Why Kejriwal’s plan to allow hi-tech industry is good for Delhi

With Delhi Chief Minister Arvind Kejriwal announcing that the new industrial areas in the city will have no place for manufacturing activities to curb pollution, industry experts have welcomed the initiative, saying that it will be good not just for city but also for the manufacturing sector itself.

Kejriwal made the announcement in a virtual conference last week.

He said that only hi-tech and service industries will be permitted to open in the new industrial areas as part of the plan to reduce pollution.

While the Delhi CM said that the move makes sense because the city’s economy is driven mainly by the service sector, industry experts have said that the nature of manufacturing has changed in India and the city is no longer suitable for these types of manufacturing units.

“The typical industry size in Delhi is cottage and SME size industry. The physical and psychological comfort of producing in a metropolitan like Delhi is one of the reasons that industry is stymied in our country and entrepreneurs choose comfort to scale,” Pankaj Mohindroo, Chairman, India Cellular & Electronics Association (ICEA), told IANS.

“The decision of move manufacturing out of Delhi in favour of services is a sound initiative prima facie. We should develop Delhi into hi tech areas of design and R&D and Singapore is an excellent model,” he said.

Delhi currently has 29 approved industrial areas and four flatted factory complexes, according to Invest India, a non-profit venture under the Department for Promotion of Industry and Internal Trade, Union Ministry of Commerce and Industry.

Major industrial areas in Delhi include the Naraina Industrial Area which was set up by the Delhi Development Authority (DDA) in 1970.

The industrial area houses units which manufacture electronic and electrical goods, engineering goods, plastic goods, ready-made garments, sanitary fittings, etc.

Similarly, the Okhla industrial area, located in the southern part of the city, is a hub of major industrial activities. Many export houses are located in the area.

Kejriwal said in the virtual conference that the move to focus on the services sector and hi-tech industry will lead to reduction in real estate prices in the city for opening new offices.

He said that apart from keeping the city clean, the initiative will help entities such as IT companies, media houses, law firms, internet service providers, call centres and advertising agencies have their offices in the city itself, instead of moving out to Gurugram and Noida to cut costs.

According to George Paul, CEO, of Manufacturers’ Association of Information Technology (MAIT), the Delhi government’s move to not allow manufacturing in new industrial areas will not have much impact on the electronic manufacturing sector as most of the new industrial units are being set in areas such as Noida and Greater Noida.

“Manufacturing is a very competitive domain. You have to keep your cost low. In Delhi, the cost of real estate is very high. That is the reason why most of manufacturing units are coming up in the National Capital Region in India. The NCR area offers cheaper real estate,” he said.

“It is much more cost-effective to set up manufacturing units in the NCR region because of availability of lands. And the plants that are coming up now are big plants. The nature of electronics manufacturing in India is also changing. That requires more space,” he said.

Overall, keeping manufacturing out of the new industrial areas will be beneficial for the city, even though the electronics industry per se does not contribute much to pollution compared to other sectors.

However, convincing existing manufacturers to make a shift in their location or business could be a huge challenge for the government if it eventually decides to completely disincentivise manufacturing in the city.

“There should be a structured resettlement process which can work as a great opportunity to scale up industry,” Mohindroo said.