India is on its way to becoming a more than USD 30 trillion economy by 2047, and industrial cities and corridors are supposed to drive this process in the country. Industries clusters in India boost economic growth through regional specialization. Since its inception, the National Industrial Corridor Development Programme has taken shape with an investment of ₹28,602 crore in 12 new industrial cities. Projects such as the Delhi-Mumbai Industrial Corridor are underway to ensure the linking of urban and rural areas. In addition to this, they fuel innovation and growth. Such industrial clusters are expected to create millions of jobs and spur a robust manufacturing base and are of key importance for India’s economic ambitions.
| GS Paper | GS Paper III |
| Topics for UPSC Prelims | Viksit Bharat@2047, Industrial Corridors, MSMEs , Production-Linked Incentives, PM Gati Shakti, Economic Survey 2022-23, European Union’s Carbon Border Adjustment Mechanism, India’s R&D spending, Industry 4.0 |
| Topics for UPSC Mains | Role of Industrial Clusters in Driving India’s Development Journey, Major Challenges Limiting the Growth of India’s Industrial Sector |
This editorial is based on “Industrial Cities, Parks Key to Viksit Bharat” published in The Hindu on 08/11/2024. It explores how industrial cities and corridors are central to India’s economic strategy.
For a UPSC aspirant, it is very important to know what industrial clusters are. It falls under broad topics in the UPSC syllabus, such as economic development and industrial policy. It gives insight into the economic strategies of India and its challenges. So, both preliminary exams and mains preparation would benefit from it.
Approving 12 new industrial cities under the National Industrial Corridor Development Programme with an investment of ₹28,602 crore is a huge leap for the country to be a USD 30-trillion economy by 2047. Such a strategic and milestone step underlines industrial clusters, which have been discussed in the UPSC exams earlier mainly in the context of India’s economic growth and reforms in industrial policies.
The industrial clusters are essential elements that can be transformed in India’s economy through innovation, employment generation, and enhanced export competitiveness. These clusters bring a set of strong synergies across industries by enhancing common infrastructure and resource utilization, thus reducing operative costs substantially. India has clearly shown its intent for the development of these clusters as it has advanced 12 new industrial cities under the National Industrial Corridor Development Programme, which is expected to generate a significant amount of employment.
Clusters are poised to reduce operational costs because they consider the common utilization of infrastructure and, therefore economies of scale. This is a typology that best epitomizes the desire of India to have cluster development; the recent nod by the NICDP is a result of this. These will lead to about one million direct and three million indirect employment making clusters fundamental in economic integration and development.
Supply chain optimization can be best viewed in clusters such as a pharmaceutical hub at the Ahmedabad-Vadodara corridor in Gujarat. The integration of suppliers, manufacturers, and distributors within a cluster reduces logistics costs, thereby enhancing cost efficiencies. The case of this cluster itself is an example wherein this cluster accounts for a large proportion of the pharma exports of India.
Therefore, industrial clusters have acted as growth engines for MSMEs through supply chains and infrastructural facilities. For instance, Vedanta’s creation of industrial parks for aluminum, zinc, and silver processing makes evident how MSMEs extract benefits from proximity to large companies as market linkages and modern infrastructure are taken advantage of by them.
Clusters make exports more competitive through specialized manufacturing ecosystems, supported by initiatives such as Production-Linked Incentives and PM Gati Shakti. For instance, the Surat diamond industry processes a huge majority of the world’s rough diamonds, thereby underlining how sector-specific clusters can compete globally and truly exemplify what the potential export portfolio from India could be.
This links both urban and rural regions, which are, therefore, encouraging economic opportunity, leading to industrial corridor-driven regional development. The Chennai-Bengaluru Industrial Corridor can be considered a similar example. It brought about growth in smaller cities across the sides of the corridor. Growth Rate in GDP was also faster in these regions, indicating their potential as a growth driver for regions.
Industrial clusters are attracting Foreign Direct Investment (FDI) due to its ready infrastructure and clear policy frameworks. The example of Toyota investing in Sambhajinagar shows how clusters attract FDI to engage global manufacturers across the sector, such as electronics and pharmaceuticals, thus raising economic growth.
Key industrial clusters and clusters within every sector of the economy constitute a significant portion of India’s economy as well as India’s trade engagements with the rest of the world. Major industrial clusters include automobiles, textiles, pharmaceuticals, chemicals, and gems. This creates the core robustness of India’s industry, contributing to national economic growth as well as higher international competitiveness of trade.
The major automobile hubs are Chennai, Pune, and Gurugram-Manesar. As these places have manufacturers, such as Ford, Hyundai, and Maruti Suzuki. The rest of the passenger and commercial vehicle production in India is comprised in these clusters, hence their importance in the Indian automotive industry sector leading in economic growth and employment.
Tiruppur and Surat are the significant textile clusters in India, which entails specialization and export leadership as specialties. For export-oriented growth and employment, these clusters have become very important for the textile industry of India.
Clusters such as Hyderabad’s Genome Valley become the nerve of pharmaceutical and biotech research and manufacturing. Companies like Dr. Reddy’s Laboratories find a home in these hubs, and India ends up becoming one of the leading players in the global pharmaceuticals market, opening it to opportunities for innovation and economic growth.
