“The data, including a recent ranking by the World Population Review placing India as the fifth largest manufacturing country globally, underscores a transformative shift: India is firmly on its path to becoming a global manufacturing hub.”
For a couple of decades or so, the narrative surrounding India’s economic prowess has predominantly highlighted its formidable IT sector and bustling customer service centers. While these sectors remain crucial pillars of the nation’s growth, a significant and increasingly compelling story is unfolding in the realm of manufacturing. The data, including a recent ranking by the World Population Review placing India as the fifth largest manufacturing country globally, underscores a transformative shift: India is firmly on its path to becoming a global manufacturing hub.
Accounting for roughly 2.9% of global manufacturing output with a value of approximately $451 billion, India’s manufacturing sector, traditionally known for its agricultural products, textiles, engineering goods, leather products, and chemicals, is undergoing a dynamic evolution. This progress is no accident; it is the direct result of strategic initiatives and a clear vision to position India at the forefront of global production.
Celebrating 10 years of Make in India
The tenth anniversary of the “Make in India” initiative on 25th September 2024, served as a powerful reminder of this ambition. Conceived during a period of economic deceleration, “Make in India” was a bold and necessary intervention, designed to revitalize the nation’s growth trajectory by transforming India into a global design and manufacturing nerve centre. Its foundational objectives – facilitating investment, encouraging innovation, and developing world-class infrastructure – laid the groundwork for the progress we are witnessing today. As a pioneering “Vocal for Local” movement, it aimed to not only bolster domestic manufacturing capabilities but also to proudly showcase India’s industrial potential on the world stage.
FDI & PLI
The impact of this decade-long commitment is undeniable. Since 2014, India has attracted a staggering US$ 667.4 billion in Foreign Direct Investment (FDI), a remarkable 119% surge compared to the preceding decade. Notably, FDI equity inflows into the manufacturing sector alone reached US$ 165.1 billion during this period, a substantial 69% increase. This influx of capital across diverse industries and states is a testament to India’s growing attractiveness as an investment destination.
Furthermore, the introduction of the Production Linked Incentive (PLI) Schemes in 2020 has injected significant momentum into the manufacturing landscape. These schemes have already spurred investments of ₹1.32 lakh crore (US$ 16 billion) and a remarkable ₹10.90 lakh crore (US$ 130 billion) in manufacturing output as of June 2024, while generating over 8.5 lakh direct and indirect jobs. The surge in India’s merchandise exports, surpassing US$ 437 billion in FY 2023-24, further validates the effectiveness of these initiatives.
Ease of doing business
Beyond direct investment and incentives, India has made significant strides in enhancing its ease of doing business. Climbing an impressive 79 ranks from 142nd in 2014 to 63rd in 2019 in the World Bank’s Doing Business Report reflects a concerted effort to streamline regulations and reduce bureaucratic hurdles. The reduction of over 42,000 compliances and the decriminalization of 3,700 provisions underscore the government’s commitment to creating a more conducive environment for manufacturing to thrive.
In the WEF’s Adapter Quadrant
A recent World Economic Forum report further reinforces India’s burgeoning manufacturing prowess, identifying it as one of six countries successfully growing its manufacturing sector. While the report places India in the ‘adapter’ quadrant, acknowledging the current dominance of its service sector in GDP, it also highlights the significant strides being made in manufacturing, with certain states emerging as key hubs for industries like automotive. India is projected to become a major global player in light vehicle production, textiles, and electronics, fueled by initiatives like the PLI scheme that encourages domestic sourcing and attracts global giants like Apple to expand their operations within the country.
On the Rise
The robust health of India’s manufacturing sector is further evidenced by the HSBC Manufacturing Purchasing Managers’ Index (PMI) reaching a 16-year high in March, driven by strong increases in output, new orders, and job creation. With 17% of the nation’s GDP and employing over 27.3 million workers, the sector’s significance is undeniable. The government’s ambitious target of achieving 25% of the economy’s output from manufacturing by 2025, reiterated by the Union Finance Minister’s announcement of the “National Manufacturing Mission” in the Union Budget 2025-26, signals a continued and unwavering focus on this sector.
India is strategically building the physical and digital infrastructure necessary to elevate the manufacturing sector’s contribution to the economy and stake its claim as a vital player in global supply chains. Initiatives like the National Manufacturing Policy and the ongoing expansion of the PLI scheme into new sectors like chemicals and shipping containers demonstrate a forward-thinking approach.
While India’s digital economy is projected to experience rapid growth, the foundational importance of a strong manufacturing base cannot be overstated. The two sectors are not mutually exclusive but rather symbiotic, with digitalization playing an increasingly crucial role in modern manufacturing processes.
Ready to deliver
The journey is ongoing, but the trajectory is clear. India is no longer just an IT powerhouse or a service-driven economy. It is rapidly emerging as a significant force in global manufacturing, fueled by strategic policies, substantial investments, and a clear vision for self-reliance and global competitiveness. The “Make in India” initiative, now in its dynamic 2.0 phase, is not just a slogan; it is a tangible reality that is reshaping India’s economic landscape and solidifying its position as a crucial node in the world’s manufacturing ecosystem. The world is taking notice, and India is ready to deliver!
Data Sources and References
https://pib.gov.in/PressNoteDetails.aspx?NoteId=153203&ModuleId=3®=3&lang=1
https://pib.gov.in/PressNoteDetails.aspx?NoteId=153454®=3&lang=1
https://pib.gov.in/PressReleasePage.aspx?PRID=2058603
