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Introduction

India is becoming the hub for manufacturing in the world. India’s manufacturing sector is growing due to China plus one strategy by West and European nations, growing competitiveness, Increased demand for Indian goods in the global market, Skilled workforce, favorable business environment, etc.

India’s goal of becoming the manufacturing hub of the world is gaining traction as more and more companies are starting to invest in India. Major manufacturing hubs in India are in Maharashtra, Gujrat, and Tamil Nadu.

India’s manufacturing sector is a lucrative opportunity for investors. Experts feel that India has an opportunity to stimulate economic growth and job creation by developing globally competitive manufacturing hubs.

India ranked second in the 2021 Global Manufacturing Risk Index, overtaking the United States of America as a top global manufacturing destination. India’s ranking was driven mainly by cost competitiveness.

In 2020, India ranked third and the US ranked second. China retained its first position in the 2021 Global Manufacturing Risk Index.

The baseline scenario for the Global Manufacturing Risk Index gives equal weight to a country’s operating conditions (40%) and cost-competitiveness (40%), while risk also matters (20%).

The annual growth rate of manufacturing production in India was 11.4% in 2022. In June 2023, manufacturing production increased 3.1% year-on-year. The manufacturing sector’s share of GDP in India was around 14% in 2021.

The compound annual growth rate (CAGR) for manufacturing in India is expected to be 4.36% from 2023–2028.

Government Initiatives

Following are some government initiatives from the Government of India to grow the manufacturing sector in India to fuel up the goal of becoming the manufacturing hub for the world. 

1. Make in India

2. Atmanirbhar Bharat Abhiyan

3. National Manufacturing Policy

4. Industrial Corridor Development

5. Invest India

6. Startup India

7. Skill India

8. National Capital Goods Policy

9. MSME Cluster Development Program

10. National Investment and Manufacturing Zones (NIMZs)

Click below to read the full article on the government initiatives to grow the manufacturing sector in India.

Part 1 | Part 2

Infrastructure Development

India needs to improve its infrastructure in order to improve transportation(including railways, roads, aviation, and shipping) and reach its goal of a $5 trillion economy by 2025. Development in the infrastructure leads to fast and efficient transportation of goods and increase the entrepreneurial mindset of the peoples due to good infrastructure in the local area. 

Under Budget 2023-24, capital investment outlay for infrastructure is being increased by 33% to Rs.10 lakh crore (US$ 122 billion), which would be 3.3 percent of GDP and almost three times the outlay in 2019-20.

Under the National Infrastructure Pipeline (NIP), projects worth Rs. 108 trillion (US$ 1.3 trillion) are currently at different stages of implementation.

In order to make India as a Manufacturing Hub for the World, then we should make our infrastructure ready for the development.

Skilled Workforce

The 2015 Report on National Policy on Skill Development and Entrepreneurship estimated that only 4.7% of the total workforce in India had undergone formal skill training compared with 52% in the US, 80% in Japan, and 96% in South Korea. 

A skill gap study conducted by the National Skill Development Corporation (NSDC) over 2010-2014 indicated an additional net incremental requirement of 10.97 crores of skilled manpower in 24 key sectors by 2022. 

In addition, the 29.82 crore farm and nonfarm sector workforce needed to be skilled, reskilled, and upskilled.

To fill this gap in skilling, the Indian government has launched many schemes and initiatives such as Pradhan Mantri Kaushal Vikas Yojana (PMKVY), Udaan, Apprenticeship Training under the Apprentices Act, 1961, Pradhan Mantri ‘YUVA’ Yojana, SANKALP, STRIVE, etc.

Under these schemes and initiatives government targets to skill the workforce of India. Having skilled manpower is an asset to any country, which attracts foreign investors to invest in India, which improves the productivity of the country, and improves the employability of people, which will tend to the overall development of the country and its GDP.

Industry Sectors Driving Transformation

There are many sectors in the manufacturing industry that are growing rapidly in India. These are Food and Beverages manufacturing, Automobile manufacturing, Consumer electronics manufacturing, Pharmaceuticals manufacturing, and Textile and Steel Manufacturing. 

Food and Beverages Manufacturing

This sector provides over 13 million people employment in India. This industry is very fast growing as India is shifting towards packaged foods and beverages.

Automobile Manufacturing

This industry in India accounts for 7.1% of the country’s GDP and employs over 29 million people. India is also the world’s second-largest market for vehicles, Total Passenger Vehicle Sales increased from 30,69,523 to 38,90,114 units. Sales of Passenger Cars also increased from 14,67,039 to 17,47,376, Utility Vehicles from 14,89,219 to 20,03,718, and Vans 1,13,265 to 1,39,020 units, in FY-2022-23, compared to the previous year.

Two Wheelers sales increased from 1,35,70,008 to 1,58,62,087 units, in FY-2022-23, compared to the previous year.

Consumer Electronics

The Indian consumer electronics market was valued at Rs 5,363.70 billion in 2021. It is expected to reach INR 12,898.89 Bn by 2027, expanding at a compound annual growth rate (CAGR) of ~15.77% during the 2022 – 2027 period. 

The industry includes segments like – Smartphones, PCs, Laptop, Tablets, Televisions, Air Conditioners, Refrigerators, and Washing Machine. The smartphone segment held the largest share of 52.38% in 2021, within the consumer electronics market, which is estimated to reach ~52.53% by 2027.

