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Indian Manufacturing Industry Analysis

November, 2020

The sector’s Gross Value Added (GVA) at current prices was estimated at US$ 350.27 billion as per the first advanced estimate of FY21. The manufacturing GVA accounts for 19% of the country's real gross value added. The IHS Markit India Manufacturing Purchasing Managers Index (PMI) increased to 57.7 in January 2021 from 56.4 in December 2020.

As per the latest survey, capacity utilisation in India’s manufacturing sector stood at 63.3% in the second quarter of FY21.

According to the Ministry of Statistics & Programme Implementation, India’s industrial output, measured by the Index of Industrial Production (IIP), stood at 135.2 in January 2021. In January 2021, industrial output indices for the mining, manufacturing and electricity sectors stood at 119.7, 135.1 and 164.2, respectively.

Overall merchandise exports stood at US$ 200.80 billion between April 2020 and December 2020.

The electronic goods industry is one of the fastest growing industries and was expected to be worth Rs. 27.96 lakh crore (US$ 400 billion) by 2020. The Government is working on an export-oriented policy for electronic products. The idea behind this policy is to promote greater export of electronics and drive larger investments by setting up port-based electronic manufacturing clusters.

The Union Budget 2021-22 is expected to enhance India’s domestic growth in manufacturing, trade and other sectors. Development of a robust infrastructure, logistics and utility environment for the manufacturing sector is a primary focus field.

Some of these initiatives are as follows:

  • The Mega Investment Textiles Parks (MITRA) scheme to build world-class infrastructure will enable global industry champions to be created, benefiting from economies of scale and agglomeration. Seven Textile Parks will be established over three years.
  • The government proposed to make significant investments in the construction of modern fishing harbours and fish landing centres, covering five major fishing harbours in Kochi, Chennai, Visakhapatnam, Paradip, and Petuaghat, along with a multipurpose Seaweed Park in Tamil Nadu. These initiatives are expected to improve exports from the textiles and marine sectors.
  • The 'Operation Green' scheme of the Ministry of the Food Processing Industry, which was limited to onions, potatoes and tomatoes, has been expanded to 22 perishable products to encourage exports from the agricultural sector. This will facilitate infrastructure projects for horticulture products.
  • The Union Budget 2021-22 allocated funds of Rs. 1,000 crore (US$ 137.16 million) for the welfare of tea workers, especially women and their children. About 10.75 lakh tea workers will benefit from this, including 6.23 lakh women workers involved in the large tea estates of Assam and West Bengal.

Make in India 2.0 presently focuses on 27 sectors. The Government of India is continuously focusing on facilitating investment and establishing schemes to boost domestic investments in India. These include the following:

  • Production-linked incentive (PLI) was launched to establish global manufacturing champions across 13 sectors with an allocation of ~Rs. 1.97 lakh crore (US$ 27.02 billion) over the next five years (starting FY22).
  • The scheme has created a buzz among global investors. On February 16, 2021, Amazon India announced to start manufacturing electronic products in India, starting first with Amazon Fire TV stick manufacturing. The company plans to start manufacturing with contract manufacturer Cloud Network Technology, a subsidiary of Foxconn in Chennai by end-2021.

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