Revitalizing Industry: The Evolving Manufacturing Sector in India
Overview of India's Manufacturing Sector
Rising Importance in Economy: Manufacturing is becoming a vital part of India's economic development, with significant contributions from sectors like automotive, engineering, chemicals, pharmaceuticals, and consumer durables. It represents about 15% of India's GDP and employs around 12% of its workforce.
Machine Tool Industry's Role: The machine tool sector forms the backbone of Indian manufacturing, where technological advancements and digital transformation are key to staying competitive.
Export Potential: India is on track to achieve a milestone of exporting goods worth US$ 1 trillion by 2030, aiming to be a significant global manufacturing hub.
Economic Contribution: The manufacturing sector contributes 15% to the nation’s GDP and employs over 27.3 million people, highlighting its critical role in India’s economy.
Government's Vision for 2025: The government aims for manufacturing to account for 25% of the country’s economic output by 2025 through various programs and policies.
Global Competitiveness: India's manufacturing sector is seen as a key driver for economic growth and job creation, with potential benefits including power growth, long-term employment, and skill development for international market engagement.
Advancing Towards Industry 4.0: India is moving towards Industry 4.0, guided by initiatives like the National Manufacturing Policy and the PLI scheme, which aim to elevate manufacturing to global standards by 2025.
Sector-specific Incentives: Plans are underway to offer incentives up to Rs. 18,000 crore (US$ 2.2 billion) to enhance local manufacturing in sectors like chemicals, shipping containers, and vaccine inputs.
'Make in India' Initiative: Launched by Prime Minister Narendra Modi, this program aims to position India as a manufacturing hub globally and generate 100 million new jobs in the sector by 2022.
Data Insights:
Record Manufacturing Exports: Manufacturing exports reached an all-time high of US$ 447.46 billion in FY23, indicating significant growth and the increasing role of the Indian middle class in global consumption by 2030.
FDI Inflows: Substantial foreign investment in sectors such as automobile, chemical manufacturing (excluding fertilizers), pharmaceuticals, and food processing from April 2000 to June 2023.
Continued Sector Growth: The manufacturing sector showed robust growth in August 2023, with the S&P Global Purchasing Managers' Index reaching a three-month high of 58.6.
Industrial Production Index: The Index of Industrial Production from April to July 2023 stood at 142.8.
Challenges in Manufacturing Sector:
Infrastructure Hurdles: Issues in communication, transportation, and skilled labor infrastructure pose challenges to manufacturing competitiveness.
Economic Sector Disparities: Imbalances between sectors such as services and agriculture in terms of GDP contribution and workforce employment.
MSME Sector Issues: Financial constraints and limited resource access affect the growth of Micro, Small, and Medium-sized Enterprises.
Skilled Labor Shortage: A shortage of skilled labor in manufacturing restricts the industry’s expansion potential.
Regulatory Challenges: Complex laws and compliance issues burden the manufacturing sector.
Supply Chain Inefficiencies: Poor supply chain management leads to increased costs and reduced operational efficiency.
Global Competition: Intense competition on a global scale poses challenges for Indian manufacturing companies.
Dependence on Imports: Heavy reliance on imports for essential materials, highlighting the need for self-sufficiency.
Government Initiatives:
2023-24 Union Budget Provisions: Tax incentives for startups, lower tax rates for new cooperative societies in manufacturing, increased turnover limits for MSMEs' presumptive taxation, and support for natural farming and textile parks.
ESDM Sector Support: Initiatives like Make in India, Digital India, and Startup India, along with schemes like M-SIPS, Electronics Manufacturing Clusters, and NPE 2019, bolster the Electronics System Design and Manufacturing sector.
SPECS Scheme: Promotes manufacturing of electronic components and semiconductors to strengthen the electronics product manufacturing value chain.
PM Gati Shakti Plan: A national infrastructure project focused on multimodal connectivity.
SAMARTH Udyog Bharat 4.0: Aims to enhance the competitiveness of the manufacturing sector in the capital goods market.
Mega Investment Textiles Parks (MITRA) Scheme: Establishing seven Textile Parks to create world-class infrastructure and promote industry growth.
Defence Sector Manufacturing: A significant tender for building submarines to bolster the 'Make in India' initiative.
Way Forward:
Attracting Foreign Investment: India is increasingly becoming a preferred destination for global manufacturing investments.
Growth Potential: The manufacturing sector has the capacity to reach a value of US$ 1 trillion by 2025.
Technology and Electronics Growth: Predictions of significant growth in laptop and tablet manufacturing capacity by 2025 through policy support.
Infrastructure Development: Focus on developing industrial corridors and smart cities, with improved infrastructure to attract more investment and enhance the industrial sector.
