25 years on from 1991’s LPG, India is planning to roll out a new industrial policy

New policy in the works


In August 2017, the Department of Industrial Policy and Promotion (DIPP) released a discussion paper on the proposed industrial policy. The paper reviewed the developments in the last twenty-five years and noted the challenges faced. Public comments were invited on the paper to facilitate the formulation of the new policy. Subsequently, a draft has been prepared and is currently being presented for seeking “consultations from industry”. Since the beginning of this month, the Commerce and Industry Minister Suresh Prabhu, has participated in deliberations on the proposed policy with stakeholders at an event in Guwahati and subsequently with the Confederation of Indian Industry members. Though the latest draft has yet to be made available to the public, it is expected that the new industrial policy will be finalised in the coming month. Consequently, even after completing inputs, the report will be tabled for approval before the cabinet by April.


Changes brought by the new proposal


The new policy is ambitious and aspires to be futuristic. It aims to link industrial growth with the growth of India’s economy, creating a globally competitive industry that leverages skill, scale and technology. Similar to the 1991 policy, the focus on foreign direct investment (FDI) and liberalising regulations remain because they have proven to be beneficial in the past. The policy now seeks to enable the creation of global brands linking Small and Medium Enterprises (SMEs), both Indian and global, along with encouraging FDIs that create local value addition. Aspirations to change, even at the district level, can strengthen the ease of doing business and reduce compliance costs. The policy also seeks to ensure employment to new entrants along with re-employment to those who might lose jobs as a result of increased automation. It will subsume the old National Manufacturing Policy of 2011 which sought to create 100 million jobs by 2022.


Special Focus on AI


To become globally competitive, India has to keep up with the technological advancement taking place internationally. The ‘Industrial Revolution 4.0’ uses the new policy to promote modern, smart technology. It has been theorised that the fourth edition of the industrial revolution will include artificial intelligence, robotics, deep learning, all of which could bring a sea of changes to everyday life.


The promotion of technology is imperative to the ease of doing business, an essential component for promoting India as an international destination for advanced manufacturing. While releasing a discussion paper on the industrial policy last year, the government also constituted an eighteen-member task force to explore the possibilities of using artificial intelligence (AI) for India’s economic transformation. The task force is chaired by Dr Kamakoti Veezhinathan, a professor at the Indian Institute of Technology, Madras. The objectives of the task force include creating a policy and legal framework to accelerate the deployment of AI technologies with a five-year horizon. This is projected to give recommendations for specific government, industry, and research programs.


Using AI in the Indian context


The new policy aims at projecting India as an advanced manufacturing hub, which is impossible to achieve without embracing and promoting smart technologies such as AI. Further, in order to emerge as a forerunner in technological advancement, there is a need to invest in research and development. The policy aims to support this by incentivising the implementation of emerging technologies for creating ease of innovation.


Speaking at the sidelines of a session at the World Economic Forum-IES last year, minister Suresh Prabhu had said that the new industrial policy will help Indian companies integrate into the global value chain, as well as ensure that they take a “quantum jump” in terms of technological advancement. Therefore, the promotion of AI will result in India gaining a global importance. AI is predicted to replace 45 percent of employee time and lessen human intervention in performing tasks. In a country like India, which boasts of its demographic dividend, lesser jobs will only result in detrimental unemployment. As such, it is crucial that the government reforms have a sound backup plan, or else AI may prove too harmful.


Threading a path forward


In October 2016, Sundar Pillai, the CEO of Google had said, “The last 10 years have been about building a world that is mobile-first. In the next 10 years, we will shift to a world that is AI-first.” As India aspires to become globally competitive, adoption of smart technology across sectors will undoubtedly contribute to economic development. The new industrial policy supports and focuses not only on what is currently important but aims to be futuristic as well.


The complexity is that India needs to provide a supportive educational framework that will enable the country to easily adapt to the technological advancements. The new industrial policy promotes sustainable and responsible development, along with drawing attention on issues of creating employment. However, the impact will only be felt when implementation will be felt.