India’s Manufacturing Industry

India's Manufacturing Industry

Reliance MET is offering Industrial Land for the establishment of a Manufacturing Plant in Jhajjar. The Haryana government has designated Reliance Industrial Plots as a Model Economic Township – Reliance MET. India’s Manufacturing Industry

Manufacturing has emerged as one of India’s fastest growing industries. Mr Narendra Modi, India’s Prime Minister, launched the “Make in India” programme to put India on the global map India as a global manufacturing powerhouse and give it international recognition. The government aims to create 100 million new jobs in the sector by 2022.

Size of the Market

According to the Government of India’s annual national income, the manufacturing sector’s Gross Value Added (GVA) at basic current prices grew at a CAGR of 5% between FY16 and FY20. In FY20PE, the sector’s GVA at current prices was estimated to be US$ 397.14 billion.

Business conditions in India’s manufacturing sector remain favourable. During FY20, the manufacturing component of IIP was 129.8. Basic metals production increased by 10.8 %, intermediate goods by 8.8 %, food products by 2.7 %, and tobacco products by 2.7 %(2.9 %). In FY20, India’s Index of Eight Core Industries was 131.9.

According to the Ministry of Statistics and Programme Implementation, India’s industrial output (IIP) increased by 3.6 %year on year in October 2020.

Merchandise exports fell 4.78 %year on year to US$ 314.31 billion in FY20.

In October 2020, India’s manufacturing sector improved for the third month in a row, with businesses increasing output to the greatest extent in 13 years.

A decline in the PMI (Purchasing Managers’ Index) shows that capital goods manufacturing is still on track to grow, despite losing momentum in November 2020.

Investments

With the help of the Make in India initiative, India is on its way to becoming a hi-tech manufacturing hub, as global conglomerates such as GE, Siemens, HTC, Toshiba, and Boeing have either established or are in the process of establishing manufacturing plants in India, drawn by India’s market of over a billion consumers and rising purchasing power.

According to the United Nations Conference on Trade and Development (UNCTAD), India was one of the top ten recipients of Foreign Direct Investment (FDI) in South Asia in 2019, attracting US$ 49 billion, a 16 %increase over the previous year.

Foreign Direct Investment (FDI) in India’s manufacturing sector totalled $89.40 billion from April 2000 to March 2020.

The Government of India increased FDI in defence manufacturing through the automatic route from 49 %to 74 %in May 2020.

India has emerged as one of the most appealing destinations for manufacturing investment. Some of the most significant investments and developments in this sector in recent years have been:

National Small Industries Corporation (NSIC) signed a Memorandum of Understanding (MoU) with Dun & Bradstreet Information Services India in November 2020 in order to develop an ecosystem to encourage, finance, and promote the growth of micro, small, and medium enterprises (MSMEs).

  • Japan Bank for International Cooperation (JBIC) agreed to provide US$ 1 billion (Rs. 7,400 crores) to SBI (State Bank of India) in October 2020 for funding the manufacturing and sales business of Japanese automobile manufacturers’ suppliers and dealers, as well as auto loans for the purchase of Japanese automobiles in India.
  • Tata Group announced plans in October 2020 to invest Rs. 5,000 crore (US$ 673.20 million) to establish an Apple phone component plant in Hosur, Tamil Nadu.
  • Greentech, an investor-backed startup specialising in lithium-ion batteries for Evs and energy storage systems, signed a Memorandum of Understanding with the Tamil Nadu government in October 2020 to establish a battery and battery management system manufacturing facility.

