India’s Manufacturing Sector: Current State and Future Directions

Current Momentum and Global Context

India's manufacturing sector is revitalizing in the context of global production network reconfigurations due to geopolitical uncertainties. Efforts focus on reducing dependence on single-country supply chains and reinvigorating industrial policy.

Strategic Focus for Sustained Growth

• Emphasis on enhancing competitiveness and integrating into the global value chain.
• Lowering entry barriers through targeted incentives and infrastructure investment.
• Expanding from capacity creation to capability building, focusing on technology-intensive sectors.

Sectoral Developments and Challenges

• Electronics: Production and exports have seen significant growth over the last 11 years.
• Pharmaceuticals: Among the largest globally, meeting significant vaccine and generic medicine demand.
• Need for enhanced private sector involvement, innovation, and industry-academia linkages.

Industrial Clusters and Infrastructure

• Development of larger and more integrated industrial ecosystems is essential.
• Potential in Tier-2 and Tier-3 cities due to cost advantages and large labor pools.
• Improvements in logistics, with logistics costs estimated at 7.97% of GDP for FY 2023–24.
• Importance of multimodal integration in freight transport to reduce costs further.

Role of Quality and Standards

• Quality Control Orders can enhance competitiveness by aligning with international standards.
• Careful implementation is needed to avoid increasing input costs.

Support for MSMEs

• MSMEs are crucial, yet face finance gaps despite improvements in formalization and finance access.
• Support needed for deeper participation in strategic value chains and technology adoption.

Regulatory Framework and Ease of Doing Business

• Need for speed, predictability, and consistency in regulatory processes affecting investments.
• Importance of state and local governments in providing stable regulatory environments.

The Path Forward

India's manufacturing growth is not just about quantity but also strategic indispensability. The National Manufacturing Mission could align reforms, skilling, and innovation within a long-term strategy to build globally competitive firms.

Conclusion

For India, the focus should be on building deeper technological capabilities and stronger R&D systems to embed its firms in strategic sectors globally.