Prudent policies support manufacturing in India

New Delhi: The manufacturing sector has emerged as a major driver of economic growth and expansion in India, contributing significantly to GDP growth and creating employment opportunities for the growing young population.

The manufacturing sector contributes approximately 16-17% to India’s GDP. The strong growth of India’s manufacturing sector is supported by digital transformation and technological innovation in key sectors such as automotive, electronics, food processing, textiles, defense and pharmaceuticals. These sectors have played a key role in increasing the productivity and efficiency of the manufacturing sector in recent years, ensuring that India remains competitive in the global market.

India is the best performer among the world’s leading producers

India’s manufacturing activities show continued momentum from 2021 to 2024, with the Manufacturing PMI (annual averages) accelerating from 54.5 in 2021 to 56.8 in 2023. According to the Manufacturing PMI, India in 2021 was ranked sixth among the world’s top 10 producers, improved to 1st year 2022, 2023 and 2024 (January-March), reflecting a significant recovery in the manufacturing sector.

In 2022, India’s average PMI was 55.3, the highest among the world’s top 10 manufacturers, followed by the United States (53.4) and Japan (52.1). In 2023, India’s PMI rose to 56.8, followed by Mexico (51.2) and China (49.9). In recent months (January-March 2024), India’s PMI was 57.5, followed by the United States (51.6), Mexico (51.6) and Korea (50.6).

India has implemented robust policies to increase industrial production and exports of manufactured goods to become a global manufacturing hub. Policy initiatives such as Make in India, Productivity Linked Incentive (PLI), PM Mitra Textile Parks, Bulk Drug Parks and 43 Towns of Export Excellence have been strategically established to promote specific export sectors and build necessary infrastructure.

The establishment of the Indian Industrial Land Bank (IILB), the Industrial Park Rating System (IPRS) and the launch of the National Single Window System (NSWS) aim to facilitate ease of doing business and support sustainable growth in the manufacturing sector. Policy efforts focus on eliminating logistics gaps and bottlenecks to reduce logistics costs and increase efficiency.

The Make in India initiative launched in 2014 with the aim of facilitating investment, fostering innovation, building best-in-class infrastructure and making India a manufacturing, design and innovation hub has yielded fruitful results. It was one of the unique singles calling for a local initiative to promote India’s manufacturing domain to the world. Various government policies, such as a 15% tax rate for new manufacturing companies, have shown promising results. Despite the Covid-19 setback, the tax cut has spurred several new ventures.

In furtherance of India’s vision of becoming ‘Atmanirbhar’, Production Linked Incentive (PLI) schemes have been announced for 14 key sectors, aimed at boosting India’s manufacturing and export potential. The PLI program covering these key specific sectors is expected to increase the global competitiveness of Indian manufacturers and attract investments in the areas of core competencies and cutting-edge technologies; ensure efficiency? create economies of scale? increase exports and make India an integral part of global value chains.

Production development in India

The transformative development of the manufacturing sector has become the cornerstone of India’s growth. The manufacturing sector has shown strong growth from 3% in 2011-12 to 5.5% in 2023-24. The sector recorded the highest growth of 11.8% in 2021-2022 in the post-pandemic period, indicating a V-shaped recovery from the discouraging impact of the corona virus, bouncing back from the negative growth rate of -9.6% in the 2020-2020 pandemic period. 21.

In the pre-pandemic period (2017-18-2019-20), the manufacturing sector grew at an average rate of 2.4%, while in the post-pandemic period (2021-22) the sector grew at an average rate of 7.3%. by 2023-24) showing the proactive measures and policies taken by the government. Over the last thirteen years, the sector has shown an average growth rate of 3%.

Share of industry in gross value added (GVA)

The contribution of manufacturing industry to India’s Gross Value Added (GVA) has shown a remarkable trend in recent years. The share of the manufacturing industry in gross value added increased from 14.7% in 2019-20 to 17.3% in 2022-23.

This recent upward trend indicates a strong post-pandemic recovery, boosted by increased investment, supportive government policies and renewed growth in domestic and international demand for Indian manufacturing products. The sector’s ability to regain and even exceed its previous share underscores its key role in driving India’s economic growth and structural transformation.

Promising growth production sectors

The importance of the electronics industry is constantly growing as its applications become more popular, especially in the context of the country’s socio-economic development. The main growth drivers in this industry are mobile phones, consumer electronics and industrial electronics. In the mobile phone segment, India has emerged as the second largest mobile phone manufacturer in the world, with mobile phone production increasing from 6 crore units in 2015 to 31 crore units in 2022.

The semiconductor industry in India has become an integral part of almost all sectors, playing an integral role in various sectors. Positioned as a critical industry, it underpins the functionality of virtually all electronic devices, shaping the efficiency and intelligence of our everyday lives. India has emerged as a significant center for semiconductor design, with nearly 2,000 chips produced annually and over 20,000 engineers involved in various aspects of chip design and verification.

The textile sector is one of the most important sources of employment in India. An estimated 4.5 crore people, including a large number of women and rural people, are directly employed in this sector. The Indian pharmaceutical industry plays a significant role in the global pharmaceutical industry. India ranks 3rd in the world in terms of pharmaceutical production volume and 14th in terms of value. The country is the world’s largest supplier of generic medicines, with a 20 percent share of global supply by volume, and the world’s leading vaccine producer with a market share of 60 percent.

The gems and jewelry sector in India is one of the oldest and most important sectors, playing a significant role in the country’s economy and international trade. India, known for its deep-rooted tradition in jewelry making, has established itself as a key player in the global market for the production, refinement and export of gems and jewelry.

This rapidly growing export-focused sector relies heavily on labor, providing employment to over 2.5 million people.

The food processing sector plays a key role in India’s economic development by fostering strong synergies between industry and agriculture. With the growing demand for processed food products shaping consumer preferences, this sector opens up new horizons of prospects for both agricultural and industrial fields. This dynamic landscape supports the diversification and commercialization of agricultural practices, optimizing resource use, increasing farmer earnings, and expanding agricultural export and employment opportunities.

Overall, India’s manufacturing sector has demonstrated remarkable resilience and adaptability, emerging as a key driver of economic growth and job creation. Despite challenges such as the global economic downturn and the disruptive effects of the Covid-19 pandemic, the sector has demonstrated strong growth, driven by technological advances and proactive government policies. Initiatives such as the PLI Scheme, infrastructure development projects and support for small and medium enterprises have played a key role in supporting the sector’s expansion, enhancing competitiveness and positioning India as a global manufacturing powerhouse.