India looks to factories to create 100mn new jobs

Manufacturing accounts for just 16 percent of India's agriculture-dependent economy, which is "a cause of concern," the cabinet said in a statement after meeting.

Under the new National Manufacturing Policy, the government hopes to reduce the regulatory burden on companies, create "manufacturing zones" on unused infertile land and promote "green" technologies.

The over-arching aim of the legislative framework is to create 100 million additional jobs by 2022.

"Inadequate physical infrastructure, a complex regulatory environment and a shortage of skilled manpower have constrained the growth of manufacturing so far," Commerce and Industry Minister Anand Sharma said at a news conference.

No specific details were given about how the policy would achieve its objectives.

"With over 220 million people estimated to join the workforce in the next decade, the manufacturing sector will have to create gainful employment for at least half this number," said the cabinet statement.

Corporate leaders see serious shortcomings in the business environment in India, particularly high inflation, endemic corruption, difficult land acquisition laws and a sclerotic legal system.

Transport infrastructure from ports to rail links is also poor, while much of the country suffers from electricity blackouts and water supply problems.

Nevertheless, the Indian economy has grown strongly over the past decade and manufacturing companies from the developed world including mobile phone group Nokia and car companies Ford and General Electric have set up plants.

The southeastern state capital of Chennai, the western state of Gujarat and the areas around the national capital New Delhi have emerged as the biggest magnets for foreign investment in manufacturing.

The new policy was welcomed by business groups, which have complained loudly recently about a string of 13 interest rate rises that have raised the cost of borrowing for companies.

"The policy announcement at this critical time would generate momentum, resulting in a long-term positive impact on growth aspirations," said Chandrajit Banerjee, director general at the Confederation of Indian Industry.

Rajiv Kumar, secretary general of the Federation of Indian Chambers of Commerce and Industry said it was "heartening to know that a consensus has been reached to have a forward-looking policy for the manufacturing sector."

In the past decade, India's population grew by 17.6 percent to 1.21 billion, according to provisional census data.

Based on current trends, India is set to overtake China as the world’s largest country by 2025, according to the US Census Bureau.

Copyright AFP (Agence France-Presse), 2011