India is on the threshold of major reformations. The growth trajectory of India is so high that it is poised to become the third-largest economy of the world by 2030. Government is taking significant initiatives to boost the overall economic growth of the country. Introduction to FDI, GST, Make In India, Digital India, Skill India etc. are one of the major development programs.
India’s manufacturing sector plays one of the most important roles in the country’s economy. It has evolved through the initial industrialization to liberalization and the current phase of the global competition. Today, Indian manufacturing industries are focusing on global markets and many of them have become formidable global competitors.
India is emerging as the new manufacturing destination of the world due to major development programs already in process. The tech-savvy population, skilled labor, abundance of raw materials, government support, modern technology implementations, progress in research and development, etc. are the key factors that have triggered the manufacturing sector of India.
Let’s learn what makes India, the next manufacturing destination of the world-
- The country is expected to become the world’s third largest economy ranking amongst the top three manufacturing destinations by 2020.
- Strong consumerism in the domestic market.
- Sustained availability of quality workforce.
- Low cost manpower.
- Strong technical and engineering capabilities backed by one of the best scientific and technical institutes.
- Industrial Parks
Every state in India has developed special industrial parks which have enabled the industries to work in a dynamic environment for progressive growth.
- National Investment & Manufacturing Zones (NIMZ)
NIMZ are the special zones with the combination production units, public utilities, logistics, residential areas and administrative services. It provides a specific processing area to the industries where manufacturing facilities are available along with associated logistics and other services located nearby a non-processing area of residential, commercial and other social and institutional infrastructure.
- Special Economic Zones (SEZ)
India has also developed special economic zones that are treated as an international territory for the purpose of industrial, service and trade operations provided with less taxation and custom duties and a more liberal regime in respect of other levies and foreign investment.
- Sector specific clusters
The Government of India has developed sector specific parks that focus on a specific sector like electronic manufacturing clusters and mega food parks. It provides an incredible environment for the industries dealing in a specific sector to operate in a more progressive and competitive trajectory with co-operated support.
- Country specific zones
There are also few country specific zones that focus on industrial units of foreign nationals. For example- Neemrana Japanese Zone.
- Industrial corridors
Government is focusing on the development of various industrial corridors between several regions by utilising the infrastructure and supply-chain. The Delhi-Mumbai Industrial Corridor (DMIC) is being developed rapidly as a global manufacturing and investment destination. It utilizes the 1,483 km long, high-capacity western Dedicated Railway Freight Corridor (DFC).
The government has also planned to create and develop other major industrial corridors like- Bengaluru-Mumbai Economic Corridor (BMEC), Chennai-Bengaluru Industrial Corridor (CBIC), Amritsar-Kolkata Industrial Development Corridor (AKIC), East Coast Economic Corridor (ECEC) with Chennai-Vizag Industrial Corridor (CVIC) as the first phase of the project.
The objective of developing economic and industrial corridors is to boost the share of manufacturing sector in the GDP of the nation and to create smart sustainable cities with manufacturing being the key economic driver.
Government offering incentives for manufacturing
- Sector specific incentives
The government of India provides sector-specific subsidies to the industries dealing in a particular sector for promoting the manufacturing production. It is provided to every industry in almost each sector to make sure that the GDP of the nation progressively grows upward.
- Area based incentives
Incentives are provided for industrial units working in SEZ or NIMZ zones in respective operations or setting up a new project in special states of North East Region, Jammu & Kashmir, Himachal Pradesh and Uttarakhand.
- R&D incentives
Government provides incentives for Research and Development as it ensures the future success of the industrial sectors. It involves certain conditions and the incentives are subject to their fulfilment. The government provides higher weighted deductions of 200% on expenditure related to R&D.
- Export incentives
Government also provides incentives like duty drawback, duty remission schemes, etc. under foreign trade policies to boost the export trade. The manufacturing sector of India is capable of satisfying the domestic demand as well as to provide a large amount of exports.
- State incentives
Apart from the Central Government incentives, the state governments in India also support manufacturing sector by providing special incentives to the industries. Some of the states have separate policies for different manufacturing sectors.
The incentives are mainly rebated land cost, relaxation in stamp duty, power tariff incentives, investment subsidies, tax incentives, backward area subsidies, special incentive packages for mega projects, concessional rate of interest on loans, etc.
Ease of doing business
Doing business in India, especially in the manufacturing sector have never been so easy as it is currently. Government has implemented major reforms to make it more favourable for the industries to operate with more ease by providing a better infrastructure and lowering impositions.
The corporate tax rate imposed on companies is brought down by the government which has provided huge benefits to them. A full-fledged regulatory mechanism is formed by the government to examine and regulate the industrial operations which has enabled the companies to report their legal formalities at one place without running through different authorities and departments for permissions, licenses, trade treaties, etc.
