23-May-2024-Editorial

INDIAN MANUFACTURING NEEDS MORE SOPHISTICATION: FINANCE MINISTER 

The manufacturing sector in India plays a significant role in the country’s economy, contributing 17% to GDP and employing over 27.3 million workers. 

The government aims to increase its contribution to 25% of the economy by 2025, as part of the Make in India initiative. 

While certain sectors like automotive, engineering, chemicals, pharmaceuticals, and consumer durables show strong performance, others have faced challenges, as evidenced by a slowdown in key industrial sectors. 

Key Highlights: 

• Manufacturing exports reached a record high of USD 447.46 billion in FY23, indicating growth and competitiveness. 
• However, there has been a recent slowdown in growth, with the eight core industries experiencing their slowest growth in 15 months in January 2024. 
• Despite challenges, the Index of Industrial Production (IIP) shows overall growth, and capacity utilization has improved. 

Opportunities for Manufacturing Sector in India: 

Broad Domestic Market and Demand: 

• India’s manufacturing sector benefits from strong demand both domestically and internationally, as indicated by the expansion shown in the Purchasing Managers’ Index (PMI). 

Sectoral Advantage: 

• Key sectors like chemicals, pharmaceuticals, automotive, electronics, and textiles have experienced significant growth. 

Outreach to Global South: 

• India’s manufacturing is integrating into Global Value Chains (GVCs), particularly with partners in the Global South, presenting opportunities for growth. 

Rise of MSMEs: 

• Micro, Small, and Medium Enterprises (MSMEs) contribute significantly to GDP and exports, indicating a robust foundation for growth. 

Challenges to the Manufacturing Sector in India: 

• Technological Obsolescence and Infrastructure: Outdated technology and inadequate infrastructure hinder global competitiveness and quality standards. 

• Shortage of Skilled Workforce: Only 24% of India’s workforce possesses skills for complex manufacturing jobs, indicating a significant gap compared to other countries. 
• High Input Costs: Logistics costs in India are higher than the global average, impacting competitiveness. 
• Regulatory Complexities: Complex regulatory environment and land acquisition processes deter businesses from investing in manufacturing. 
• Competition from China and Import Dependence: India faces competition from China, which remains the world’s leading manufacturer, and significant import dependence in various sectors. 

Way Forward: 

• Industry 4.0 Adoption: Embracing digital transformation and investing in technology can enhance productivity and competitiveness. 
• Investment in Infrastructure: Improving infrastructure standards and logistics can attract more investment and business interest. 
• Promoting Export-Oriented Manufacturing: Supporting export-oriented manufacturing can help tap into new markets and increase competitiveness. 
• Financial Assistance: Enhancing access to finance for MSMEs in the manufacturing sector can support growth and development. 
• Enabling Regulations: Simplifying regulations can reduce the burden on businesses and encourage investment. 
• Skill Development: Increasing training and skill development programs can address the shortage of skilled labour in the sector.