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Indian Manufacturing Industry Analysis

April, 2019

The Gross Value Added (GVA) from the manufacturing sector is estimated at US$ 395.89 billion in FY19. During April-December 2018, GVA from manufacturing at current prices grew 12.4 per cent year-on-year to Rs 288.56 trillion (US$ 395.89 billion). During 2017-18, Index of Industrial Production for manufacturing sector grew 4.50 per cent. India’s Index of Eight Core Industries advanced 4.2 per cent year-on-year during 2017-2018.

Nikkei Manufacturing sector PMI of India increased to 52.6 in March 2019, indicating an expansion. Firms remain confident about strong underlying demand, successful advertising and the receipt of bulk orders, all of which are supporting sales growth.

The electronic goods industry is one of the fastest growing industries and is expected to be worth US$ 400 billion by 2020. Government is working on an export-oriented policy for Electronic products. The idea behind this policy is to promote greater exports of electronics and drive larger investments by setting up port-based electronic manufacturing clusters. Also, in October 2018, Ministry of Electronics and Information Technology had released a draft National Policy on Electronics.

The Government of India has been supportive towards this growth. It set up Electronic Hardware Technology Parks (EHTPs), Special Economic Zones (SEZs) and brought about a favourable climate for Foreign Direct Investment (FDI). The government has also increased liberalisation and relaxed tariffs to promote growth in the sector. In addition, it has given the nod to Modified Special Incentive Package Scheme (MSIPS) under which the central government will be offering up to US$ 1.7 billion in benefits to the electronics sector in next five years. Under the scheme, subsidy for investment in capital expenditure is provided to the extent of 20 per cent of investment in SEZs and 25 per cent of investment in non-SEZs.

The growing customer base and the increased penetration in consumer durables segment have provided enough scope for the growth of the Indian electronics sector. Also, digitisation of cable could lead to increased broadband penetration in the country and open up new avenues for companies in the electronics industry.

During April-January 2019, GVA from manufacturing at current prices grew 12.8 per cent year-on-year to Rs 28.54 trillion (US$ 395.56 billion).

India’s merchandise exports grew 9.78 per cent year-on-year to US$ 302.84 billion in 2017-18. Merchandise exports recorded 9.06 per cent year-on-year growth to reach US$ 331.02 billion in FY19.

In February 2019, the Union Cabinet passed the National Policy on Electronics (NPE) which has envisaged creation of a US$ 400 billion electronics manufacturing industry in the country by 2025. 32 per cent growth rate has been targeted globally in next five years.

Note: PE – Provisional Estimate

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