The government is targetting to push up growth of the manufacturing sector to 11 per cent from 6.5 per cent at present over the next five years, a top official said on Friday.

"The Tenth Plan has set an 8 per cent economic growth target. Our target is to increase growth in the manufacturing sector to 11 per cent from 6.5 per cent at present by 2007," Naresh Narad, secretary, ministry of heavy industries, said.

Speaking at a conference on global outsourcing organised by the Confederation of Indian Industry in New Delhi, he said the government and the industry would have to work together to increase investment in the manufacturing sector.

"More and more global companies are looking at lower cost and higher quality for their sub-assemblies and India with its diverse manufacturing can become an internal part of the global manufacturing as it has in IT," he said.

Emphasising the need for Indian manufacturing industries to focus on quality and costs, he said that the government was alive to the concern of the industry on creating a conducive environment for investment.

"The heavy industries ministry had already set up an inter-ministerial group which is focussing on growth of capital goods. In addition to this we also have a taskforce on exports. A committee looking at project exports has recently submitted its report and we are hoping that the report will be positively implemented," he said.

Speaking on the occasion, J N Godrej, chairman of CII's Manufacturing Council, said the industry was concerned with the present regulatory framework that surrounds manufacturing.

Citing the findings of a CII-McKinsey study, he said in products which use skilled labour, India has an enormous advantage over China.

However, the same benefit did not extend to labour intensive industries where China had succeeded in achieving low costs.

The study had also pointed out that the burden of the indirect taxes on the manufacturing industry was enormous.

"While we are keen for the implementation of the VAT regime, the industry is concerned that some states will move ahead and some will lag behind," he said, adding that the industry was for a hassle-free, quick and easy regime in the external trade sector.

Referring to the Kelkar committee, he said that the industry favoured that duties must come down and that finance must be made easily available.