The major objectives of the National Manufacturing Policy, NMP, approved by the Union cabinet is to increase the sectoral share of manufacturing in GDP to at least 25 percent by 2022 and at the same time will increase the rate of job creation so as to create 100 million additional jobs by 2022. The clearance of the policy will set the pace for a higher trajectory of growth in employment, investment and output.
Interestingly the policy has some good news for companies seeking a certain degree of flexibility in terms of labor laws. Hiring and laying off workers in factories may be easier in large national investment and manufacturing zones as proposed in a new policy. Labor and environment issues that held up the policy for a long while have been ironed out, as the policy indicates while painting a promising picture of 100 million new jobs and USD120 billion in investment in the zones in a decade. The policy provides for easier closing down of a factory to limit its losses and deploy assets elsewhere. It also allows lay-off of workers with greater flexibility. In case of layoffs, the policy provides for an insurance cover to compensate workers for job loss. Alternately, a sinking fund has been proposed to make payments to workers laid off. Employers in the zones may use either or a combination of both. The policy prescribes that laid off workers will be entitled to 20 days’ pay for every year’s work. This goes beyond the section 25FFF of the Industrial Disputes Act which applies all over India and which prescribes 15 days’ average pay for every year’s work in the event of a lay-off. Alternatively, laid-off workers may be paid from the sinking fund under a special purpose vehicle to be created to manage these zones. All factories in the zones will have to contribute to this fund, which will be replenished after a draw down.
The most important pillar of the policy is the intention to create 100 million new jobs. This is not an easy task since it requires both supply-side and demand-side measures. The strong measures for skill development for rural and urban poor included in the NMP will help upgrade the talents of the country's best asset: its people.