Manufacturing Industry in India

For the construction of a manufacturing plant in Jhajjar, Reliance MET is providing Industrial Land. Reliance Industrial Plots has been authorised by the Haryana government to serve as a Model Economic Township (Reliance MET).

One of India's sectors with the highest growth rates is manufacturing. The "Make in India" programme was introduced by Indian Prime Minister Narendra Modi to promote India's manufacturing industry and boost the country's economy internationally. By 2022, the government wants to add 100 million new jobs to the sector.

Market Size

According to the annual national income report released by the Government of India, the Gross Value Added (GVA) at basic current prices from the manufacturing sector in India increased at a CAGR of 5% between FY16 and FY20. In FY20PE, the sector's GVA at current exchange rates was estimated to be US$ 397.14 billion.

The manufacturing sector in India is still experiencing good business conditions. During FY20, the manufacturing portion of IIP was 129.8. Production of basic metals (10.8%), intermediate goods (8.8%), food products (2.7%), and tobacco products (2.9%) all saw significant growth. In FY20, India's index of its eight core industries was 131.9.

The Ministry of Statistics & Programme Implementation reports that in October 2020, India's industrial output, as measured by IIP, increased by 3.6% year over year.

Exports of goods fell 4.78% year over year to US$ 314.31 billion in FY20.

India's manufacturing sector saw growth in October 2020 for the third consecutive month, with companies increasing production to the highest level in 13 years while also experiencing strong sales growth. The PMI (Purchasing Managers' Index) showed strong growth in the manufacturing sector despite losing traction, dropping from 58.9 in October 2020 to a three-month low of 56.3 in November 2020.

Investments

With the aid of the Make in India initiative, India is moving toward becoming the centre for high-tech manufacturing as multinational corporations like GE, Siemens, HTC, Toshiba, and Boeing have already established manufacturing facilities there or are in the process of doing so. These companies were drawn to India by its market of more than a billion consumers and rising purchasing power.

India ranked among the top 10 recipients of foreign direct investment (FDI) in South Asia in 2019, bringing in US$ 49 billion—a 16% increase from the previous year, according to the United Nations Conference on Trade and Development (UNCTAD).

Between April 2000 and March 2020, total FDI in India's manufacturing sector amounted to US$ 89.40 billion. The Government of India increased FDI under the automatic route in defence manufacturing from 49% to 74% in May 2020.

India has risen to the top of the list of desirable locations for manufacturing investment. Following are a few examples of recent significant investments and developments in this industry:

• The National Small Industries Corporation (NSIC) and Dun & Bradstreet Information Services India signed a Memorandum of Understanding (MoU) in November 2020 to establish an ecosystem to support, finance, and advance the development of micro, small, and medium-sized businesses (MSMEs).

• In October 2020, the Japan Bank for International Cooperation (JBIC) and SBI (State Bank of India) reached an agreement for JBIC to give SBI US$ 1 billion (roughly Rs. 7,400 crores) for financing the manufacturing and sales operations of suppliers and dealers of Japanese automakers as well as providing auto loans for the purchase of Japanese vehicles in India.

• Tata Group announced plans to establish an Apple phone component factory in Hosur, Tamil Nadu, in October 2020 for an investment of Rs. 5,000 crore (US$ 673.20 million).

• In order to establish a battery and battery management system manufacturing facility in the state of Tamil Nadu, Grinntech, an investor-backed startup that specialises in lithium-ion batteries for electric vehicles and energy storage systems, signed an MoU with the Tamil Nadu government in October 2020.

• The Indian government has approved five applications from businesses including Foxconn, Wistron, Pegatron, Samsung, and Rising Star to set up production totaling Rs. 9 trillion (US$ 122.5 billion) over the following five years.

• The Indian government has given the go-ahead for five Indian manufacturers, including Micromax, Lava, Padget Electronics, UTL Neolyncs, and Optiemus Electronics, to start producing smartphones worth Rs. 1.25 trillion (US$ 17.02 billion) over the next five years.

