Manufacturing and MSMEs Strategy

Executive Summary

Vision 2029-Sector papers


Andhra Pradesh`s current status: -
Indicator Current Status of the State
Industry Growth Rate (%) at Constant Prices 5.90 (CAGR from 2004-2014)
Industry GSDP (INR in Crore) at Constant Prices 51,771 (as in 2014-15)
Industry GSDP (%) at Constant Prices 19.6% (as in 2015-15)

Under Vision 2029, it is envisioned to position Andhra Pradesh as a leading state in manufacturing to enable value driven growth, local job creation and market oriented products. The vision to achieve a sustainable economic transformation can be realized only with a structurally strong, technically efficient and economically inclusive manufacturing sector. The Sector Paper has critically identified the challenges faced by the sector; and in response to these challenges it has chalked out the theme based strategic roadmaps. Further, the paper also has listed down strategy specific and action oriented KPIs (Key Performance Indicators) to be adopted in short, medium and long term to achieve the Vision.

A thriving industrial sector in Andhra Pradesh will be a critical factor in achieving the necessary structural transformation for both labour and output. To this end, the state faces the following key challenges or focus areas:

  • Job Creation : the manufacturing sector contributes around 9-10% to employment and the percentage has been decreasing; this can be because of the shift to work in capital intensive sectors. The state needs to increase the percentage contribution towards the employment so as to meet the targets and this can be very well achieved through focusing on MSMEs which are labor intensive and increasing the industrial base in the state
  • Investments : Gross Fixed Capital Formation of the sate for the period2008-2012 on an average has been INR 11000 crores which is very low. This can be because of underutilization of existing capabilities, rigid production processes and not a friendly regulatory process
  • Sustainable competitiveness : It is critical that industrial growth in the state be aligned to the Sustainable Development Goals, so that the benefits of growth may be accompanied with human development
  • Enterprise Creation: Average number of employees for a manufacturing enterprise is 46 in India while 21 in AP. This can be because of the inability of the firms to scale up; lack of adoption to modernization and adoption to new technologies. A number of schemes are taken by the government for the same like AP Innovation & Start up Policy- 2014 and AP Industrial Development Policy- 2015

• Challenges of physical infrastructure:

  • Water - There is a huge shortage of water availability for industrial purposes which can be attributed to the lack of water resources and high demand of water for consumption purposes. The problem is further aggravated because of the inefficient use of water in agriculture
  • Power - The power demand for industries is expected to increase in the future and the state needs to ensure that there is transparency with respect to the pricing and purchasing power of the power plants
  • Network - Railways, roads and sea ports need to be built up which will reduce the logistics costs of the industries and thus lower the input cost. There is 1 working and 4 non-functional sea ports which need to be focused upon as this will reduce the logistics costs
  • Industrial Infrastructure - Existing clusters and SEZs are either underperforming or there is underutilization of resources in the same

The potential of Andhra Pradesh to position itself as a leading in Manufacturing is not achievable without shifting from Factor driven economy to technology driven economy. To achieve this sector papers suggests four strategies:

  • Districts as engines of growth: There is a need for inclusive and balanced regional growth, job creation and creation of consumption centres (market-share capture from neighbouring states). The sector paper suggests to have a spatially embedded planning i.e decentralized industrial planning with local autonomy. By the same token, existing large industrial locations are to be identified. It also suggests end-to-end cluster management framework to identify and rectify root causes of stagnation in underperforming clusters. Institutional framework for initiating, managing, and monitoring joint actions to be incorporated. There is a need for hard and soft infrastructure creation. There is need to create institutional and policy framework for the decentralized regional planning
  • Districts as engines of growth: There is a need for inclusive and balanced regional growth, job creation and creation of consumption centres (market-share capture from neighbouring states). The sector paper suggests to have a spatially embedded planning i.e decentralized industrial planning with local autonomy. By the same token, existing large industrial locations are to be identified. It also suggests end-to-end cluster management framework to identify and rectify root causes of stagnation in underperforming clusters. Institutional framework for initiating, managing, and monitoring joint actions to be incorporated. There is a need for hard and soft infrastructure creation. There is need to create institutional and policy framework for the decentralized regional planning
  • Dynamic MSMEs: MSME ecosystem transformation. The sector paper suggests Institutional support to promote and develop start-ups and entrepreneurship; ICT interventions, market intelligence, and brand-building actions to build export competitiveness and access to markets and finance. Policies for energizing small firms – updated procurement policy, revision of existing MSME policy, creation of start-up and exit policies need to be implemented
  • Promotion of Sunrise Sectors and Advance Manufacturing: The sector paper suggests that there is a need to shift from factor-driven to innovation driven economy and global integration. There is a need for regional innovation system – science-based manufacturing, research infrastructure, highly qualified workforce and innovation culture in the state

Policy/Scheme Support: The sector paper also suggests that there is a need for institutional and policy support for the same. Moreover, implementation of the suggested strategies would be enabled by the existing policies and schemes such as Aerospace and Defense Manufacturing Policy 2015-2020, Automobile and Auto Components Policy 2015-2020, Textile and Apparel Policy 2015-2020, Electronics Policy 2015-2020, MSME Policy, ASPIRE - A Scheme for Promotion of Innovation, Rural Industry and Entrepreneurship, Micro, Small and Medium Enterprises Development (Amendment) Bill, 2015 and Ease of Registration Process of MSMEs- Udyog Aadhaar Memorandum (UAM).

KEY TARGET NUMBERS:

Target 2019 2022 2029
Total Investments in Economy 12.75 Lakh Crores 36.8 Lakh Crores 84 Lakh Crores
Industry- Contribution to GSDP 23% 23.7% 25-28%
Labour Productivity Rs 8 Lakh Rs 12 Lakh Rs 16 Lakh
Cumulative Number of Additional Jobs created 046 Crores (2.25 lakh each year till 2029) 1.44 crores
Global Competitiveness Index Ranks 51 (out of 140) - Top 25


Global Competitiveness Index:

AP currently ranks 51st (against India’s 56th rank) out of 141 economies on the Global Competitiveness Index, and aims to be amongst the top 25 by 2029.

Ease of Doing Business:

AP ranks 2nd in India according to the DIPP study on implementation of reforms for Ease of Doing Business. The state aims to rank 1st in the country by 2019.

Further, the state’s Ease of Doing Business rank according to World Bank methodology is being calculated for 4 cities – Vijayawada, Visakhapatnam, Kurnool, and Tirupati.

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