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Manufacturing Sector in India

June, 2013

Manufacturing: Brief Introduction

India is largely moving towards high-end manufacturing with the Government announcing multiple reforms and policies in the sector. Indian manufacturing industry is largely driven by low-cost, skilled labour, adequate land laws and reasonable cost of capital. McKinsey and Co believes that India's manufacturing sector has the potential to create up to 90 million jobs by 2025. Today, the sector generates about 45 million jobs, 80 per cent of which are in the unorganised segment.

India is increasingly adopting global approach to become a strategic player on international platform. Entry of foreign companies in manufacturing industry has anchored technology-based orientation which is subsequently helping India create a core and contemporary manufacturing sector, fed by ancillary manufacturers that rely on simple technical skills.

Deloitte’s global index, 2013, for 38 nations, has ranked India the fourth most competitive manufacturing nation, behind China, the US and Germany. Not only this, but even the Global Manufacturing Competitiveness Index, 2013, based on a survey of CEOs, executives and other officials of 550 global manufacturing companies, has positioned India as second five years down the line, next only to China.

Growth Trend

The HSBC India Manufacturing Purchasing Managers' Index (PMI) - a measure of factory production - stood at 50.1 in May 2013. The official data showed that the Indian economy grew 4.8 per cent in the January-March 2013 quarter. Manufacturing sector recorded a year-on-year (y-o-y) growth at 2.6 per cent in the three months to March 2013.

The survey indicated that orders from abroad came in at a faster pace than in April 2013.

Manufacturing: Key Developments and Investments

  • Bosch Rexroth, manufacturer of hydraulic components and systems (which are used in machinery applications and engineering, factory automation and mobile applications), has commenced operations at its new plant in Sanand with an investment of Rs 280 crore (US$ 49.07 million). The company intends to acknowledge the specific regional product and system requirements through this new facility and it is not only expanding production but also stepping up sales and development.
    The company, present in India for over 35 years, also plans to establish an additional project at its old site in Vatva in Ahmedabad.
  • Japanese electronics goods major Panasonic Corporation has decided to invest Rs 1,500 crore (US$ 262.89 million) in India over 2013-16 and restructure its operations. The company intends to introduce new products and form new alliances with Indian business groups to increase its market share and beat competition. While laying sound focus on local manufacturing and expand production processes, the company will continue focusing on developing India-specific product innovations. Panasonic aims to increase the contribution of local manufacturing to as much as 60 per cent of overall sales from the current 46 per cent.
  • The Netherlands-based coordinated design bathroom company Coram International, is set to commence operations in India from July 2013. The company plans to set up a manufacturing facility for its flagship products in India as it foresees a good potential here. “India is likely to emerge as the manufacturing base for our operations in Asia over the next few years,” said Niels Pilaar, CEO, Coram International.
    Coram has decided to shift its focus on Indian market owing to the country’s huge population, coupled with affinity towards European designs. India would be the first country outside Europe where Coram is planning to establish a manufacturing facility. At present, it has production units in Holland, Poland, the UK, Germany, France and Italy.
  • Helical Auto Technology India Pvt Ltd, a subsidiary of the UK-based Helical Technology Ltd, has recently established a modern manufacturing unit in Pune at an investment of around Rs 16 crore (US$ 2.80 million). The new plant would have an annual installed capacity of four million units. The company also plans to design parts of some components, particularly to cater Indian customers.