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Manufacturing Sector in India

September, 2014


As per global management consulting firm McKinsey and Company, India’s manufacturing sector could touch US$ 1 trillion by 2025. The burgeoning demand in the country and the multinational corporations’ desire to establish low-cost plants in India can contribute to this. There is potential for the sector to account for 25-30 per cent of the country’s GDP and create up to 90 million domestic jobs, by 2025.

India’s growing economy offers domestic entrepreneurs and international players many opportunities to invest. The country’s government, realising the significance of the manufacturing industry to India’s industrial development, has taken necessary steps to increase investment in the sector.

India’s growth in the manufacturing sector over the last decade has been good. It was ranked the fourth most competitive manufacturing nation in Deloitte’s global index for 38 nations, in 2013. Its economy also experienced significant expansion during the period 2006-2011, achieving a five-year compound annual growth rate (CAGR) of 7.8 per cent.

Market size

Manufacturing activities in India rose the most in 17 months in July 2014, on increased orders, as per the HSBC Purchasing Managers' Index (PMI). PMI was at 53 points in July from 51.5 in June.

With investors gaining more confidence in India’s economy, the country’s manufacturing sector could grow by up to 14 per cent, according to the government. India witnessed 15 per cent growth in the manufacturing sector in FY07. "Therefore, achieving 14 per cent growth is not impossible," as per Mr Ajay Shankar, National Manufacturing Competitiveness Council's member secretary.

The Indian chemical industry is the 12th largest producer in the world and third largest in Asia, in terms of volume production.

Electronics goods production in India is expected to touch US$ 104 billion by 2020. The production grew at a CAGR of 14.4 per cent during the period FY07-13. The country’s electronics market is anticipated to grow to US$ 400 billion by 2020 and expand at a CAGR of 24.4 per cent during the period 2012-2020.


Pidilite Industries Ltd has approved the acquisition of adhesive business of Blue Coat Pvt Ltd for a cash consideration of Rs 263.57 crore (US$ 43.08 million).

Toshiba Group plans to make India the design, manufacturing and export hub for its lighting business, and multiply the local headcount to design lights for planned smart cities airports, stadiums, highways, warehouses and factories, said Mr Yoichi Lbi, President & CEO, Toshiba Lighting & Technology Corporation.

Chemical manufacturer Deepak Nitrite Ltd plans to invest Rs1,200 crore (US$ 196.18 million) to establish a plant for manufacturing phenol and acetone in Dahej, Gujarat. The capacity of the phenol plant will be 200,000 tonnes per annum (MTPA) and that of acetone will be 120,000 MTPA.

Sesa Sterlite will spend up to Rs 8,000 crore (US$ 1.31 billion) over the next three to four years to expand its Lanjigarh refinery in Odisha, following consent from villagers. The company will now produce 6 MT of alumina from the present capacity of 1 MT, as per the Odisha government.

Lanco Industries has lined up a Rs 325 crore (US$ 53.13 million) expansion plan to produce ductile iron pipes of smaller diameter. The company will add a capacity of 100,000 tonnes of pipes in the size range of 100 mm-300 mm. The new project will take Lanco's total capacity to 325,000 tonnes per annum. 

Tide Water Oil Co (India), a lubricant manufacturer, has signed an agreement with Japan's JX Nippon Oil & Energy Corp to form a joint venture (JV) company in India - JX Nippon TWO Lubricants India. The companies will enjoy equal stake in the new entity, as per a statement by Tide Water Oil. The JV will manufacture, sell, market, and distribute the 'Eneos' brand of lubricants in India, Nepal, Bangladesh and Bhutan.

Glenmark Pharmaceuticals plans to establish a plant in North Carolina, US, which will be its first manufacturing facility in North America. The company will start work on an oral solid unit before building manufacturing units for injectables and topicals. “Our plan to set up a new manufacturing facility in the US underlines the fast-paced growth the company has witnessed in a short span of eight years in the US, and our long-term commitment to the country,” as per Mr Glenn Saldanha, Chairman, Glenmark Pharmaceuticals. 

Siemens has announced the launch of operations at the Technology & Application Center (TAC) at Peenya, the industrial area of Bengaluru. This facility, the first in the country by Siemens, will facilitate machine tool manufacturers and end users to enhance productivity by testing machining techniques in real-world conditions.

Kinfra’s proposal to develop an electronics manufacturing centre in Kochi has received in-principle approval from the Department of Electronics & IT Industry. The detailed project report will still have to be submitted for getting the final approval to establish the electronic cluster (EMC) with quality infrastructure at par with international standards, in the 75 acres owned by Kinfra in Kakkanad.

Government Initiatives

India and China have formalised an agreement to take forward the establishment of the China-dedicated industrial clusters in India, with the objective to enhance Chinese investment in infrastructure and manufacturing. The agreement was signed during Indian Vice-President, Mr Hamid Ansari’s visit to Beijing. Officials have described the Memorandum of Understanding (MoU) as more ‘an enabling framework’ than a concrete agreement, as of now.

The Indian government has given in-principle approval to five National Investment and Manufacturing Zones (NIMZs) outside the Delhi-Mumbai Industrial Corridor (DMIC) region. The zones include Nagpur in Maharashtra; Tumkur in Karnataka; and Chittoor, Medak and Prakasam in Andhra Pradesh. The state governments have to first acquire the land prior to any investments being made in the approved zones.

In accordance with the vision of ‘Make in India’, the Cabinet Committee on Economic Affairs (CCEA) has cleared a scheme of Rs 931 crore (US$ 152.2 million) in the capital goods sector.

Road Ahead

India’s manufacturing sector is vital for its economic progress. Presently, the sector is an attractive hub for foreign investments. Several mobile phone, luxury and automobile brands, among others, have set up or are looking to establish their manufacturing bases in the country. Hi-tech exports are also predicted to enhance India’s manufacturing sector; they witnessed a CAGR of 26 per cent during the period 2007-2011, with exports reaching US$ 20.9 billion from US$ 8.1 billion in 2007. Pharmaceuticals and electronic goods dominate exports of hi-tech products, with the share of electronics growing nearly twofold in the period 2007-2011, according to an industry study.

Exchange Rate Used: INR 1 = US$ 0.0163 as on September 25, 2014

References: Media Reports, Press Releases, McKinsey Publication, Deloitte Report