Introduction
Since independence, one of the highly invested and most reliable sectors has been the Indian manufacturing sector. India’s manufacturing sector has consistently been one of the important sectors of the Indian economy, playing a crucial role in the country’s overall development. The sector is defined by the potential of various up and coming small and medium-sized enterprises. SMEs have been contributing significantly to the country’s gross domestic product (GDP) since the 2000s, also creating jobs and providing livelihood opportunities to millions of people in the process.
India’s manufacturing sector is booming
India’s manufacturing sector is currently booming, with the country becoming a leading manufacturer of multiple goods and products.
The manufacturing sector has evolved drastically in the previous 4 decades, accounting for almost one-third of the GDP. The sector employs around 30 million people, making it the most sought-after sector for employment in the country. In recent years, there has been tremendous growth in the manufacturing sector, with output growing at an annual rate of over 10%.
The sector is expected to grow at a rate of 6-7% annually, with the overall size of the industry reaching $1 trillion by 2030.
The government has been taking various initiatives to promote the growth of the sector, including the introduction of new policies and schemes, the development of industrial corridors and parks, and the setting up of specialized institutions for training manpower.
Major drivers for this growth as per current estimates are rising income levels, increasing urbanization, and expansion in export markets.
The Manufacturing industry segments that are likely to see the highest growth include automotive, textiles & apparel, food processing, and electronics & appliances.
There are many opportunities for foreign investors in the Indian manufacturing sector, given that its huge growth potential is endless. India is now among the top five of the global economies, soon to be a $5 trillion economy by 2027-2028.
Keeping in mind the trajectory India’s economy is currently in pursuit, trade relations with the American, European, and middle-eastern nations will improve our county’s economic stability for long-term benefits.
Factors that have contributed to this growth
The current growth is being driven by several factors, including the government’s focus on developing the sector, the availability of efficient labor, and the rising consumer demand.
The government has been working to develop India’s manufacturing sector for many years now, with initiatives such as ‘Make in India’ encouraging companies to set up operations in the country.
The campaign was launched by the Indian government in 2014 with the goal of enhancing India’s manufacturing capabilities. The campaign has been successful in attracting foreign investors, with over hundreds of billions worth of investment commitments received since the introduction.
Some of the biggest investors include Apple, Foxconn and Suzuki Motor Corporation, Amazon, Meta, and more.
The availability of efficient labor is also a major factor driving growth in the sector; wages in India are much lower than in developed countries, making it an attractive destination for manufacturers.
Consumer demand has been on the rise ever since the Indian economy opened up to foreign investors in 1991, providing opportunities for Indian companies operating in the manufacturing space to improve their infrastructure and gradually grow to meet the existing needs and demands of a diversifying Indian population.
All these factors have led to rapid growth in India ambitions of achieving its eventual manufacturing capabilities in the past few years. In fact, according to a report by The Boston Consulting Group (BCG), India is expected to become the world’s third-largest manufacturer by 2025.
This would be a major achievement for India and would go a long way in boosting economic growth and development in the country.
The Indian economy in recent years has grown at a rapid pace, and this is driving increased demand for manufactured goods. In addition, the population of India is relatively young, with a large percentage of people in the working-age group. This provides a large pool of potential workers for the manufacturing sector.
Sub-Sectors that are doing well in manufacturing
Certain Indian sub-sectors are doing exceptionally well in manufacturing. These include the automobile, pharmaceutical, and consumer electronics sectors.
The automobile sector is among the most valuable industries in India. It accounted for more than 7% of India’s GDP in 2022, and it employs more than approximately 37 million people.
The sector has grown at a rate 10% per year and is anticipated to progress even faster with the expansion of electronic vehicles or EVs. Major global automakers such as Ford, Hyundai, Maruti Suzuki, and Honda are among the major producers of four-wheelers and are planning to increase their investment in the country.
The pharmaceutical sector is another important sub-sector of the Indian economy. Estimated to be worth $49 billion, it contributes over 2 percent to India’s GDP with an 8 percent contribution in terms of total merchandise exports.
Considering the sector’s past performance and current progress in mind, it is expected to grow at 16% annual rate in the next five years. Some of the biggest players in this sector include Sun Pharmaceuticals, Dr. Reddy’s Laboratories, and Cipla.
The Consumer electronics sector is yet another booming Sub-sector in India. The market size valuation of the consumer electronics sector was calculated to be approximately $73 billion in 2022 and is expected to reach $100 billion in valuation by 2030.
The sector also recorded an impressive growth of about 37 percent between October 2021 and October 2022 which includes $ 1.85 billion in recorded exports of electronic products.
Other well-performing sectors that are expected to display impressive numbers in terms of growth are the Renewable energy sector, Health and insurance sector, FMCG sector, IT sector, and Real Estate sector.
Opportunities and Challenges that Indian manufacturers may face in 2023
In 2023, the Indian manufacturing sector is expected to experience significant growth. This growth will be driven by a few key factors which include consumer demand, increasing investment in the sector, and the government’s various initiatives.
However, the sector faces numerous challenges as well, which must be addressed to ensure that it realizes its full potential before entering the next decade of exceptional growth.
The potential challenge at hand is the increasing demand for skilled labor. To compete with the global market, the manufacturing sector will need to pour significant investments into training and development programs to ensure that its workforce is up to date with the latest technologies and processes.
Additionally, the focus will also be on improving quality standards and becoming more competitive on price.
Next is the infrastructure. This includes both institutional infrastructure (such as power supply and banking facilities) and physical infrastructure (such as roads and ports).
The government has done plenty to improve its infrastructural might in the past couple of decades and plans to keep doing the same for the foreseeable future, but more needs to be done to make India a globally competitive manufacturing hub.
Finally, manufacturers must grapple with the issue of rising input costs. With a potential recession in cards for 2023, these costs can soar even higher. Input costs can be attributed to a variety of factors such as rising commodity prices and increasing wages. Manufacturers will need feasible ways to keep the rising costs under control.
Conclusion
As global production and trade are taking a new shape with multiple factors responsible for it, the global economy is headed for uncertainties entering 2023. The Indian manufacturing sector faces many hurdles along the way, along with opportunities in 2023. The government’s initiatives, coupled with improving international trade relations should help to overcome some of the key challenges faced by manufacturers, making the sector more competitive and productive.
