The average growth rate of industrial production of eight core industries started showing signs of recovery after a steep decline in April 2020 but still clocked a decline of 1.3 per cent in December, compared with a contraction of 1.4 per cent in November. Only the coal and electricity sectors clocked positive growth in December 2020, government data shows. The eight core Industries includes coal, crude oil, natural gas, petroleum refinery, fertilisers, steel, cement and electricity.
The Covid-19 pandemic adversely impacted some of the major economies of the world such as the US, European Union, the UK and Japan. Similarly in India, several sectors were affected due to the nation-wide lockdown to help curb the spread of Covid-19. However, after the pandemic-imposed lockdown was relaxed, improvement has been seen in several sectors of the economy.
In response, the Union government implemented several major reforms in recent years to boost industrial production and gross domestic product (GDP) growth. Among the measures the government implemented the Insolvency and Bankruptcy Code (IBC) and recapitalised banks. Among the other important measures implemented were the Goods and Services Tax (GST) to simplify the indirect taxation rules, Make-in-India initiative to boost domestic manufacturing capacity, liberalisation of Foreign Direct Investment (FDI) and Jan Dhan-Aadhaar-Mobile trinity. The trinity refers to the government of India initiative to link Jan Dhan accounts, mobile numbers and Aadhar cards of Indians to plug the leakages of government subsidies.
In September 2019, the corporate tax rate was reduced to 15 per cent for new domestic manufacturing companies. The Union government unveiled the Rs.103 lakh crore National Infrastructure Pipeline to significantly boost infrastructure and spur growth. The Union Budget 2021-22 has announced a number of growth improvement measures such as a hike in custom duty to benefit Make in India policy, critical measures to boost infrastructure, innovation and research and development (R&D).
The government has also announced a special economic and comprehensive package of Rs. 27.1 lakh crore — equivalent to 13 per cent of India’s gross domestic product (GDP) — to combat the impact of the Covide-19 pandemic in India. The package includes, among others, in-kind and cash transfer relief measures for households, employment provision measures under Pradhan Mantri Garib Kalyan Rojgar Abhiyaan and increased allocation under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), credit guarantee and equity infusion-based relief measures for Ministry of Micro, Small and Medium Enterprises (MSMEs) and non-banking financial companies (NBFCs) and regulatory and compliance measures related to tax-filing, Insolvency and Bankruptcy Code, 2016 (IBC) and procurement. Structural reforms have also been promoted as part of the Atmanirbhar Bharat Package, including deregulation of the agricultural sector, change in definition of MSMEs, new PSU policy, commercialisation of coal mining, higher foreign direct investment (FDI) limits in defence and space sector, development of Industrial Land/Land Bank and Industrial Information System, revamp of Viability Gap Funding scheme for social infrastructure, new power tariff policy and incentivising states to undertake sector reforms.