The Indian manufacturing industry generated 16-17% of India’s GDP pre-pandemic and is projected to be one of the fastest growing sectors. The machine tool industry was literally the nuts and bolts of the manufacturing industry in India. Today, technology has stimulated innovation with digital transformation a key aspect in gaining an edge in this highly competitive market.
Manufacturing is emerging as an integral pillar in the country’s economic growth, thanks to the performance of key sectors like automotive, engineering, chemicals, pharmaceuticals, and consumer durables.
Technology has today encouraged creativity, with digital transformation being a critical element in gaining an advantage in this increasingly competitive industry. The Indian manufacturing sector is steadily moving toward more automated and process-driven manufacturing, which is projected to improve efficiency and enhance productivity.
India has the capacity to export goods worth US$ 1 trillion by 2030 and is on the road to becoming a major global manufacturing hub.
With 17% of the nation’s GDP and over 27.3 million workers, the manufacturing sector plays a significant role in the Indian economy. Through the implementation of different programmes and policies, the Indian government hopes to have 25% of the economy’s output come from manufacturing by 2025.
India's manufacturing sector is poised to reach US$ 1 trillion by 2025-26, led by Gujarat, Maharashtra, and Tamil Nadu, fuelled by investments in automobile, electronics, and textile industries. Government initiatives like Make in India and PLI schemes drive growth, attracting FDI and enhancing industrial infrastructure.
The Indian manufacturing industry generates around 17% of India’s GDP and is projected to be one of the fastest-growing sectors.
India now has the physical and digital infrastructure to raise the share of the manufacturing sector in the economy and make a realistic bid to be an important player in global supply chains.
Manufacturing exports have registered highest ever annual exports of US$ 447.46 billion with 6.03% growth during FY23 surpassing the previous year (FY22) record exports of US$ 422 billion. By 2030, Indian middle class is expected to have the second-largest share in global consumption at 17%.
Propelled by growth in priority sectors and driven by favourable megatrends, India’s manufacturing sector has opened itself into new geographies and segments. Significant initiatives have been introduced under Aatmanirbhar Bharat and Make in India programmes to enhance India’s manufacturing capabilities and exports across the industries. Sector specific Production Linked incentives (PLI) have been introduced in the aftermath of the pandemic to incentivize domestic and foreign investments and to develop global champions in the manufacturing industry.
During FY24, India’s merchandise exports reached US$ 437.06 billion, down from US$ 451.07 billion in the previous fiscal.
Building on the competitive advantage of a skilled workforce and lower cost of labour, the manufacturing sector is also witnessing an increased inflow of capex and heightened M&A activity, leading to a surge in manufacturing output and resultant increased contribution to exports. The positive developments in the manufacturing sector, driven by production capacity expansion, government policy support, heightened M&A activity, and PE/VC-led investment, are creating a robust pipeline for the country’s sustained economic growth in the years to come.
For the month of April 2024, the Quick Estimates of Index of Industrial Production (IIP) with base 2011-12 stands at 147.7. The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of January 2024 stand at 130.8, 144.2, and 212.0, respectively.
India’s GDP surged in the January-March quarter, growing 7.8%, exceeding the 6.7% forecast. Manufacturing rebounded by 9.9%, contrasting with last year's contraction. GDP for the fiscal year hit 8.2%. IMF projects India as the world's fourth-largest economy by 2025.
The Index of Industrial Production (IIP) from April-March 2024 stood at 144.6.
At the aggregate level, the capacity utilization (CU) in the manufacturing sector increased to 74.7% in Q3:2023-24 from 74% in the previous quarter.
In Q2 FY24, the survey, which covered 380 manufacturers that account for about Rs. 4.8 trillion (US$ 58 billion) in sales, showed a robust 74% capacity utilization and improved future investment outlook during Q2.
India's manufacturing sector, driven by pharmaceuticals, motor vehicles, and cement, demonstrated resilience despite weak global demand in July-August 2023. PMI remained robust, reflecting domestic economic strength. Capacity utilization in manufacturing trended upwards, signalling positive investment prospects. RBI MPC maintained policy repo rate to control inflation.
India’s gross value added (GVA) at current prices was estimated at US$ 506.35 billion as per the quarterly estimates of the fourth quarter of FY24.
Chemicals, pharmaceuticals, electronics, automotive, industrial machinery, and textiles (among others) are expected to propel manufacturing exports to reach US$ 1 trillion by FY28.
Mobile phone production has increased fivefold in the past five years, and India is on track to emerge as a global exporting hub of mobile phones, which creates robust demand for integrated circuits and semiconductors. This will get a boost with the focus moving from assembly to developing expertise in end-to-end hardware component manufacturing.
DPIIT is boosting India's startup ecosystem and manufacturing sector by developing incubators to foster innovation, enhance competitiveness, create jobs, and strengthen the country's self-reliance and global trade position, with support from government initiatives and collaborations between corporates and startups.
India is planning to offer incentives of up to Rs. 18,000 crore (US$ 2.2 billion) to spur local manufacturing in six new sectors including chemicals, shipping containers, and inputs for vaccines.
The fourth industrial revolution, Industry 4.0 is poised to happen on a global scale, taking the automation of manufacturing processes to a new level by linking the cyber & physical, incorporating AI and enabling customized and flexible mass production technologies.
India's overall exports during the April-March period of 2023-24 are estimated to be US$ 776.68 billion, reflecting a marginal positive growth of 0.04% over the April-March period of 2022-23. In March 2024 alone, exports stood at US$ 70.21 billion.
