India needs to revive corporate sector investment, push critical reforms and remove infrastructural bottlenecks to boost industrial growth in the country, says the government's annual Economic Survey.
"In view of the ongoing industrial slowdown, the policy focus now needs to target key growth drivers in the short term. One of the crucial drivers can be revival of the private corporate sector investment," said the Economic Survey for 2013-14 tabled in Parliament on Wednesday.
It said the current industrial sector downturn presents an opportunity to push ahead with critical reforms and removal of infrastructure bottlenecks.
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"Industrial policy needs to focus on labour-intensive and resource-based manufacturing in informal sector to rejuvenate small businesses. In the medium term, challenge for the Indian manufacturing is to move from lower tech to higher tech sectors, from lower value-added to higher value added sectors and from lower productivity to higher productivity sectors," the Survey added.
It also said with the improvement in overall macroeconomic environment, industry is expected to revive and growth can accelerate gradually over the next two years.
"The near term industrial outlook is conditional on continued improvements in the policy environment and quick return to peak investment rate," the annual survey said.
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Industrial output as measured by the index of industrial production (IIP) remained almost flat in 2013-14 and declined 0.1 per cent compared with an expansion of 1.1 per cent in 2012-13.
The key reasons for poor performance have been contraction in mining activities and deceleration in manufacturing output.
Manufacturing, which constitutes over 75 per cent of the index, contracted 0.8 per cent compared with 1.3 per cent growth previously. Similarly, the mining output during 2013-14 shrank 0.8 per cent compared with a decline of 2.3 per cent in 2012-13.
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Considerable deceleration in investment particularly by the private corporate sector during 2011-12 and 2012-13 has led to the poor performance of these two sectors.
During 2013-14, India had received FDI worth $36.4 billion. Out of this, the net FDI inflows were $21.6 billion.
Further, the survey added that in order to boost manufacturing sector, the government has already announced setting up of 16 national investment and manufacturing zones (NIMZs). Of these, eight are along the Delhi Mumbai Industrial Corridor or DMIC.