturing sector can provide the jobs that are required to absorb the vast numbers of our people who will need to move out of agriculture," Singh said.

In recent times, agriculture's share in India's gross domestic product has fallen from about 50 per cent in the 1950s to barely 20 per cent at present.

Singh said factories and production lines were becoming increasingly important to absorb the 12 million new job-seekers every year.

One of the keys to higher growth in manufacturing would be improved infrastructure. Referring to the progress in highways, airports and railway freight corridors, the Prime Minister said: "I assure you that by 2009, Indian infrastructure will have a new look and a new sense of dynamism."

He exhorted industry to focus on technical competencies and new technologies.

The development of manufacturing, he said, depended not only on the tax regime but also on infrastructure support, the pace of growth of the home market and creation of domestic skills.