New Delhi: India will not enter into any bilateral or regional trade-opening agreements at the cost of domestic manufacturing, the government has said.

"It will be ensured that such agreements (free trade agreements) do not have a detrimental effect on domestic manufacturing in India," according to the National Manufacturing Policy (NMP), cleared by the Union Cabinet on October 25.

While the Commerce Department is promoting the country's trade interest through liberalisation of bilateral or multi-lateral commerce, the Department of Industrial Policy and Promotion (DIPP) has worked out the policy that places emphasis on strengthening domestic manufacturing.

Both the departments, though headed by different secretaries, are under the charge of Commerce and Industry Minister Anand Sharma.

After implementing free trade agreements (FTAs) with the Association of South-East Asian Nations (ASEAN), South Korea and Japan, India is in the final stages of working out a similar deal with the 27-nation European Union.

The EU is exerting a lot of pressure on the Indian negotiators to allow duty-free imports of European automobile and other manufactured goods under the proposed agreement in return for opening up their services sector.

The Indian industry, including some of the multinational companies which have invested in setting up manufacturing hubs in the country, are opposing the European efforts.

The NMP document, clearly spells out priority for the domestic manufacturing.

"While India will continue to integrate itself with the globalised world through bilateral and regional free trade agreements/comprehensive economic partnership agreements, it will be ensured that such agreements do not have a detrimental effect on domestic manufacturing in India," it said.

Meanwhile, the Confederation of Indian Industry (CII) said the new policy would encourage investment in the manufacturing sector.

It said measures like Capital Gains Tax exemption on sale of plant and machinery for units in the proposed National Investment and Manufacturing Zones (NIMZ) would accelerate growth in the sector.

"We believe that the NIMZ would push manufacturing growth to 12-14 percent...the NMP creates the right framework for achieving it," the chamber said.

It added that the NMP would provide the foundation for the manufacturing to increase its share in the national Gross Domestic Product (GDP) to 25 percent. Presently, manufacturing accounts for 15-16 percent of the national GDP.

"The objective to create 100 million new jobs is particularly welcome, given the fact that the country will add an estimated 20 million youth to the workforce annually."

Stating that the new policy will "revolutionise" the manufacturing sector and will help India head off a global economic slowdown, CII president B Muthuraman said, "The policy will generate momentum, resulting in long-term positive impact on growth aspirations."

"Finally, we are dealing with the missing piece in our economic development -- manufacturing. CII believes this sends out a clear message to the industry about government's resolve to take the reform process forward," he said.

On the absence of clearly defined exit policy in the draft, he said, "It does in fact offer one, and the industry is happy to work within the system. It does offer flexibility to hire and fire workers and this is one of the major positive steps in the policy."

He also pointed out that land acquisition policy in the draft is welcome, as government will provide basic infrastructure and develop land in these mega zones, which takes away the burden of the industry.

"We, at CII, have been saying for years that industry thrives in clusters, and hence the NMP decision to buy land and develop is a big step. Later on we can make these land bags a land corporation and this conversion is very much provided for in the SPV."

On whether the government will be able to meet desired objective, he said he "is more than hopeful".

(Agencies)