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Manufacturing

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Manufacturing

September, 2011

Manufacturing

Following a steady path of progress, the Indian economy has consistently enjoyed a relaxed economic position. The recent growth pattern can be attributed to radical policy reforms brought in by the Indian government, liberalized foreign investment strategies, and industrial de-licensing. Apart from this, restructuring of the Export Import Policy (EXIM) policy in order to boost exports for the manufacturing sector, and lining up the import duties as per World Trade Organization (WTO), added to the growth rate of the segment.

As per a survey, India's manufacturing sector rose sharply during February 2011, and February was the 23rd consecutive month of expansion in India's manufacturing sector. "The momentum in India's manufacturing sector strengthened yet again in February, continuing the good start to the year. Output growth is holding up and the inflow of new orders is accelerating, holding promise of a strong momentum in output in the months ahead," as stated by Leif Eskesen, Chief Economist for India & ASEAN, HSBC.

Growth trend

Fifty sectors of the country’s economy grew by 39 per cent during the period April – December 2010, and were rated in the “excellent growth” category. These segments included air conditioners, natural gas, tractors, nitrogen fertilizers, ball bearings, electrical and cable wires, auto components, construction equipment, electric fans and the tire industry. Another twenty-two segments were rated as the “high growth” group, and registered a growth of 17.3 percent during the first nine months of the existing fiscal. Industries such as utility vehicles, crude oil, power transformers, energy meters, alcoholic beverages and textile machinery have registered around 10-20 percent growth.

Investments

Jubilant Life Sciences, India's largest custom research and manufacturing services company, has entered into a US$ 70million deal with a US drug maker company to manufacture over-the-counter health products for women. "This is a take or pay contract with a minimum quantity commitment and has a total value of over US$ 70 million for a period of over four years," as stated by the company.

Dixon Technologies, an electronic parts manufacturer, is also opening up US$ 10.2 millionplant in Noida to create LED lighting solutions for the Indian market for its US based partner Lighting Science Group's (LSG). This joint venture will allow the US based company LSG, to increase its presence in the Indian market and tap the US$ 407.98 miliion LED market in India.

Volvo Construction Equipment (Volvo CE), part of Volvo India Private Ltd (VIPL), is set to launch excavators manufactured in the country by November. The company presently imports excavators from its Korean facility, and intends to set up its own manufacturing plant for manufacturing excavators up to 30-tonne capacity with an investment of US 18.4 miliion.

Electrical equipment maker Jyoti Ltd entered into collaboration agreement with DMW Corporation for manufacturing pumps for large power and irrigation projects in India. The collaboration marks company's entry into larger business segment. Recently, Jyoti Limited invested close to US$ 20.4 miliion in capacity and expansion, which will be utilised to manufacturing pumps for large power and irrigation projects in India.

Matheson K-Air India Private Limited (MKI) is looking forward to invest US$ 100 million in the next five years and set up a 200 ton per day air separation plant in Chakan near Pune. The plant is expected to be up by December 2012, and produce liquid oxygen, liquid nitrogen and liquid argon for delivery within a 300 kilometer radius. The company is targeting to expand its business and supply industrial gases throughout India.

Manufacturing - Government Initiatives

Indian government has set up a new “Consolidated Foreign Direct Investment Policy,” which came into effect on April 1, 2010. The government also intends to create National Manufacturing and Investment Zones (NMIZs) which will promote the following objectives -

  • To encourage investments in the Indian manufacturing segment
  • To boost the manufacturing share in the country’s GDP to 25 per cent by the year 2022
  • To increase the sector employment by two times
  • To augment global competitiveness of the Indian manufacturing sector on the global stage

Mr Anand Sharma, Union Minister for Commerce and Industry stated that the government will soon launch a new national manufacturing policy that will allow the manufacturing zones in the country to set up world class facilities and offer tax rebates.

The new policy aims to create 100 million jobs in the sector that will contribute to 25 per cent of the GDP. The manufacturing sector presently contributes 16 per cent to the GDP. "We propose to establish 4-5 NMIZs as green-field integrated industrial townships with world-class infrastructure, financed by the central government in partnership with respective state governments, with a competitive regulatory environment for attractive investments," as per Mr Anand Sharma, Union Minister for Commerce and Industry.

On the ambitious US$ 90billion Delhi-Mumbai Industrial Corridor (DMIC), Sharma said that seven new investment regions would be set up across the six states under the project. "We have completed the perspective planning of the entire DMIC region and I have moved the Cabinet for seeking support of US$ 3.77 billion for establishment of seven new investment regions across the six states," he said.

Manufacturing - Road Ahead

Trade data analysis state that during 1990-91, machinery manufacturing sector occupied the second spot in the import item list, valued at US$ 5.83 billion and accounted for about 24 per cent of the total imports of US$ 24 billion. For 2009-2010, the figures have risen sharply which clearly signify the growth in the domestic manufacturing sector and increasing demand of the Indian economy. The Indian manufacturing sector has achieved a competitive edge with the help of increasing demands, pool of engineering talent in the country and liberal policy structure by the Indian government. India has been able to stage itself as a global manufacturing hub supported by expert technical competencies and rising demands. Moreover, India has been recognized for the superior manufacturing quality and has been ranked at number two after Japan. The future definitely promises more growth for the Indian manufacturing sector.