The future of the manufacturing industry in India seems very bright. The sector is witnessing a steady growth following various initiatives taken by the Government of India. And this trend is expected to continue in the long term, various sources such as the India Brand Equity Forum, Associated Chambers of Commerce and Industry, Federation of Indian Chambers of Commerce and Industry, Confederation of Indian Industries and newspaper reports.
In this article, I will provide an overview of the future of the manufacturing industry in India. If you’re planning on opening a Small-Scale Industry (SSI) or startup, this article might provide you with some valuable insights.
Therefore, let’s begin by understanding some factors that would impact the future of the manufacturing industry in India.
Indian Government Initiatives
India provides a very dynamic and vibrant ecosystem for startups. In fact, anyone in India can register a startup online and free of cost through the Ministry of Micro, Small & Medium Industries (MSME). The requirements are simple. As a result, several micro and small industries are cropping up across the country.
Second and perhaps the most important one is the ‘Make in India’ policy that the Indian government led by Prime Minister Narendra Modi launched in 2014. This policy provides ease of doing business and manufacturing in India. Consequently, include almost everything from aerospace companies to clothing manufacturers setting up manufacturing hubs in India to cater to the Indian market and export to their foreign markets too.
The Skills India program, also launched by the current government aims at creating 100 million new jobs by the year 2020. Already, we’re seeing tens of thousands of fresh graduates complete the over 160 courses offered under the Skills India scheme every year.
And finally, the Covid-19 pandemic of 2020 is also seeing India emerge as a manufacturing hub of choice among global companies, as the exit China due to political fallout over origins of the virus and unilateral military actions in the South China Sea. Countries such as Japan, US and member states of the European Union now view India in a different light as several top companies including Samsung and Apple moving their manufacturing bases to India.
All the above three factors clearly indicate that the future of the manufacturing industry in India is rather bright. Below, we will look at some facts and figures that would prove my point.
Future of India’s Manufacturing Industry
Statistics released by IBEF show that the Gross Value Added of India’s manufacturing industry stands at about $350.27 billion during the first half of the year 2021. The HIS Markit India Manufacturing Purchasing Managers Index (PMI) crossed the 55.5 point in March 2021, which is unprecedented in India’s manufacturing industry’s history. This is a record high figure because it represents that manufacturing GVA now contributes about 19 percent of India’s GVA in total. The IBEF research also indicates that India’s manufacturing industry is operating at about 66 percent of its in-built capacity.
“According to the Ministry of Statistics & Program Implementation, India’s industrial output measured by the Index of Industrial Production (IIP) stood at 129.4 in February 2021. The overall index stood at 127.8 as of February 2021. Growth in the index was supported by growth in fertilizer production. Fertilizer output grew by 2.4 percent between April 2020 and February 2021,” says the IBEF report.
Investments in India’s Manufacturing Industry
Thanks to the ‘Make in India’ policy, some of the largest organizations in the world including but not limited to such as General Electric, Siemens, HTC, Toshiba, and Boeing are establishing manufacturing facilities in India. This growth is also spurred by the fact that Indians have an ever-increasing purchasing power. Hence, these companies wish to attract both individual Indian consumers as well as businesses with Indian made products.
As a result, the Cumulative Foreign Direct Investment (FDI) in India’s manufacturing sector crossed the US$ 91.28 billion mark between April 2000 and September 2020. The government of India also increased the limits for Foreign Direct Investments in the defense sector in May 2020 from the earlier 49 percent limit to a new 74 percent. As a result, we’re seeing several aerospace and defense equipment manufacturers setting up bases in India for exports as well as sales to the Indian Armed Forces, which ranks as the fourth largest military in the world.
FDI in India
Between April 2020 and January 2021, India received a total foreign direct investment (FDI) inflow of US$ 72.12 billion, a 15 percent increase over the same period in 2019-2020.
Here’re some highlights of these FDIs in India’s manufacturing sector.
- In February 2021, Amazon India said it would start manufacturing electronic products in India, starting first with Amazon Fire TV stick manufacturing. The company plans to start manufacturing with contract manufacturer Cloud Network Technology, a subsidiary of Foxconn in Chennai by end-2021.