• With the appointment of statutory auditors and the transfer of Rs. 99 lakh (US$ 0.1 million) for an initial subscription of equity shares, Pegatron, the second-largest Apple manufacturer after Foxconn, started operations in India in September 2020. The action serves as a prelude to the Taiwanese electronics manufacturer establishing a manufacturing facility in India.

• For Rs. 2,600 crores (US$ 368.85 million) in May 2020, Sterling and Wilson Solar Limited (SWSL) won an Engineering, Procurement, and Construction (EPC) contract in Australia.

• To establish a new business, Tecnocap Oriental, for the production of lug caps, Oricon Enterprises and the Tecnocap Group, which has its headquarters in Italy, entered into a joint venture agreement in March 2020.

Government Initiatives

The Indian government has launched a number of initiatives to encourage a favourable environment for the development of the manufacturing industry in the nation. The following are a few noteworthy projects and developments:

• The Ministry of Skill Development and Entrepreneurship started training 3 lakh migrant workers in November 2020 in the 116 districts in Uttar Pradesh, Bihar, Rajasthan, Odisha, Madhya Pradesh, and Jharkhand that had been identified. Through demand-driven skilling and orientation under the centrally sponsored and centrally managed (CSCM) component of the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) 2016–20, the initiative seeks to empower migrant workers and the rural population in the post–COVID-19 era.

• The Production Incentive Scheme (PLI) for Large-scale Electronics Manufacturing was approved by the government in March 2020. In order to increase domestic manufacturing and draw significant investments in the production of mobile phones and specific electronic components, such as Assembly, Testing, Marking and Packaging (ATMP) units, the plan suggests production-linked incentives.

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

• The Modified Electronics Manufacturing Clusters (EMC2.0) Scheme for the Development of World Class Infrastructure along with Common Facilities and Amenities was approved for financial assistance by the Union Cabinet in March 2020. (EMCs).

• The Employees' Provident Fund Scheme had 10,47,167 new subscribers* as of September 2020, according to a report on payroll reporting in India from the Ministry of Statistics and Programme Implementation (MOSPI) and the Ministry of Labour & Employment.

• 73 lakh people received training through the Pradhan Mantri Kaushal Kendras between 2016 and 20; 723 of these centres have been established as of January 2020.

• In India, there were about 15,000 Industrial Training Institutes (ITIs) as of August 2020.

• In contract manufacturing, the government approved 100% FDI through the automatic route in August 2019.

• The National Policy on Electronics (NPE), which aimed to establish a $400 billion US electronics manufacturing industry in the nation by 2025, was approved by the Union Cabinet in February 2019. Over the next five years, a 32% growth rate has been set as the global target.

• By 2025, the government wants the manufacturing sector's contribution to the GDP of the nation to reach 25% as part of the Make in India initiative.

• The Government of India increased the amount of export incentives available to labor-intensive MSME sectors under the Mid-Term Review of Foreign Trade Policy (2015–20) by 2%. The government extended FTP for an additional year, through March 31, 2021, in April 2020.

Road Ahead

India is a desirable location for foreign manufacturing investments. Numerous manufacturers of luxury goods, including mobile phone and auto brands, have established manufacturing facilities in the nation or plan to do so.

India's manufacturing industry has the potential to generate $1 trillion in revenue by 2025. With a GDP of US$2.5 trillion and a population of 1.32 billion, India will become a common market after the Goods and Services Tax (GST) is implemented, which will be very attractive to investors. According to the Indian Cellular and Electronics Association (ICEA), through policy changes, India could increase its total capacity for producing laptops and tablets to US$ 100 billion by 2025.

The Government seeks to ensure the total development of the country with a focus on creating industrial corridors and smart cities. The corridors will also support advanced manufacturing practises and help with integrating, monitoring, and creating a favourable environment for industrial development.

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