There are the chemical and petrochemical hubs in the country: Vadodara and Jamnagar, in which the latter accommodates the oil refinery of Reliance. These are important industrial units of the chemical industry of India through the large-scale functions of their production, and through them, other industries in the chemical sector get support.
Surat and Mumbai are significant diamond and jewelry groups and hubs that have a considerable influence over international trade. Surat is the world hub for cutting and polishing diamonds, whereas Mumbai is the prime center for manufacturing gold jewelry. This cluster is crucial to the position of India at global levels of the gems and jewelry market.
Critical infrastructure bottlenecks and impediments in the industrial sector, such as land acquisition complications, rigid labor laws, difficulty in accessing credit, barriers to new technologies, cost of complying with environmental norms, trade barriers, and a research and innovation gap, are huge bottlenecks that impede India’s growth and competitiveness.
Logistics costs in India are quite high and range around 14-18% of the GDP, and create a concern regarding industrial competitiveness. Financial losses being incurred by state-owned discoms also add to the challenge, further impinging upon competitiveness, since logistics costs in comparison to developed economies appear significantly more expensive.
The complications in land laws and judicial delays hamper the timeline and escalate the prices of a project. Bengaluru Peripheral Ring Road project is one classic example where the delays caused landed more than 1,800 infrastructure projects into the red due to issues with the acquiring of lands.
Industrial productivity suffers from a slow implementation of labor reforms and a lack of certain skills. The recent strikes, as at the Samsung facility in Bangalore, throw light on these issues. If not addressed, it would go a long way to deter industrial growth and employment.
They have virtually limited access to formal credit, which limits their growth. This reflects the fact that only 16% of MSMEs access formal credit and therefore rely predominantly on informal sources, limiting their likelihood of growing larger and considerably contributing to economic development.
The available scale and skills further restrict MSMEs from adopting modern technologies. The digital infrastructure gap, and high technology adoption costs due to import dependencies, are other significant investment requirements that hamper the efforts in modernization.
High compliance costs and bureaucratic delays in acquiring environmental approvals hinder industrial operations. The difficulties raise project costs and the time-consuming schedule execution of industrial projects, negatively impacting overall growth.
The share of India in world exports is small, yet India remains one of the world’s biggest economies. Non-tariff barriers and green trade regulations, including the Carbon Border Adjustment Mechanism of the European Union, are affecting key sectors, hence adverse to India’s export expansion possibilities.
Compared with the rest of the world, R&D spending in India is very low and negative on innovation and competitiveness. Patent filings were improved; however, a share of less than 1% in the world’s total share remains a cause of worry, as good returns can be expected if targeted initiatives are taken to add momentum to research and innovation.
Strategic measures are always required to further enhance the development and efficiency of industrial clusters. Integrated infrastructure development, technology innovation centers, environmental sustainability initiatives, and international collaboration programs need to be accelerated to achieve cluster growth.
SPVs to be created for cluster infrastructure in the form of multi-modal logistics parks, with time-bound development of facilities such as 24×7 power, waste management system, and others to ensure efficient operation of clusters and to accelerate growth of their economies.
Establish centers of excellence and shared facilities for advanced manufacturing technologies. Subsidized access to Industry 4.0 technologies should be made available to MSMEs. To promote innovation and competitiveness in clusters, like Pune’s Auto Cluster Development and Research Institute.
Establish cluster-specific funds and credit schemes for MSMEs. Design the supply chain finance programs and fintech platforms which would allow invoice discounting to finance cluster development and growth.
Develop renewable energy and waste management facilities within the clusters. Establish green rating systems and circular economy networks that promote sustainability, then reduce environmental impact to enhance cluster competitiveness.
Promote digital platforms and export facilitation centers that can better facilitate clusters’ access to markets. Internationally standardized quality certification programs may also be established to enable clusters to access the world market.
Develop 5G networks and blockchain platforms to facilitate efficiency in cluster operations. Introduce digital twins and IoT infrastructure to the modern management of cluster operations, which shall enhance growth and innovation.
Emphasize integrated townships and social facilities to be developed near clusters. Develop public transportation networks and recreational facilities to support the workforce. Improve retention and productivity within clusters.
Suggest twinning arrangements and sharing of best global practices towards cluster development. Establish international market intelligence cells and knowledge exchange programs to make clusters more competitive and global in reach.
India’s industrial clusters can serve as one of the significant sectors that drive innovation and economic growth. If the country overhauls its infrastructure, enhances financial access, and emphasizes sustainability, India will create world-class industrial hubs. These will not only generate employment but also increase exports. By pushing the country towards an ambitious target of its becoming a $30 trillion economy by 2047. For aspirants of UPSC, this journey of transformation forms an integral part of sustainable development and economic resilience.
| UPSC Civil Services Examination, Previous Year Questions (PYQs) Mains Q.To what factors can the recent dramatic fall in equipment costs and tariff of solar energy be attributed? What implications does the trend have for the thermal power producers and the related industry? (UPSC Mains 2022, GS Paper III) Q. Discuss the strategic importance of industrial corridors like the Delhi-Mumbai Industrial Corridor in achieving the goals of Viksit Bharat@2047. How do such corridors contribute to regional development and employment generation? |
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