Textile Manufacturing

The Indian textile industry is the second largest in the world, with over 3,400 textile mills. The industry is the second largest employer in India, providing direct employment to over 35 million people. In 2022, India exported $44.4 billion worth of textiles and clothing.

The Indian textile and apparel market was valued at $172.3 billion in 2022. Analysts expect the market to grow at a CAGR of 14.45% between 2022 and 2028, reaching $387.3 billion by 2028.

India is one of the largest producers and consumers of cotton in the world. It has the largest cotton acreage, with 12.4 million hectares under cultivation, which is about 36% of the global total.

Steel Manufacturing

India is the world’s second-largest producer of crude steel. In 2021, India produced 118.20 million tonnes of crude steel, which is a 17.9% increase from the previous year.

In 2022-23, India’s output jumped 4.2% to a record 125.3 million tonnes. India’s domestic steel demand is estimated to grow annually by 7.5% to reach 128.85 million tonnes in the current financial year. Demand is expected to rise further by 6.3% to reach 136.97 mt in the next financial year 2024-25.

Foreign Direct Investment (FDI)

Foreign direct investment (FDI) is a major source of economic development for India. In 2021, India was the world’s seventh-largest recipient of FDI. In 2022, India received the highest-ever FDI inflows of $84.8 billion. This includes $7.1 billion in FDI equity inflows in the services sector.

Foreign direct investment (FDI) in India’s manufacturing sector increased by 76% in 2021-22, to $21.34 billion. This is compared to $12.09 billion in 2020-21. India’s overall FDI inflows in 2021-22 were $84.83 billion, the highest ever. This FDI came from 101 countries and was invested across 31 states and 57 sectors.

Global Trade and Export for the manufacturing sector

India’s manufacturing exports reached $418 billion in the fiscal year 2022 (FY22). This is a 40% increase from the previous year and a surge compared to the pre-pandemic peak of $328 billion in FY18–19. India’s total merchandise exports in FY2022–2023 are estimated to be $447 billion, the highest ever. This 6% year-on-year growth is in line with other global manufacturing hubs, such as Hong Kong, China, Vietnam, and Taiwan.

India’s exports of toys registered a 636% growth from April–August 2022. The toy industry in India is one of the fastest growing globally. It’s expected to grow to $3 billion by 2028, with a compound annual growth rate of 12% between 2022 and 2028. In 2021, the toy manufacturing business in India was worth $1.35 billion. The profit margin for toy manufacturing is around 25 to 30% annually.

The biggest segments of India’s Manufacturing Production:

• Basic metals (13%)
• Coke and refined petroleum products (12%)
• Chemicals and chemical products (8%)
• Food products (5%)
• Pharmaceuticals, medicinal chemical and botanical products (5%)
• Motor vehicles, trailers and semi-trailers (5%)

Case Studies

Tata Motors:

• Background: Tata Motors is one of India’s largest automobile manufacturers, known for producing a wide range of vehicles, including commercial trucks, passenger cars, and electric vehicles. Tata motors has contributing huge in making India as a manufacturing hub of the World
• Success Story: Tata Motors successfully expanded its global presence through strategic acquisitions such as Jaguar Land Rover (JLR) in 2008. JLR’s premium vehicles helped Tata Motors enter global markets and enhance its reputation.

Reliance Industries Limited:

• Background: RIL is a conglomerate with interests in petrochemicals, refining, telecommunications, and retail. Its petrochemical and refining segments are crucial to India’s manufacturing sector.
• Success Story: RIL’s massive investments in petrochemical and refining capacities have made India self-reliant in these sectors and enabled it to export products globally. Their innovations, like the world’s largest oil refinery in Jamnagar, have significantly contributed to India’s manufacturing prowess.

Hero MotoCorp:

• Background: Hero MotoCorp is the world’s largest manufacturer of two-wheelers, producing motorcycles and scooters.
• Success Story: Hero MotoCorp’s emphasis on research and development, fuel-efficient technology, and cost-effective manufacturing processes has helped it maintain a dominant position in the Indian and global two-wheeler market.

Future Prospects

India’s manufacturing industry is expected to be worth $1 trillion by 2030 and $20 trillion by 2047. The industry will grow at an 11% CAGR between 2020 and 2030.

Factors affects the growth of Indian manufacturing Industry are:

• Government Initiatives and its implementation
• Infrastructure Development
• Skilled Labour
• Consumer spending

The Indian government has emphasized the future growth of manufacturing by initiating the National Manufacturing Policy. The policy’s target is to achieve a 25% share of GDP and create 100 million additional jobs in the manufacturing sector by 2025.

Conclusion

India’s journey to become the global manufacturing hub has been remarkable. Government of India is taking the necessary steps to increase the production capabilities of India, like Make in India, Atmanirbhar Bharat, PLI schemes, etc. The overall trade deficit of India in 2022 is $122 Billion. And 36% of this trade deficit is with China. That shows that India is very much dependant on China. So in order to decrease it dependency with China, India must produce goods in India and increase its export. So that why manufacturing sector in India places a very important role in it. 

The MSME sector, Indian startups, Agriculture sector, Electronics industry of India has the biggest impact on the manufacturing growth of the India. 

From last 10 years government is investing in the Infrastructure, which will improve the transportation efficiency. It will eventually attract the manufacturers of India to produce more, invest more and export more. 

According to the forcast numbers, India is moving rapidly toward becoming the manufacturing hub of the world. It showing positives signs as government, investors, and entrepreneurs of India are very much bullish on the growth of the Indian Manufacturing sector in the upcoming years. 

Thank you for reading.

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