Manufacturing has emerged as one of the high growth sectors in India. Prime Minister of India, Mr Narendra Modi, launched the ‘Make in India’ program to place India on the world map as a manufacturing hub and give global recognition to the Indian economy. Government aims to create 100 million new jobs in the sector by 2022.
The sector’s gross value added (GVA) at current prices was estimated at US$ 348.53 billion as per the second advanced estimates of FY21. The IHS Markit India Manufacturing Purchasing Managers Index (PMI) reached 55.5 in April 2021 from 55.4 in March 2021. The manufacturing GVA accounts for 19% of the country's real gross value added.
As per the latest survey, capacity utilisation in India’s manufacturing sector stood at 66.6% in the third quarter of FY21.
The manufacturing component of the IIP stood at 116.9 between April 2020 and March 2021.
According to the Ministry of Statistics & Programme Implementation, India’s industrial output measured by the Index of Industrial Production (IIP) stood at 143.4 in March 2021.
With the help of Make in India drive, India is on a path of becoming the hub for hi-tech manufacturing as global giants such as GE, Siemens, HTC, Toshiba, and Boeing have either set up or are in process of setting up manufacturing plants in India, attracted by India's market of more than a billion consumers and an increasing purchasing power.
In May 2020, the Government of India increased FDI in defence manufacturing under the automatic route from 49% to 74%.
India has become one of the most attractive destinations for investment in the manufacturing sector. Some of the major investments and developments in this sector in the recent past are:
The Government of India has taken several initiatives to promote a healthy environment for the growth of manufacturing sector in the country. Some of the notable initiatives and developments are:
The government approved a PLI scheme for 16 plants for key starting materials (KSMs)/drug intermediates and active pharmaceutical ingredients (APIs). The establishment of these 16 plants would result in a total investment of Rs. 348.70 crore (US$ 47.01 million) and generation of ~3,042 jobs. The commercial development of these plants is expected to begin by April 2023.
As part of efforts to expand its smartphone assembly industry and improve its electronics supply chain, the government, in March 2021, announced funds worth US$ 1 billion in cash to each semiconductor company that establishes manufacturing units in the country.
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:
India is an attractive hub for foreign investments in the manufacturing sector. Several mobile phone, luxury and automobile brands, among others, have set up or are looking to establish their manufacturing bases in the country.
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$ 2.5 trillion along with a population of 1.32 billion people, which will be a big draw for investors. The Indian Cellular and Electronics Association (ICEA) predicts that India has the potential to scale up its cumulative laptop and tablet manufacturing capacity to US$ 100 billion by 2025 through policy interventions.
With impetus on developing industrial corridors and smart cities, the Government aims to ensure holistic development of the nation. The corridors would further assist in integrating, monitoring and developing a conducive environment for the industrial development and will promote advance practices in manufacturing.
References: Central Statistics Office, FICCI, Economic Survey of India, DPIIT, Media sources, Ministry of Skill Development and Entrepreneurship
Note: Conversion rate used in May 2021, Rs. 1 = US$ 0.014
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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