Manufacturing Sector in India
India ranked 30th on WEF global manufacturing index in 2017-18.

Manufacturing Sector in India

Latest update: June, 2018

  • Indian manufacturing sector’s Gross Value Added at basic prices based at current prices is expected at US$ 388.01 billion in 2017-18E.
  • Manufacturing sector is estimated to have grown at a CAGR of 4.34 per cent between FY12 and FY18.
  • The Wholesale Price Index, in respect of manufactured goods grew 4.4 per cent 2016-17.
  • Quarterly GVA at basic prices from manufacturing sector grew by 10.92 per cent in the third quarter of FY18.
Growth

Notes: FY – Indian Financial Year (April -March), E – Estimate, Exchange rate used is average for the Financial Year
Source: MOSPI, News Articles

  • The Index of Industrial Production (IIP) is prepared by the Central Statistics Office to measure the activity happening in three industrial sectors namely Mining, Manufacturing, and Electricity.
  • It is the benchmark index and serves as a proxy to gauge the growth of manufacturing in India since manufacturing alone has a weight of 77.63 per cent in the index.
  • The manufacturing component of the IIP recorded 4.4 per cent growth in FY17 and 8.7 per cent in January 2018.
  • The production levels are expected to pick up growth again as the Goods and Services Tax (GST) has finally been implemented.
Growth

Notes: FY18* - From April to January 2017-18
Source: Central Statistics Office

Last Updated: June, 2018

Introduction

Manufacturing has emerged as one of the high growth sectors in India. Prime Minister of India, Mr Narendra Modi, had 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. India is expected to become the fifth largest manufacturing country in the world by the end of year 2020*.

Market Size

The Gross Value Added (GVA) at basic current prices from the manufacturing sector in India grew at a CAGR of 4.34 per cent during FY12 and FY18 as per the second advance estimates of annual national income published by the Government of India.Under the Make in India initiative, the Government of India aims to increase the share of the manufacturing sector to the gross domestic product (GDP) to 25 per cent by 2022, from 16 per cent, and to create 100 million new jobs by 2022. Business conditions in the Indian manufacturing sector continue to remain positive.

Investments

With the help of Make in India drive, India is on the 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 increasing purchasing power.

As per Labour Bureau’s Quarterly Report on Employment Scenario, manufacturing sector added an estimated 89,000 jobs in the second quarter of 2017-18.

Cumulative Foreign Direct Investment (FDI) in India’s manufacturing sector reached US$ 73.70 billion during April 2000-December 2017.

India has become one of the most attractive destinations for investments in the manufacturing sector. Some of the major investments and developments in this sector in the recent past are:

  • As of May 2018, The Chatterjee Group (TCG) is planning to set up a Continuous Polymerisation (CP) unit and a spinning unit, which will act as forward integrated units for its petrochemicals subsidiary MCPI.
  • As of April 2018, Rallis India, a subsidiary of Tata Chemicals, is planning to undertake backward integration as its inputs have become costlier and the move will help the company to ease pressure on its profit margins.
  • For its Commercial Vehicles, Ashok Leyland is utilising machine learning algorithms and its newly created telematics unit to improve the performance of the vehicle, driver and so on.

Government Initiatives

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:

  • As of March 2018, Government of India is in the process of coming up with a new industrial policy which envisions development of a globally competitive Indian industry.
  • In Union Budget 2018-19, the Government of India reduced the income tax rate to 25 per cent for all companies having a turnover of up to Rs 250 crore (US$ 38.75 million).
  • Under the Mid-Term Review of Foreign Trade Policy (2015-20), the Government of India increased export incentives available to labour intensive MSME sectors by 2 per cent.
  • The Government of India has launched a phased manufacturing programme (PMP) aimed at adding more smartphone components under the Make in India initiative thereby giving a push to the domestic manufacturing of mobile handsets.
  • The Government of India is in talks with stakeholders to further ease foreign direct investment (FDI) in defence under the automatic route to 51 per cent from the current 49 per cent, in order to give a boost to the Make in India initiative and to generate employment.
  • The Ministry of Defence, Government of India, approved the “Strategic Partnership” model which will enable private companies to tie up with foreign players for manufacturing submarines, fighter jets, helicopters and armoured vehicles.
  • The Union Cabinet has approved the Modified Special Incentive Package Scheme (M-SIPS) in which, proposals will be accepted till December 2018 or up to an incentive commitment limit of Rs 10,000 crore (US$ 1.5 billion).

Road Ahead

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 and India is expected to rank amongst the top three growth economies and manufacturing destination of the world by the year 2020. 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.

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.

Exchange Rate Used: INR 1 = US$ 0.015 as on March 30, 2018

Notes: * - According to the Global Manufacturing Competitiveness Index published by Deloitte

 

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

Posters

Brand India Pharma

MANUFACTURING SECTOR INDIA

+ More >

Brand India Pharma

IBEF Publications

IBEF Publication

India Now Magazine


Towards a healthier India - Focus on accessibility, affordability, and quality

English

+ More Publications >

IBEF Publication

IBEF Blog - INDIA ADDA – PERSPECTIVES ON INDIA More

author_logo-ibef1.jpg INDIA'S GOVERNMENT E-MARKETPLACE: MAKING PROCUREMENT SIMPLE!
IBEF, Knowledge Centre

The Government e-Marketplace (GeM) is a national public procurement platform in India that was launched about two years back, in August 2016. Till date, the platform clai...

author_logo-ibef1.jpg Indian Logistics Sector: Shining bright!
IBEF, Knowledge Centre

The Indian logistics sector is on a big growth tide. According to the domestic rating agency ICRA, Indian logistics sector is expected to grow at a rate 8-10 per cent ove...

author_logo-ibef1.jpg India's Franchise Industry: The road so far and way forward!
IBEF, Knowledge Centre

Whether you are in a big metropolitan city or a smaller town, one look around you is bound to reveal bright signage with recognisable names all around. From heading to th...

author_logo-ibef1.jpg India: Strong in Tractor Manufacturing
IBEF, Knowledge Centre

In India, agriculture and its allied sectors are the primary source of livelihood for a large chunk of domestic population. In 2017, the Gross Value Added (GVA) in these...

author_Pragati_Khare1.jpg The role of HR in the Rise of India's Tech Industry!
Pragati Khare, Head HR, COMIO Smartphone

Improvements in human resources (HR) practices and technology are a key reason for the continuous rise of India's technology sector. However, the growth of the tech s...

author_logo-ibef1.jpg Indian BPM Industry: Way forward!
IBEF, Knowledge Centre

Most businesses are dynamic, with processes and objectives that are constantly developing. In order to keep the processes within a business streamlined and efficient as w...

ideas More

Ideas

Zuper: Dynamic Disruptor
Zuper is a B2B Software as a Service (SaaS) offering for organizations, irrespective of shape and size. It is the first in Asia to offer voice biometrics-based timesheet management of workforce. Zuper offers an end to end platform to bring together the power of people, process, product and promise. ...

JOIN IBEF.org

Join IBEF.org now. Enjoy FREE subscriptions downloads, updates and more.

Error

Already a member?
Login / Retrieve Password