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Indian Manufacturing: Leading Production vs The Globe

The country’s Gross Domestic Product (GDP) at the current prices amounted to ₹ 38.22 lakh crore in the third quarter of FY22. The objectives of Make in India propel the country to become a worldwide manufacturing powerhouse by 2030, and India’s industrial development attracts international investors. 

As a result, top manufacturing companies, including cell phones, luxury, and automobile makers, have built or intend to make production facilities in the country. India’s manufacturing industries expect to reach $1 trillion by 2025. 

This blog aims to discuss the growth of manufacturing industries in India. 

The Importance of Manufacturing Industries

The following are the reasons for the manufacturing industry’s importance: 

  • It aids the modernization of agriculture by producing tractors, tools, and machinery needed in farming.
  • It has alleviated agricultural employment pressures and brought in much-needed foreign cash.
  • It has increased trade and commerce significantly across the globe.
  • Manufacturing industries have aided in lowering unemployment and poverty while enabling growth and expansion of the economy.
  • The manufacturing industry is estimated to have accounted for approximately 17% of the GDP. 

Manufacturing Industries In India: How Fast Is It Growing?

India can become a global manufacturing powerhouse, and the global economy annually can rise by $500 billion from 2030. The Indian government initiated the ‘Make in India’ campaign to establish India as a manufacturing center on the global stage. 

Supported by the Make in India initiative, India is on its way to becoming a powerhouse for high-tech manufacturing. Global conglomerates such as GE, Siemens, HTC, Toshiba, and Boeing have established manufacturing units in India. 

Reduction of tax rates (from 25% to 15%) for newly incorporated manufacturing units, and public investment to the infrastructure are welcome moves from the Union Budget 2022-23.

How Is Make in India Helping?

‘Make in India’ is an Indian Government initiative under the Atma Nirbhar Bharat Abhiyan that spans 25 areas of the Indian economy. The Government of India began this campaign on September 25, 2014. The motto “Zero Defect, Zero Effect” is the ethos of the Make in India program.

  • The Make in India initiative is aimed to focus on 25 areas of the Indian economy, focusing on job development and skill training.
  • Other challenges to be addressed for the Make In India initiative to be effective were corruption, red tape, a plethora of laws and approvals, policy paralysis, etc.
  • To counter the Make in India program, China launched the ‘Make in China’ initiative.
  • With the Make in India concept, the country should emerge as a favored manufacturing hub for international players.

Some Other Initiatives by the Indian Government

A central focal point to make India as one of the manufacturing hubs is developing a solid infrastructural, logistical, and utility environment for the industrial sector.

  • The market for grain-oriented electrical steel sheet production in India is seeing significant demand from power transformer manufacturers, owing to the country’s rising need for electric power and increasing acceptance of renewable energy.
  • The display panel market in India expects to expand to $15 billion in 2025.
  • The Mega Investment Textile Parks (MITRA) project to construct world-class infrastructure will allow global companies to compete.

A Glimpse of Industrial Development in India

Automobile, digital infrastructure and services, healthcare, and metallurgy industries lead the post-COVID rebound. In 2020-21, India received a record Foreign Direct Investment (FDI) of $81.97 billion.

But what is the current industrial development in India, and what does the future hold?

Since independence, the private and governmental sectors have risen in tandem, yet India has witnessed only limited industrialization when compared to advanced countries.

  • In December 2021, as reported by the Index of Industrial Production (IIP) in India, industrial output climbed 0.4%  from 2020. It technically increased at a slower pace, after a 1.3% gain in November 2021.
  • Below information provides the Y-o-Y growth rate of different sectors as measured by the IIP in December 2021:
SectorYear-on-Year Growth
Mining2.6%
Electricity2.8%
Manufacturing-0.1%
Primary Goods2.8%
Construction Goods1.7%
Intermediate Goods0.3%
Capital Goods-4.6%
Consumer Durables-2.7%
Consumer Nondurables-0.6%

The Top Manufacturing Companies in India

Manufacturing has contributed significantly to the Indian economy. In 2021, the manufacturing sector contributed $397.14 billion to the Gross Value Add (GVA).

Some of the top manufacturing companies in India:

Top Manufacturing Countries in the World

According to the real estate consultancy Cushman & Wakefield, India has surpassed the United States of America to become the world’s second-most sought-after manufacturing site, mainly owing to cost competitiveness.

  • The 2021 Global Manufacturing Risk Index states China as the number one destination for global manufacturing among 47 nations in Europe, the Americas, and Asia-Pacific (APAC).
  • The United States is ranked third, followed by Canada, the Czech Republic, Indonesia, Lithuania, Thailand, Malaysia, and Poland.
  • In the previous year’s study, the United States came in second, with India third.
  • The rising emphasis on India can build India’s operating environment.

Challenges for the Manufacturing Sector in India

Poor Technology

A majority of the Indian manufacturers are still labor-intensive and rely heavily on human efforts. The manufacturing sector is far behind in terms of technological advancement which is one of the biggest challenges in their global competitiveness. 

Low Productivity

The lack of technological advancements leads to low productivity as humans have limitations in increasing productivity beyond a certain level. Out-of-date processes of manufacturing make it difficult for the manufacturers to compete at an international level.

Ineffective Supply Chain

Complex procedures and legal compliances for the suppliers to deliver the materials to the manufacturing companies have caused extended lead times and excessive inventory storage across the supply chain. 

Lack of Skilled Manpower

Although ranking as one of the highest populated countries in the world, the Indian manufacturing industry still lacks skilled human resources to effectively plan and manage the manufacturing process and execute them as expected. 

Conclusion

Unfortunately, the manufacturing industry in India has to face a lot of challenges to compete at the global level. Adopting lean manufacturing concepts could help in joining the leaders in operational excellence and competing worldwide.

However, you can count on the manufacturing sector by investing in the WealthBaskets, curated explicitly by the SEBI-approved professionals, consisting of stocks or ETFs reflecting an investment strategy or theme.

FAQs

What is India’s rank in the global manufacturing index?

India is ranked second in the Global Manufacturing Index 2021.

What are the leading manufacturing industries in India?

Automobiles, aircraft, and ships; consumer electronics and consumer nondurables; computers; communications, medical, and electrical equipment; food; chemicals; textiles; steel; heavy machinery; leather, rubber, and metal goods; gems and jewelry are the most critical and largest manufacturing industries in India.

What does India manufacture the most?

Leather, electronics, and textiles are India’s top three manufacturing industries.

Indian Manufacturing: Leading Production vs The Globe

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Indian Manufacturing: Leading Production vs The Globe

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