Six new technology innovation platforms launched to enhance indigenous manufacturing. The platforms have been developed with the aim of facilitating globally competitive manufacturing in India.
These six platforms will work towards urging industries (including Original Equipment Manufacturers (OEMs), Tier 1, Tier 2 & Tier 3 companies and raw material manufacturers), start-ups, domain experts/professionals, R&D institutions, and academia (college and universities) to come up with technology solutions, suggestions and opinions on matters related to manufacturing technologies.
India has potential to become a global manufacturing hub and by 2030, it can add more than US$ 500 billion annually to the global economy.
India's GDP surged by 8.4% in the October-December quarter, surpassing expectations. GDP growth was driven by robust performances in the manufacturing and construction sectors, with the manufacturing sector expanding by 11.6% annually and the construction sector growing by 9.5%.
India’s gross value added (GVA) at current prices was estimated at US$ 770.08 billion as per the quarterly estimates of the first quarter of FY24.
India's manufacturing industry witnessed its fastest expansion in 16 years in March, with the HSBC final India Manufacturing Purchasing Managers' Index (PMI) soaring to 59.1, the highest since February 2008. This surge was fuelled by increased demand, resulting in notable improvements in new orders, output, input stocks, and job creation, as reported by S&P Global.
The manufacturing sector has seen some major developments, investments, and support from the Government in the recent past.
- The combined index of eight core industries stood at 150.3 for April-November 2023 against 139.4 for April-November 2022.
- The cumulative index of eight core industries increased by 8.6% during April-October 2023-24 over the corresponding period of the previous year.
- In FY23, the Manufacturing Purchasing Managers’ Index (PMI) in India stood at 55.6.
- In February 2024, the Manufacturing Purchasing Managers’ Index (PMI) in India stood at 56.9.
- In FY23, the export of the top 6 major commodities (Engineering goods, Petroleum products, Gems and Jewellery, Organic and Inorganic chemicals, and Drugs and Pharmaceuticals) stood at US$ 295.21 billion.
- The Employees' Provident Fund Organisation (EPFO) added 8.41 lakh people in December 2023.
- During the financial year 2022-23, around 1.39 crore net members were added by EPFO with an increase of 13.22% compared to the previous financial year 2021-22 wherein EPFO had added approximately 1.22 crore net members.
- India's overall exports during the April-February period of 2023-24 are estimated to be US$ 709.81 billion, reflecting a marginal growth of 0.83% over the April-February period of 2022-23. In February 2024 alone, exports stood at US$ 73.55 billion, showing a growth of 14.20% compared to the same month in the previous year.
According to Department for Promotion of Industry and Internal Trade (DPIIT), India received a total foreign direct investment (FDI) inflow of US$ 46.03 billion in FY23.
In the Interim Union Budget 2024-25, the Ministry of Defence has been allocated Rs. 621,541 crore (US$ 74.78 billion), marking a significant increase of approximately 4.72% from the previous allocation of Rs. 593,538 crore (US$ 71.41 billion).
In the interim budget 2024, the allocation for the Production Linked Incentive (PLI) Scheme for various sectors saw a substantial increase, with notable examples including a 360% rise to Rs 6,903 crore (US$ 830 million) for the Semiconductors and Display Manufacturing Ecosystem and a 623% surge to Rs 3,500 crore (US$ 421 million) for the Automobile sector.
Semiconductor associations IESA and SEMI signed a Memorandum of Understanding (MoU) in Bengaluru to establish India as a global manufacturing hub, focusing on talent development, policies, design, skilling, research, academia, and supply chains, leveraging SEMI's international network and IESA's expertise.
In FY24, India received a total foreign direct investment (FDI) inflow of US$ 46.42 billion.
In the interim budget 2024, there was commendable fiscal responsibility demonstrated alongside significant investments in infrastructure, including emphasis on affordable housing, clean energy, and technological advancement. Additionally, the budget allocated funds for the creation of a Rs 1-lakh crore (US$ 12 billion) innovation fund for sunrise domains, providing a substantial boost for the startup industry. Moreover, there was a notable focus on promoting the shift to electric vehicles (EV) through the expansion of EV charging networks, thereby offering opportunities for small vendors in manufacturing and maintenance.
Electronics, vehicle, and solar panel production account for around 80% of total manufacturing expenditure, with semiconductors/electronics value chain accounting for 50% of total expenditure in February 2022.
As per the survey conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI), capacity utilisation in India’s manufacturing sector stood at 72.0% in the second quarter of FY22, indicating significant recovery in the sector.
In September 2021, Prime Minister Mr. Narendra Modi approved the production-linked incentive (PLI) scheme in the textiles sector—for man-made fibre (MMF) apparel, MMF fabrics and 10 segments/products of technical textiles—at an estimated outlay of Rs. 10,683 crore (US$ 1.45 billion).
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.
To propagate Make in India, in July 2021, the Defence Ministry issued a tender of Rs. 50,000 crore (US$ 6.7 billion) for building six conventional submarines under Project-75 India.
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).
India's display panel market is estimated to grow from ~US$ 7 billion in 2021 to US$ 15 billion in 2025.
The outlook of the manufacturing sector looks on track with pandemic easing out.
The manufacturing sector of India has the potential to reach US$ 1 trillion by 2025. The implementation of the Goods and Services Tax (GST) will make India a common market with a GDP of US$ 3.4 trillion along with a population of 1.48 billion people, which will be a big draw for investors. With impetus on developing industrial corridors and smart cities, the Government aims to ensure holistic development of the nation.
