Prof M K Bhat
Leader of opposition in Parliament Mr. Rahul Gandhi in Texas (America) held that India handed over manufacturing to China. This was strongly rebutted by ruling party as a step to demean India in a foreign country. While the LOP produced a grim picture of the manufacturing sector on one hand, the Government on the other continuously talks of Vikshit Bharat, which is impossible without a vibrant manufacturing sector. This makes it imperative to analyse the actual position of our manufacturing sector. Before analysing the health of our manufacturing sector, it is worthwhile to mention here that the growth rate of India last year stood at 7% while as the growth rate of China was just 5%.
In the present era of global competitiveness manufacturing sector has emerged as a pivot of country’s economy. It currently contributes 16 -17 percent of the GDP and has placed India as the 5th largest manufacturing economy in the world with a contribution of 7.59 % of the global GDP. It gives employment to over 12% of the country’s work force. India presents itself as a favorable destination for foreign companies by streamlining of its regulatory processes, joint research and development opportunities and capacity to manufacture high quality products meeting international standards. India is fast emerging as an alternative supply source given its raw material,low labourcosts, growing manufacturing knowhow, robust domestic demand, growing middle class,a young population and high rate of return on investment-all these make India a credible investment destination too. India’s manufacturing landscape is witnessing a paradigm shift with investment opportunities stretching over a broad spectrum of sectors like electronic manufacturing,infrastructure encompassing roads, airports, railways and ports, defense production,insurance, medical devices etc.are on the forefront.
It took India 63 years from 1947 to 2010 to reach a GDP of $1 trillion, while as it attained 2 trillion in 2017and 3trillion in 2020. The lockdown during covid- 19 delayed the $4 trillion mark and is expected by the end of 2024.Indian economy is poised to growby$ 1trillion every 1.5 years over the next six years as per the report of IDBI capital report sept.2024 India will be10 $ trillion economy by 2032.India’s export potential is expected to increase significantly, exports are projected to contribute 25% of GDP by 2030 amounting to $2 trillion
It is worth to mention here that vibrant manufacturing requires a proper business environment to grow and to attain it, various steps were taken consecutively for new startups and established units since 2014. India stood at 142 number in ease of doing business in 2014 and in 2019 it stood at 63 number.
In order to achieve the target of Vikshit Bharat,the role of manufacturing sector is going to be vital in driving the nation forward.In order to attain this target the present Government ever since 2014 has taken various steps concertedly, mention can be made of; Make in India initiative, the production linked incentives scheme, the unified payment interface, the real estate regulatory authority, the insolvency and bankrupt code, the goods and services tax,etc. and the C+1 strategy of companies have collectively laid a robust foundation for Indian manufacturing sector.
Let us briefly enumerate the outcome of these efforts of the Government’
To make manufacturing sector vibrant,’Make in India initiative’ was launched in Sept.2014 by Narendra Modi govt.- designed to transform India into a global hub for design and manufacturing with the core objective to facilitate investment, encourage innovation and develop world class infrastructure. The Make in India 2.0 phase encompasses 27 sectors and intends to have more domestic and foreign investment,building best in class infrastructure, enhancing skill development ,protecting intellectual property rights, streamlining regulatory processes to create a conducive environment for business to thrive.
Make in India has become a game changer for certain sectors namely defense, electronics, medicine etc. Defense sector today caters to domestic requirements and boosts exports INS Vikrant is domestically produced air craft, the shoes worn by Russian army are made in Bihar.Indias electronic sector has made history by reaching to US $ 155 bn in 2023.Its production doubled from US$ 48 bn in FY 2017 to US$ 101bn in FY23 driven mainly by mobile phones. India has significantly reduced its reliance on the smartphone imports, now 99% are manufactured domestically. Mobile phones today top India’s export list. In case of medicine India produced lifesaving vaccine for covid – 19 and exported it to both developed and developing countries of the world.
The quality production along with the steps taken by government has led to the confidence of investors in India.The foreign direct investment hasrisen from $45.14 -15 to $84.83 bn in 2021-22 and in FY 2023-24 the total FDI inflow amounted to$70.95 bn.This talks of Indias growing appeal as an international investment destination.Due to the sustained efforts of the government during 2014 – 2023,FDI equity inflow in manufacturing sector increased by 55% to reach $ 198.47 billion compared to$96 billion in the previous nine years(2005- 2014).Today 10% FDI is allowed in almost all sectors except prohibited ones. Defense industry allows 74% FDI under automatic route and 100% under government route. India is applying multipronged strategy to attract foreign investment by inviting bids for frontier sectors like semiconductor manufacturing, industry specific incentives and financial packages.
In order to streamline indirect taxes, the government introduced GST.It solved the problem of multiple taxation filling and assessment by different tax authorities. Corporate tax rate was slashed to 15% from 22% for new manufacturing units incorporated on or before March 31,2024.
Under production linked investment scheme companies are incentivized to promote domestic production.PLI covers 14 key sectors with an incentive outlay of $26 billion. It has helped more FDI inflow in pharmaceuticals,medical appliances, food processing. PLI has prompted major smart phone companies like Foxcom,Wistron and Pegatron to shift suppliers to India resulting in the manufacturing of top end phones in the country. Today smart phones top the list of Indian exports to USA.In the last five years India has seen a rise in foreign technical collaborationsparticularly in mobile phones,electronics and food processingwith US,Germany and Japan being the major technology patterners.
The central government revised its expenditure on infrastructure to INR 110 bn ($133.3) for 2024-25 marking 11.1% jump from previous years capex of INR 10,000 bn($119.97). Government focused on developing industrial corridors and smart cities, integrating state of art technology and highspeed communication to create world class infrastructure. 52 Vande Bharat trains roar on the railway tracks with state of art technology.
Covid -19 and the expansionist attitude of China has made companies to formulate China+1 strategy. Companies want to diversify to other countries e.g. India, Thailand, Vietnam, Turkey etc. Western companies invested in China mainly because of low production costs and big domestic market. The surge in India’s domestic demand,improvement in automation, workers training etc.reduced production costs and established India as a positive destination for companies coming out of China.
India’s leadership in fintech has got well established by the success of united payments interface (UPI), facilitating seamless digital transactions in multiple countries of the world.
The achievements in manufacturing are quite visible so any bluff by opposition carries little meaning.Constructive criticism is welcome but criticism for the sake of criticism carries no weight in the era of fast communication.
(The author is Guru Gobind Singh Indraprastha University, Delhi)
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