Indian officials approved five production applications from foreign companies in October 2020 for companies such as Foxconn, Wistron, Pegatron, Samsung, and Rising Star to produce goods worth Rs. 9 trillion (US$122.5 billion) over the next five years. India’s Manufacturing Industry

  • In October 2020, the Government of India approved five Indian manufacturers, including Micromax, Lava, Padget Electronics, UTL Neolyncs, and Optiemus Electronics, to set up handset production worth Rs. 1.25 trillion (US$ 17.02 billion) over the next five years.
  • Pegatron, Apple’s second-largest manufacturer after Foxconn, began its India operations in September 2020 with the appointment of statutory auditors and the transfer of Rs. 99 lakh (US$ 0.1 million) for an initial subscription of equity shares. The move is a prelude to the Taiwanese electronics manufacturer establishing a manufacturing base in India.
  • Sterling and Wilson Solar Limited (SWSL) has been awarded an Engineering Procurement Construction (EPC) contract in Australia for Rs. 2,600 crores (US$ 368.85 million) in May 2020.
  • Oricon Enterprises entered into a joint venture agreement with the Italy-based Tecnocap Group in March 2020 to establish a new company, Tecnocap Oriental, to manufacture lug caps.

Initiatives of the Government

The Government of India has taken several initiatives to foster a favourable environment for the growth of the country’s manufacturing sector. Among the noteworthy initiatives and developments are:

  • The Ministry of Skill Development and Entrepreneurship began skill training for 3 lakh migrant workers from 116 districts in Uttar Pradesh, Bihar, Rajasthan, Odisha, Madhya Pradesh, and Jharkhand in November 2020. The initiative aims to empower migrant workers and rural residents in the post-COVID-19 era through demand-driven skilling and orientation through the centrally funded initiative. The Pradhan Mantri Kaushal Vikas Yojana (PMKVY) 2016-20 includes a component that is managed (CSCM).
  • The government approved the Production Incentive Scheme (PLI) for Large-scale Electronics Manufacturing in March 2020. The scheme proposes a production-linked incentive to boost domestic manufacturing and attract large investments in mobile phone manufacturing and specific electronic components, such as assembly.
  • The government increased FDI in defence manufacturing under the automatic route from 49 %to 74 %in May 2020.
  • The Union Cabinet approved financial assistance to the Modified Electronics Manufacturing Clusters (EMC2.0) Scheme in March 2020 for the development of world-class infrastructure, as well as common facilities and amenities, via Electronics Manufacturing Clusters (EMCs).

 According to the Ministry of Statistics and Programme Implementation (MOSPI) and Ministry of Labour and Employment report on Payroll Reporting in India, the number of new subscribers* to the Employees’ Provident Fund Scheme will reach 10,47,167 in September 2020.

  • 73 lakh people were trained through the Pradhan Mantri Kaushal Kendras during 2016-20, with 723 Pradhan Mantri Kaushal Kendras established as of January 20.
  • In India, there were approximately 15,000 Industrial Training Institutes (ITIs) as of August 2020.
  • The government approved 100 %FDI in contract manufacturing through the automatic route in August 2019. 
  • The Union Cabinet approved the National Policy on Electronics (NPE) in February 2019, with the goal of developing a US$ 400 billion electronics manufacturing industry in the country by 2025. In the next five years, the global growth rate is expected to be 32%.
  • The government’s Make in India initiative aims to increase the manufacturing sector’s contribution to the country’s GDP to 25% by 2025. 
  • The Government of India increased export incentives available to labour-intensive MSME sectors by 2% under the Mid-Term Review of Foreign Trade Policy (2015-20). The government extended FTP for another year, until March 31, 2021, in April 2020.

Taking the next step

Road Ahead India is a desirable location for foreign manufacturing investments. Several mobile phones, luxury, and automobile manufacturers, among others, have established or are planning to establish manufacturing bases in the country.

India’s manufacturing industry could reach $1 trillion in revenue by 2025. Goods and Services Tax (GST) implementation will create a common market for India with a GDP of US$2.5 trillion alongside a population of 1.32 billion people, which will be an important draw for investors. By 2025, India is predicted to have a capability of manufacturing US$100 billion in laptop and tablet PCs, according to the Indian Cellular and Electronics Association (ICEA).

Government plans to meet homegrown development goals through the development of smart cities and industrial corridors. As a result of the corridors, an integrated, monitored and developed industrial environment will be created that supports advanced manufacturing practices. India’s Manufacturing Industry

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