The government will have to accord high priority to Skill India to realise Make in India, because highly dynamic and productive sectors such as telecom and finance face skill shortage, “thereby limiting the benefit of the underlying dynamism,” chief economic advisor Arvind Subramanian has said in a document prepared for the Central Board of Excise and Customs (CBEC).
In a chapter titled Indirect Tax Policy and Make in India Campaign, the CEA has argued that dynamic transformational sectors “have tended to be skill-intensive in which India does not necessarily have comparative advantage. An exception is construction which is unskilled-labour intensive and fairly dynamic”. Also, for the manufacturing sector to be transformational, it has to be formal as “unregistered manufacturing can’t be a transformational sector… efforts to encourage formalisation will be critical”.
Emphasising on the need to embark on rapid skill upgradation, Subramanian said that skill-intensive sectors are dynamic and for sustaining their dynamism, there is a need for supply of skills to keep pace with the rising demand for them “otherwise even these sectors could become uncompetitive”.
Further, he said that the government should make policy interventions at three levels — improving business environment by making regulations and taxation less onerous, reforming labour laws and building infrastructure; promoting manufacturing by providing subsidies, lowering cost of capital and creating SEZs; and shielding domestic manufacturing from foreign competition via tariff and local content requirement.
“The effectiveness of protectionist measures is open to debate given past experiences. Moreover, they would run up against India’s external obligations under the WTO and FTAs and also undermine its openness credentials,” he said.
He said that an intervention in form of doing away with all exemptions for countervailing duty (CVD) can be implemented to eliminate the negative protectionism facing Indian manufacturers and help the country without violating international obligations.