- In April 2021, Samsung started manufacturing mobile display panels at its Noida plant and plans to ramp up manufacturing IT display panels soon.
- Samsung Display Noida, which has invested Rs. 4,825 crore (US$ 650.42 million) to move its mobile and IT display manufacturing plant from China to Uttar Pradesh, has received special incentives from the state government.
- In April 2021, Bharti Enterprises Ltd. and Dixon Technologies (India) Ltd., formed a joint venture to take advantage of the government’s PLI scheme for the manufacturing of telecom and networking products.
- In April 2021, Godrej Appliances launched a range of Made-in-India air conditioners (AC). The company plans to invest Rs. 100 crore (US$ 13.48 million) in its manufacturing units (located in Shirwal and Mohali) to increase its AC production capacity to 8 lakh units by 2025.
The above figures from the IBEF clearly prove that the future of India’s manufacturing sector, thanks to large FDIs coming into this country, is rather bright.
Growing Sectors of India’s Manufacturing Industry
Here’re some highlights of the Indian government’s initiatives for various manufacturing industry sectors.
- The government approved a PLI scheme for 16 plants for key starting materials (KSMs)/drug intermediates and active pharmaceutical ingredients (APIs). The establishment of these 16 plants would result in a total investment of Rs. 348.70 crore (US$ 47.01 million) and generation of about3,042 jobs. The commercial development of these plants is expected to begin by April 2023.
- To expand smartphone assembly industry and improve its electronics supply chain, the government, in March 2021, announced funds worth US$ 1 billion in cash to each semiconductor company that establishes manufacturing units in the country.
- The Mega Investment Textiles Parks (MITRA) scheme to build world-class infrastructure will enable global industry champions to be created, benefiting from economies of scale and agglomeration. Seven Textile Parks will be established over three years.
- The government proposed to make significant investments in the construction of modern fishing harbors and fish landing centers, covering five major fishing harbors in Kochi, Chennai, Visakhapatnam, Paradip, and Petuaghat, along with a multipurpose Seaweed Park in Tamil Nadu. These initiatives are expected to improve exports from the textiles and marine sectors.
- The ‘Operation Green’ scheme of the Ministry of the Food Processing Industry, which was limited to onions, potatoes and tomatoes, has been expanded to 22 perishable products to encourage exports from the agricultural sector. This will facilitate infrastructure projects for horticulture products.
- The Union Budget 2021-22 allocated funds of Rs. 1,000 crore (US$ 137.16 million) for the welfare of tea workers, especially women and their children. About 10.75 lakh tea workers will benefit from this, including 6.23 lakh women workers involved in the large tea estates of Assam and West Bengal.
Some Figures of India’s Manufacturing Sector
India is rapidly emerging as a preferred country for foreign investments in the manufacturing sector. Several mobile phone, luxury and automobile brands, among others, are already here or have plans to establish their manufacturing bases in the country. The manufacturing sector of India has the potential to reach US$ 1 trillion by 2025. The implementation of the Goods and Services Tax (GST) will make India a common market with a GDP of US$ 2.5 trillion along with a population of 1.32 billion people, which will be a big draw for investors.
“The Indian Cellular and Electronics Association (ICEA) predicts that India has the potential to scale up its cumulative laptop and tablet manufacturing capacity to US$ 100 billion by 2025 through policy interventions,” an IBEF report states. “With impetus on developing industrial corridors and smart cities, the Government aims to ensure holistic development of the nation. The corridors would further assist in integrating, monitoring and developing a conducive environment for the industrial development and will promote advance practices in manufacturing,” it adds.
As we can see from the above figures from IBEF, FICCI, CII and ASSOCHAM, the future of India’s manufacturing industry is very bright. The manufacturing industry is expected to grow and generate more employment opportunities, mainly for the millennial generation as they graduate with Skills India courses. And with more and more foreign companies pumping in large FDIs into this country, we can safely assume that India is on the right path to become the world’s largest manufacturing hub.