Indian manufacturing sector: Economic growth engine on track

Manufacturing has emerged as one of the prominent growth sectors in India and the nation is on track to become the fifth largest manufacturing country in the world by 2020. The ‘Make in India’ program aims to position India on the world map as a manufacturing hub and give global recognition to the economy. Various studies have estimated that every job created in manufacturing sector has a multiplier effect in creating 2–3 jobs in the services sector, this makes manufacturing critical to achieve inclusive growth in the country as India looks at transforming gradually from a service based economy to an economy with enhanced contribution from manufacturing sector. A globally competitive Indian manufacturing sector will be a key enabler in achieving the vision of a USD 5 trillion economy by 2025, creating 100 million new jobs by 2022.

Business conditions in the India continue to remain positive and Foreign Direct Investment (FDI) is on the rise as companies and economies try to capture Indian growth. Global competition and cost pressures are aiding the flow of organic investments in India. India is on the path of becoming the centre for hi-tech manufacturing as global giants such as GE, Siemens, HTC, Toshiba, and Boeing have either set up or are in process of setting up manufacturing plants in India, attracted by India’s market of more than a billion consumers and increasing purchasing power, cumulative Foreign Direct Investment (FDI) in India’s manufacturing sector reached USD 76 billion during April 2000-June 2018.

While global manufacturing companies look at India for investments and capturing growth emanating from India, there are peculiarities in the market that makes India different from other markets.

Indian markets are price sensitive. While the volumes could be interesting for the manufacturers, obtaining high prices for premium products could be challenging. The global manufacturers need to evaluate each product with the "sufficient for application" Vs the "best in class" design philosophy. With price sensitive markets being more susceptible to counterfeit products, brand protection becomes more important than other geographies.

Strong manufacturing process development and implementation to ensure consistency of quality across the globe could ensure companies gain customer brand confidence in long term. Quality perception of products manufactured in developing countries should be countered by delivery of equivalent quality products manufactured in India.

India is on the path of reforms in policy framework to accelerate process of ease of doing business. While implementation of these reforms may bring some evident short term repercussions on the business performance, organizations tend to gain growth momentum with these policy changes in longer duration. There are more reforms in pipeline and companies need to focus on the long term gains achieved through these reforms and not be flustered with the ripples of change.

With the unprecedented growth in India, the pace of business is fast. Time to market new products requires organization agility & flexibility. New products (& designs) specific to the geography and market conditions (Made-for-India) need to be developed. Local R&D centres may help organizations to be more efficient in new product development. "Reverse Innovation" (product developed for the developing economies but marketed/ distributed globally) can be the mantra to obtain leverage in the global market.

MSMEs (Micro, Medium and Small enterprises) in India have tremendous potential to grow and contribute to the Indian economy. Long term partnerships with Indian MSMEs having good technical capabilities could not only provide a low cost advantage but also a source of "frugal innovation" for companies worldwide. An ecosystem with MSMEs could be a source of global competitive advantage for the companies investing in India.

With changing geopolitical scenario expected to play a major role in coming time, having a global manufacturing base in India, could be a good strategy for companies. India’s relationship and acceptability in the world could help it in establishing itself as a hub of manufacturing for the world. Impetus on developing industrial corridors and smart cities, aims to ensure holistic development of the nation. The corridors would further assist in creation of ecosystem for co-development and growth.

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