Commerce minister Anand Sharma (right) with Jairam Ramesh (left) in New Delhi on Tuesday. Picture by Ramakant Kushwaha

New Delhi, Oct. 25: The Union cabinet today approved the setting up of giant industrial enclaves where the government will create a hothouse for factories in the form of world-class infrastructure, lower taxes, easier labour rules and fast-track clearances, with the goal of taking the share of manufacturing to 25 per cent of the gross domestic product by 2020 from 16 per cent now and create 10 crore more jobs.

“China has done it, Germany has done it, now India has decided to do it,” commerce and industry minister Anand Sharma said after the cabinet meeting today that cleared the National Manufacturing Policy.

The National Investment and Manufacturing Zones envisage at least seven industrial parks, with the first planned across Haryana, Rajasthan and Gujarat.

“The basic thrust is to provide an enabling environment for tapping the potential of the private sector and the entrepreneurial skills of the younger population,” he said.

The enclaves would be spread across 5,000 hectares, or 12,500 acres, on an average and cater to the domestic market. Some of these will subsume special economic zones (SEZs).

The plan was silent on how land would be acquired for the enclaves, beyond stating that the states will be responsible for acquiring land.

The policy has tried to simplify labour and environment norms within the framework of the existing rules.

“An exit policy will be prepared keeping in view provisions for protecting workers’ right within the statutory framework… firms operating in zones would insure workers against loss of employment … and such policies will be utilised for the payment of compensation to workers at the time of closure or rightsizing,” the policy said.

Analysts read the exit clauses as an attempt to relax stringent labour laws which often stop factories from downsizing in times of economic crisis.

An environment impact study will be done prior to the project, while proper zoning regulations will be enforced.

A special purpose vehicle will be set up and it will act as a one-stop shop for all clearances to businesses interested in operating in industry parks. Small- and medium-sized companies will be offered incentives. No subsidy has been proposed.

“The policy announcement will generate momentum, resulting in a long-term positive impact on growth,” CII director-general Chandrajit Banerjee said.

“The policy will foster manufacturing activity in the country,” Rajiv Kumar, secretary-general of Ficci said.