Manufacturing in India is emerging as an integral pillar in the country’s economic growth following the performance of key sectors like automotive, engineering, chemicals, pharmaceuticals, and consumer durables, projected to be one of the fastest-growing sectors. It is said to have the capacity to export goods worth $ 1 trillion by 2030 and is said to be on the road to becoming a major global manufacturing hub, shifting from an import-dependent economy to a global production hub.
Report by Colliers India
As per the report of Colliers India, specialising in professional services and investment management, published in December, 2023, Indian manufacturing has the potential to reach $1 trillion by 2025-26 with the sector witnessing rapid growth in investment.
As per the Department for Promotion of Industry and Internal Trade (DPIIT), manufacturing sector has received substantial Foreign Direct Investment amounting to $ 29.79 billion in the first half of FY 2024-25 driven by strong inflows in services, telecom, and pharma sectors with key contributors including:
• Mauritius;
• Singapore, and;
• US
This surge, it is opined, emphasises increasing investor confidence in India’s attractiveness as one of the most lucrative manufacturing destinations in the world.
Acknowledging the pivotal role played by Make in India initiative in accelerating investments, the report has underlined that besides the policy reforms and incentives including the Production Linked Incentive (PLI) scheme, the government has pro-actively incentivised various manufacturing industries such as automobiles, electronics, and textiles, nurturing an environment conducive to augmented investment.
The Indian government, it is opined, has been actively fostering a conducive environment for global manufacturing companies through strategic initiatives such as:
1. Bharatmala Pariyojana Project
2. Proposed DESH (Development of Enterprise and Service Hubs) Bill;
3. National Logistics Policy, and
4. Appropriate taxation and incentives for various sectors.
According to the report, these are expected to enhance opportunities in the industrial market.
Emulating these measures, Indian states have also been offering number of advantages in the form of:
• Incentives
• Subsidies
• Robust infrastructure, and
• Essential utilities
Foray into new geographies & sub-sectors/segments
According to the report, India’s manufacturing sector, propelled by development in significant sectors and favourable megatrends with an effect on a global scale has been entering into new geographies and sub-sectors/segments.
Emphasising the competitive advantage enjoyed, with skilled workforce and low cost of labour, the manufacturing sector is also witnessing an increased inflow of capital investment and Mergers and acquisitions (M&A), leading to surge in manufacturing output, with increased contribution to exports. It has been pointed out that in the first quarter of FY24, the manufacturing GVA (Gross Value Added) at current prices was estimated to be $110.48 billion.
Pointing out that the manufacturing sector contributes around 17 % to the GDP supported by robust physical and digital infrastructure, the report expects it to grow to 21 % in the next 6-7 years. In support, the report points out the following:
• Global players like Tesla and Ford have shown interest in the automotive sector, indicating intent for establishing or expanding their manufacturing units in the country.
• Electronics manufacturing is experiencing a rise in investment, particularly in the smartphone production domain, with major players like Apple establishing assembly units in India.
• Textiles and garment manufacturing sectors are witnessing upsurge in investment with several global brands reconsidering their sourcing strategies and investing in Indian textile units.
Launching SAMARTH Udyog Bharat 4.0 in 2021
The Ministry of Heavy Industries and Public Enterprises, Government of India has launched SAMARTH (Smart Advanced Manufacturing and Rapid Transformation Hub) Udyog Bharat 4.0 in 2021 as a strategic initiative intended to enhance the manufacturing sector’s competitiveness, predominantly in the capital goods domain.
Industry 4.0 or 4th industrial revolution is expected to lead to:
1. Minimising wasteful processes and actions, and;
2. Optimising use of energy and other inputs.
This is expected to be achieved by capturing data, its analysis, and using the analysis to improve functioning of machines, factories, and systems.
Various MoUs (Memorandum of Understanding) have also been signed by different States in India with a view to boosting industrial and manufacturing sectors.
Thus, while Maharashtra has signed 21 MoUs worth Rs. 88,420 Crore at the World Economic Forum (WEF) in 2023;
1. Andhra Pradesh has signed MoUs in Global Summit 2023 with 352 firms;
2. Gujarat has signed 3 MoUs in Oct 2023 worth Rs 3,000 Crore for textile, industrial park, engineering, including auto sector, and
3. Tamil Nadu has signed 79 MoUs in the year 2022-23.
Top regions for industrial investment in India identified by Colliers India
In a detailed study carried out by Colliers India across the states of Gujarat, Maharashtra, Rajasthan, Madhya Pradesh, Karnataka, Andhra Pradesh, Tamil Nadu, Telangana, and Odisha focusing on the Industrial Sector, Gujarat was ranked first, followed by Maharashtra and Tamil Nadu.
Then, emerging themes in the manufacturing sector of India according to the report include:
1. Advanced technologies
2. Sustainable practices
3. Industry 4.0
4. Local manufacturing focus
5. AI integration
6. 3D printing adoption, and
7. IoT (Internet of Things) driven processes
Emerging sectors identified by it include:
1. Semiconductors
2. Agri tech, and
3. Waste management, particularly e-waste
Epilogue
India’s manufacturing sector has experienced steady growth in the past decade. Recently, the sector has gained momentum driven by new investments and a strategic move by several foreign manufacturing firms to diversify their operations across multiple markets.
Corroborating the analysis of Colliers India, analysts opine that India is poised to become the factory to the world, as corporate tax cuts, investment incentives and infrastructure spending are bound to help drive capital investments into the Indian manufacturing sector. With the global economies looking to reduce reliance on China, India has thus emerged a key alternative manufacturing hub due to:
1. Its market potential
2. Favourable policies, and
3. Competitive advantages
Sensing this, the Union Budget 2025-26 has offered a structured, incentive-driven approach to empower Indian manufacturing on a global scale.
Disclaimer
Views expressed above are the author's own.
Top Comment
{{A_D_N}}
{{C_D}}
{{{short}}} {{#more}} {{{long}}}... Read More {{/more}}
{{/totalcount}} {{^totalcount}}Start a Conversation