Make in India: A thrust into India’s Manufacturing and Export Domain

Introduction
Make in India, launched in the year 2014, is to transform the country into a leading global manufacturing and investment destination. This initiative is an open invitation to potential investors and partners across the world to participate in the growth story of 'New India'. Make in India has made substantial achievements in 27 sectors. These also include the strategic sectors of manufacturing and services.

The main objectives of the Make in India Initiative are:

• To attract foreign investment for new industrialization and to develop the already existing industry base in India to overtake China. Targeting 12-14% annual manufacturing sector growth in the medium term.
• To increase the share of the manufacturing sector in the country's GDP from 16% to 25% by the year 2022.
• To create 100 million additional jobs by the year 2022.
• To promote export-based development.

The Aatmanirbhar Bharat Abhiyan, Make in India and the Production-Linked Incentive (PLI) became fundamental stepping-stones to shaping India as an efficient, equitable, and resilient manufacturing hub. The PLI scheme, as its name reflects, is meant to provide companies incentives on incremental sales from products manufactured in domestic units.

Production Linked Initiative (PLI) Scheme
The scheme was originally designed for FY20 for a few select industries such as mobile phones and allied equipment manufacturing, pharmaceutical ingredients, and medical devices. This was implemented by the Ministry of Electronics and Information Technology (MEITY) and the Department of Pharmaceuticals with a financial outlay of Rs. 51,311 crores (US$ 7,089 million) to be used over a five-year period. In FY2020, the scheme benefitted ~150 manufacturing units, generating incremental sales of Rs. 46,400 crores (US$ 6,187 million) and showcased the significant potential for additional employment over the next eight years.

As a result, the scheme has been expanded to accommodate an additional 10 ‘sunrise’ sectors to boost the economy and India’s self-reliance. This initiative was announced by the Union Finance Minister, Ms. Nirmala Sitharaman, during the Atmanirbhar Bharat 3.0 Stimulus Package for FY20–21, with an estimated allocation of Rs. 145,980 crores (US$ 20,169 million) spread across five years.

The bulk of the exports will come from large-scale electronic manufacturing, which is dominated by mobiles. Exports will account for 48% of the sales value of Rs. 28.9 trillion (US$ 351 billion) committed by companies across nine Production Linked Incentive (PLI) schemes spanning various sectors, based on their commitments to the government.

Through their implementation, it is hoped that economies of scale are created so that domestic manufacturing becomes competitive in India. The resultant benefits include job creation, export capabilities, and lessening the import dependency – particularly in critical sectors and high-tech goods. 

It is envisaged that India’s total industrial production will increase by over US$ 520 billion during the period covering PLI policy implementation. Additionally, the government is also working on reducing the compliance burden, improving the ease of doing business, creating multi-modal infrastructure to reduce logistics costs, and constructing district-level export hubs.

Impact of the Make in India Scheme

There are three key features to the scheme added to PLI:

• Attracting record FDI inflow
  In the first year of the 'Make in India' scheme, FDI inflows stood at US$ 45.15 billion. The year 2021-22 recorded the highest-ever FDI at US$ 83.6 billion and India is on track to attract US$ 100 billion FDI in the current financial year, according to a press release from the commerce ministry.
• Improving toy exports, and reducing imports
  To reduce the import of foreign-made toys and enhance India's ability to manufacture toys domestically, the Basic Customs Duty on the import of toys was increased from 20% to 60%. Initiatives such as The India Toy Fair 2021, Toycathon 2021, and Toy Business League 2022 have been conducted to encourage innovation in this sector. The Indian toy industry has grown, boasting of export of US$ 326 million (Rs 2,601.5 crore) of toys in FY21-22, which is an increase of over 61% over US$ 202 million (Rs 1,612 crore) in FY18-19. The import of toys in FY21-22 has reduced by 70% to US$ 110 million (Rs 877.8 crore), compared to imports worth US$ 371 million (Rs 2,960 crore) in 2018-19.
• Ensure ease of doing business
  A Phased Manufacturing Programme along with a reduction in corporate taxes, public procurement orders, and the National Single Window System (NSWS), which was soft-launched in September 2021, have increased the ease of doing business. Additionally, the launch of the Prime Minister’s 'Gatishakti' programme to ensure multimodal connectivity to manufacturing zones in the country has enhanced access to markets and reduced logistics costs.

Exports: Make in India
India reached US$ 418 billion in manufacturing exports in FY22 with rapid growth over the last 2 years. By 2028, it is expected that India will reach 1 trillion in manufacturing exports. The manufacturing share of GDP in India is estimated to increase from 15.6% currently to 21% by 2031 and, in the process, double India’s export market share.

India’s textile and apparel exports (including handicrafts) achieved US$ 44.4 billion in FY22 showing a YoY increase of 41%. Exports of readymade garments which included cotton accessories recorded US$ 6.19 billion for FY22. With new agricultural reforms, cotton production in India is said to reach 7.2 million tonnes by 2030.

India exports inorganic and organic chemicals, tanning and dyes, agrochemicals, plastics, synthetic rubber, filaments, etc. In FY 2022-23, exports of chemicals and petroleum products stood at US$ 8.24 billion. The export growth of chemicals has been achieved because of a surge in shipments of organic, and inorganic chemicals, agrochemicals, dyes, and dye intermediates, and specialty chemicals.

Pharmaceuticals consist of OTC medicines, generics, APIs, vaccines, biosimilars, and Custom Research Manufacturing (CRM) as its key segments. Formulations and Biologics constituted a major portion of India’s exports with a share of 73.31% followed by drug intermediaries and bulk drugs during 2021-22.

In FY22, iron and steel exports (finished steel) stood at 13.49 MT. India was the world’s second-largest producer of crude steel, with an output of 10.14 MT in April 2022. Infrastructure, industrial parks, adequate power, and quick administrative processes are required to be in place at the state level. In a remarkable achievement, India’s exports of toys registered a tremendous growth of 636%.

The Road Ahead
There is a surge in demand for computers, phones, TV, and kitchen appliances, which is giving a push to manufacturing in India. With rapid urbanization, and money to spend (increased disposable income), people are spending more on household appliances and definitely mobile phones. Hence, manufacturers certainly have a bright future. The union government has exempted taxes on certain components and parts to promote manufacturing in India. Apart from these, there are export incentives and reduced customs duties on raw material imports. Several other measures have been taken to give the Make-in-India plan a boost and promote the manufacturing of electronic items which were earlier imported from other countries and assembled in India. The transition to 5G, the introduction of artificial intelligence, and the rollout of IoT are driving the demand, as people increasingly adapt to technology. While everything is still in the initial phase, the transition is expected to be quick. Hence, Indian manufacturers who enter the segment will gain an advantage.