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Manufacturing

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Manufacturing

April, 2010

Sector/Market size

India is fast emerging as a global manufacturing hub. India has all the requisite skills in product, process and capital engineering, thanks to its long manufacturing history and higher education system. India's cheap, skilled manpower is attracting a number of companies, spanning diverse industries, making India a global manufacturing powerhouse.

According to a United Nations Industrial Development Organisation’s (UNIDO) ‘International Yearbook of Industrial Statistics 2010’, India ranks among the top 10 producers of manufacturing output in 2009.

While the US and China occupy the first two places, India is in the ninth place followed by Brazil. India surpassed Canada, Brazil and Mexico in 2009 to reach the 9th position from the 12th position it held in 2008.

According to the report, India is among the global top ten in the following sectors: basic metals; electrical machinery and apparatus; transport equipment, other than motor vehicles, trailers and semi-trailers; textiles; leather, leather products and footwear; coke, refined petroleum products, nuclear fuel; chemicals and chemical products.

According to the UNIDO estimates, India's manufacturing value added (MVA) per capita is US$ 283.

The Index of Industrial Production (IIP) data for February 2010 shows a robust growth of 16 per cent in the manufacturing sector as compared to February 2009. The cumulative growth during April-February 2009-10 over the corresponding period of 2008-09 was 10.5 per cent.

Growth Trends

The HSBC Markit Purchasing Managers' Index (PMI), the most reliable indicator of manufacturing activity in the country based on a survey of 500 companies, stood at 57.2 in April 2010. A figure above 50 means activity is expanding and it has been above that level for 13 months.

Exports from Special Economic Zones (SEZs) grew by over 122 per cent to US$ 49.5 billion in 2009-10 compared to US$ 22.4 billion in 2008-09. IT, IT hardware, petroleum, engineering, leather and garments are the leading exports from SEZs.

  • BorgWarner Inc, a US based US$ 4 billion (2009) auto component and systems manufacturing company with presence in 18 countries, has established its Indian manufacturing facility at Sipcot industrial park at Sriperambadur near Chennai at a cost of US$ 6.6 million.
  • US-based electronic manufacturing services company Sanmina-SCI opened a new manufacturing facility in March 2010, at Oragadam, Tamil Nadu at an investment of US$ 55.6 million.
  • Ingersoll Rand plc has earmarked about US$ 100 million investment in its Indian operations during the next three years and expects to source products and services of an equal amount.
  • Panasonic India plans to invest US$ 100 million in its new plasma TV production facility in 2011.

Global Manufacturing Hub

India is fast emerging as a global manufacturing hub with a large number of companies shifting their manufacturing base to the country. Moreover, India has the largest number of companies, outside of Japan, that have been recognised for excellence in quality. As many as 21 companies have received the Deming Excellence awards; 153 companies have achieved Total Productive Maintenance (TPM) Excellence Award for their total productivity management practices by the Japan Institute of Plant Maintenance (JIPM) committee.

  • GE Healthcare is drawing up plans to grow its India business and develop the country as a global hub for manufacturing low-cost medical devices.
  • Volkswagen AG will make India a low-cost manufacturing hub catering to select export markets. Volkswagen will export fully-built models and completely knocked-down kits of its hatchback, Polo, to South East Asia, Middle East and Africa from its Pune plant.
  • Japanese automobile major, Yamaha, is planning to make India a hub for manufacturing its premium and deluxe bikes for overseas markets. The company’s Indian unit supplied 66,904 bikes in fiscal 2010 to Yamaha’s global operation compared with 38,639 units in 2008-2009, a jump of 73 per cent.
  • According to a report by RNCOS, “Global Vaccine Market Forecast to 2012” published in February 2010, India has emerged as a new hub for vaccine manufacturers from across the world.

Government Initiatives

The government has issued the new consolidated FDI policy, which has come into effect from April 1, 2010. The government is also looking at publishing a new manufacturing policy document to make India a world class manufacturing hub. The policy is likely to be published by June 2010.

According to the Union Minister of Commerce, Mr Anand Sharma, India is creating national investment and manufacturing zones to attract more foreign interest. The first of these will be in Rajasthan, alongside the Delhi-Mumbai industrial corridor. "We want these manufacturing zones to be incubators of new innovations and new technologies," he said.

Exchange rate used:
1 USD = 44.93 INR (as on March 2010)
1 USD = 44.43 INR (as on April 2010)