The e-BIZ portal by Indian government has given a huge contribution in enhancing the ease of doing business in India. The portal enables the user to carry out almost all the legal process including filling forms, uploading attachments and making payments online.
SKILL INDIA, is a multi-skill development programme by the government of India with an objective for creating jobs and entrepreneurship for all socio-economic classes. It focuses on establishing an international equivalent of the Indian system on skill development, increasing youth employability as well as creating workforce mobility.
The Current Scenario of India’s manufacturing sector:
Electronics systems design and manufacturing
The electronics and electrical manufacturing sector of India is burgeoning with huge scope and opportunities. Apart from satisfying the domestic demand for electronics, the export trade of such products and machineries have also witnessed exponential growth.
This industry is the major sub-sector of the manufacturing industry being the fastest growing sector in Indian economy with many reasons to invest. Factors influencing investments in this sector are- India’s huge consumption market for electronics, attractive incentives by the government, availability of infrastructure, skilled manpower, etc.
Here’s a list of India’s electronics system design and manufacturing (ESDM) industry output:
- Heavy electricals
- Steel Products
- Industrial Equipment
- Electrical & Home appliances
- Builders Hardware
- Railway Equipment & related products
India’s automotive industry has exponentially grown in recent times. The increasing working-age population of the country is the major key-trigger for the growth of automobiles sector. The market for private vehicles in India is burgeoning with huge scope and opportunities as globalisation has strike the country. People are focusing on high standard of living and use of science & technology.
While two wheelers remain the primary choice of the nation, factors like rising prosperity, easier access to finance and increasing affordability of the consumers have influenced the future market for private four-wheelers to witness huge growth.
India is amongst the lowest cost producers of steel in the world. This indirectly affects the costing of automotive and thus, make it more favourable for the domestic consumers. The rural market for two-wheelers is already experiencing huge demand while its market for four-wheelers is also developing on large-scale. Vehicles like tractors have seen an exponential growth in its sales through rural demand.
Multinational automobile plants of India rank among the top across the world in terms of their quality and productivity. It’s interesting to know that India is the largest tractor manufacturer, second largest two-wheeler manufacturer, 6th largest car manufacturer and the 8th largest commercial vehicle manufacturer of the world.
Here’s a list of India’s automobile industry output:
- Two-wheelers (Motorcycles, Geared & Ungeared Scooters, Bikes and Mopeds)
- Three wheelers
- Commercial Vehicles (Light, Medium & Heavy)
- Passenger Cars
- Utility Vehicles (UVs) and Tractors.
The Indian engineering sector has witnessed a remarkable growth in recent times driven by increased investments in industrial production and infrastructure. Engineering sector needs a mention as it is closely associated with the manufacturing sector.
The engineering sector encompasses significant strategic importance to the Indian economy due to its intense integration with other industry segments. The sector is de-licensed with 100% FDI. As a result, it is burgeoning with huge investments as well as development in major functional areas.
In terms of technology and innovations, the manufacturing sector is partially depended upon the growth of engineering sector as it deals with capacity creation in infrastructure, power, mining, oil & gas, refinery, steel, automotive and consumer durables.
Scope and Opportunities in other manufacturing sub-sectors:
India is spending huge amount on defence purchases and the expenditure is expected to increase in the upcoming years. The defence sector in India is open for private sector participation which will help foreign manufacturers to enter into strategic partnerships with Indian companies and leverage the domestic markets as well as aiming at global markets.
India has a burgeoning textile industry and it’s one of the largest producers of textile products in the world. There are several segments of the industry like cotton, silk, woollen, readymade garments, handcrafted textiles, jute and coir. Due to the growing global demand for polyester fabric, the Indian textile industry has the potential to grow five-fold over the next ten years.
The Indian chemical industry is the third largest producer in Asia and ranks 12th in the world, in terms of volume. India accounts for approximately 7 per cent of the world production of dyestuff and dye intermediates. India is the third largest consumer of polymers, while being the fourth largest producer of agrochemicals.
- Food processing
The food processing industry of India is highly influenced by the agricultural output of the nation. With an exponential growth in recent times, food processing industry is expected to grow at a rate of 11% by the year 2018.
India’s leather industry has witnessed a robust growth. It has transformed from a mere raw material supplier to a value-added product exporter. Now, almost 50% of India’s leather business comes from international trade.
The Indian pharmaceutical industry is estimated to grow at 20% CAGR rate over the next five years. The domestic demand for pharmaceutical products is the key-driver of this sector. India is focusing on developing this industry by educating and creating more scientists and pharmacists who will encompass the future growth of this industry, bringing more investment opportunities.
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