India poised to become a global manufacturing hub

India is the third most sought-after manufacturing destination in the world and has the potential to export goods worth US$ 1 trillion by 2030.

Due to the country's rapidly growing population, the manufacturing sector in India has emerged as a fast-growing sector. Investments in the industry have been increasing, and initiatives like "Make in India" aim to make the south Asian nation a centre of the world's manufacturing.

Due to China's poor product quality, trade conflicts, and border issues, India is currently in an excellent position to profit from the country's deteriorating competitiveness. Additionally, India is changing its trading approach to benefit from the growingly popular China-plus-one model. In essence, this is a strategy whereby corporations diversify their markets and refrain from investing solely in China.

A prohibition on the importing of Chinese goods has opened up enormous potential for Indian businesses.

The Indian manufacturing industry may contribute more than $500 billion annually to the global economy by 2030. India's ease of doing business ranking increased dramatically from 142 in 2014 to 63 in 2020.

India is growing at a fast rate and continues to provide special impetus to the manufacturing sector in different ways. Some factors favouring Indian manufacturing include:

Manufacturing costs are lowest in India

A survey ranks India as the country with the lowest manufacturing costs, ahead of China and Vietnam. India has earned the 31st spot in the overall Best Countries rating by US News and World Report out of 85 countries.

Policies aimed at transforming India into a centre of global manufacturing

Large-scale manufacturing opportunities have arisen in India as a result of disruptions in the global supply chain, made possible by important policy changes including production-linked incentive (PLI) programmes, low corporation tax rates for new manufacturing, and "Make in India" campaign (covering 25 economic sectors).  By 2025, the National Manufacturing Policy wants manufacturing to account for 25% of the GDP.

A vibrant and powerful start-up ecosystem exists in India. In truth, anyone can register a business for free online through India's Ministry of Micro, Small & Medium Industries (MSME). The requirements are simple. As a result, numerous micro and small industries are growing across the entire country.

India well-poised for digital transformation of manufacturing

India has a distinct advantage of being at the vanguard of the digital manufacturing era because to a sizable young workforce, the most of whom are trained in science and engineering, as well as a strong IT industry.

With digital transformation being a crucial component in achieving an advantage in this more competitive sector, technology has now fostered innovation. The manufacturing industry in India is gradually shifting toward more automated and process-driven manufacturing, which is expected to increase productivity and efficiency.

Major investments have been made in the manufacturing sector.

The manufacturing sector has seen some major developments, investments and support from the Government in the recent past. According to IBEF statistics, the following are a few instances of recent large investments and developments in this industry:

According to the Department for Promotion of Industry and Internal Trade (DPIIT), India received a total inflow of US$ 58.77 billion in foreign direct investment for the fiscal year 2021–2022. (FDI).

The automobile sector got US$32.84 billion in foreign direct investment from April 2000 to March 2022.

The chemical manufacturing sector saw FDI inflows of US$19.45 billion (excluding fertilisers).

FDI inflows into the drug and pharmaceutical manufacturing industry totalled US$19.41 billion.

FDI inflows into the drug and pharmaceutical manufacturing industry totaled US$19.41 billion.

In June 2022, the eight core industries' combined index reached a value of 143.4 thanks to the production of coal, cement, power, fertilisers, steel, natural gas, and refinery products.

From January to June 2022, production increased for coal by 31.1%, electricity by 15.5%, items from refineries by 15.1%, fertilisers by 8.2%, cement by 19.4%, and natural gas by 1.2%.

In June 2022, India's manufacturing purchasing managers' index (PMI) was 53.9.

From January to June 2022, the top ten exports of major goods totaled US$ 190.4 billion and included engineering goods, petroleum products, gems and jewellery, organic and inorganic chemicals, drugs and pharmaceuticals, electronic goods, RMG of all textiles, cotton yarn/fabric/madeups, rice, plastic, and linoleum.

EPFO added 81 lakh net consumers in May 2022, up 1.45 lakh net subscribers from April 2022.

As a result of the "Make in India" programme, some of the biggest companies in the world, including but not limited to General Electric, Siemens, HTC, Toshiba, and Boeing, are establishing manufacturing facilities in India. Another element contributing to this growth is the increasing purchasing power of Indians. Therefore, these businesses want to attract both Indian consumers on their own and businesses that sell products made in India.

But the path to prosperity is dotted with challenges

Despite the many advantages there are a few obstacles that India confronts as a manufacturing hub, they include power limitations, training and upskilling deficits, and problems acquiring land.

To achieve the goal of becoming a manufacturing centre, there must be more power available. With a 5% deficit, India is experiencing a power shortage.

Additionally, it is now difficult for the nation to draw in investors for the manufacturing sector because of the country's strict land acquisition restrictions and rigid labour laws. To ensure that the necessary workforce requirements are met for mega industrial projects, a significant amount of skilling and upskilling resources are also required.

Authored By: Arjun N, Founder and CEO, SolutionBuggy