Indian Manufacturing Industry Analysis

The sector’s Gross Value Added (GVA) at basic prices based at current prices is estimated at Rs 2,818,218 crore (US$ 403.23 billion) in FY19PE. GVA of the sector has recorded a CAGR of 4.29 per cent FY12-19. During 2018-19, Index of Industrial Production for manufacturing sector grew 3.50 per cent. In FY20 (till June2019), IIP grew at 3.1 per cent. Strong growth was recorded in production of construction goods (6.4 per cent), tobacco products (13.5 per cent) and computer, electronic and optical products (10.6 per cent). India’s Index of Eight Core Industries advanced 4.3 per cent year-on-year during 2018-19.

India’s manufacturing PMI stood at 52.5 in July 2019. Also, companies start to spend more on hiring and anticipate good growth in prospects.

The electronic goods industry is one of the fastest growing industries and is expected to be worth Rs 27,95,600 crore (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 Rs 11,881 crore (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 28,54,000 crore (US$ 395.56 billion).

India’s merchandise exports grew 9.78 per cent year-on-year to Rs 21,16,548.76 crore (US$ 302.84 billion) in 2017-18. Merchandise exports recorded 9.06 per cent year-on-year growth to reach Rs 23,13,498.78 crore (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 Rs 27,95,600 crore (US$ 400 billion) electronics manufacturing industry in the country by 2025. 32 per cent growth rate has been targeted globally in next five years.

PE – Provisional Estimate