Unleashing the potential: Strengthening India’s manufacturing competitiveness

With India set to become the world’s third-largest economy by 2030, entailing the lead in macroeconomic indicators including the GDP Growth, Export Growth, Gross National Savings, enhanced Investments, it is imperative that manufacturing plays a pivotal role.1

In recent past the Geopolitical conflicts have been reshaping the world, disrupting global value chains. Further, India's geopolitical significance is growing, earning praise from international institutions, and there stands an opportunity to be the prominent piece in the global trade.

Extending a sharpened Industry focus to highlight and unfold the right pulse of the opportunity, FICCI set up an “India Manufacturing Leadership Forum” (IMLF) with the set of committed CEOs,  FICCI leadership, and Mckinsey.

McKinsey in its report identified that up to $4.6 Tn of annual trade flows could shift over the next 3-5 years and India is well-placed to capture this opportunity. There could be a potential $1 Tn of trade shift that could be impacted.

Blessed with high workforce and the country with one of the most cost-effective manufacturing labor, India can offer a strong cost advantage in labor as well as capex.

The findings also indicate that, compared to other global manufacturing hubs, India is in a favorable position with lowest infrastructure cost, speedy approvals on credit, electricity, construction permits and an encouraging environment for minority investors.

While there may be challenges and gaps, the preparedness to close the gaps with following accelerated measures are building the confidence towards manufacturing:

1.       Logistics infrastructure development addressing logistics costs through initiatives such as PM Gati Shakti and National Logistics Plan.

2.       Increased focus on multi-modal connectivity with the development of 35 large-scale multi-modal logistics parks, 200 Gati Shakti Cargo terminals, and commissioning dedicated freight corridors to promote rail traffic.

3.       Strong financial backing from the government to support manufacturing such as PLI schemes, newly introduced employment-linked incentives, credit guarantees, and tax reforms such as abolishing angel taxes.

4.       Emphasis on promoting creation of manufacturing clusters through development of industrial parks and innovation clusters. Around 100 cities with 12 “plug and play” parks by National Industrial Corridor Development Corporation announced in Budget 2024.

5.       Policy intervention with the Move towards a trust-oriented policy ecosystem.  Trust-based measures to decriminalize 3,400 minor technical and procedural defaults.

6.       Renewed policy focus on R&D and Innovation through operationalisation of the Anusandhan National Research Foundation (ANRF), and announcement of the INR 1 lakh crore fund for boosting private sector research spending.

The above steps are the few examples that manifest the intent and how we can come closer to the vision 2047, where manufacturing contributes to one-fourth of the GDP.

This is an ongoing journey, requiring a dipstick and re-calibration at consistent and well-measured milestones, where IMLF has offered to play a role to identify and work towards ongoing interventions for which both Industry and the Government collaboratively can make a difference towards the road ahead. 

The ILMF forum presented its first findings to the honorable Minister, for the sectors prioritised, across a combination of maturity levels that are aligned with India’s characteristics to capture value:

Automotive sector offering its maturity: The automotive sector has been a pioneer in setting up an example for the Indian Industry on how the Indian market could embrace technology and get the taste of manufacturing. Today, India’s automotive industry has significant headroom for growth, despite being the 3rd largest automotive market globally. With EV penetration expected to expand rapidly, there lies much scope for cost-competitive component manufacturing.

Electronics with the potential to cut across sectors and hence bring in qualitative and quantitative value through scale.

As India grows to become a USD 5+ Tr economy by FY26, the projected Electronics Production in India is expected to be USD ~300 Bn – with exports contributing to USD ~120 Bn. There lies an opportunity to expand into complex products and substitute imports, primarily display, camera modules, motherboards, precision, and medical components. PCBAs, semiconductors, and late-stage manufacturing emerge as potential opportunities.

Industry 4.0 is revolutionising manufacturing and supply chains. The digital transformation can further add significant value by unlocking the potential. Solutions like Robotic automation solutions: Automated quality control, advanced analytics, and machine learning models have proven to yield high impact in productivity contributing to Higher efficiencies and cost reductions. Scaling and replicating for higher impact with more investments beyond pilots will boost high-end efficient manufacturing.

India can emerge as a hub for chemicals manufacturing through improved access to feedstock and technology.

Building the Road Ahead as unfolding the opportunities and enhancing the enablers continues

Promote design-led manufacturing, encourage increased R&D activity, engaging SME, develop skills required for promoting R&D priorities and component localization, creation of Industrial parks, Renewable Energy power Infrastructure, Digitization, tech-enabled lighthouse culture and balanced duty structure, rationalizations of HSN codes, last mile logistics are a few key deliberations that cut across.