India Manufacturing Sector: Recently, the Annual Survey of Industries (ASI) for 2022-23 was released showcasing a positive correlation between Production Linked Incentive (PLI) scheme incentives and sectoral performance that have been pivotal in revitalizing the manufacturing sector, positioning India as a potential global manufacturing hub.
Current Status of India Manufacturing Sector
The manufacturing sector is emerging as an integral pillar in the country’s economic growth with 17% of the nation’s GDP and over 27.3 million workers.
Growth and Performance: According to the Annual Survey of Industries (ASI) for 2022-23, the manufacturing sector registered a robust growth rate of 21.5% in output, with a Gross Value Added (GVA) growth of 7.3%.
- Key sectors such as basic metal manufacturing, coke and refined petroleum products, food products, chemicals, and motor vehicles collectively contributed 58% to the total manufacturing output.
Employment Generation: The manufacturing sector has also been a significant source of employment, adding approximately 22 lakh jobs in 2022-23.
- It has surpassed pre-pandemic levels, indicating a steady recovery and expansion.
Major states like Maharashtra, Gujarat, Tamil Nadu, Karnataka, and Uttar Pradesh have been leading contributors to the sector’s GVA and employment.
Foreign Direct Investment (FDI): FDI in India’s manufacturing sector has reached US$ 165.1 billion, a 69% increase over the past decade, driven by production-linked incentive (PLI) schemes.
In the last five years, total FDI inflows amounted to US$ 383.5 billion.
Future Prospects
According to the National Manufacturing Policy (NMP), India aims to have 25% of the economy’s output come from manufacturing by 2025.
India can export goods worth US$ 1 trillion by 2030 and is on the road to becoming a major global manufacturing hub.
As in the Confederation of Indian Industry (CII)’s estimations, manufacturing sectors share in the GVA has a potential to rise from the current 17% to over 25% by 2030-31, and to 27% by 2047-48 if sustained efforts to boost domestic manufacturing capabilities and domestic value addition continue.
It helps to transform the Indian Economy into a developed economy by 2047.
Challenges and Concerns Related to India’s Manufacturing Sector
Infrastructure Deficiencies: It includes not only physical infrastructure like roads, ports, and power supply but also digital infrastructure.
- Poor connectivity and unreliable power supply increase operational costs and reduce efficiency.
Skilled Labor Shortage: While India has a large workforce, there is a significant gap in the skills required for modern manufacturing processes.
- It is partly due to inadequate vocational training and education systems.
Regulatory Hurdles: Land acquisition laws, labor laws, and environmental regulations can be cumbersome and time-consuming, deterring investment and slowing down project implementation.
Access to Finance: Small and medium-sized enterprises (SMEs), which form the backbone of the manufacturing sector, often face difficulties in accessing finance.
- High-interest rates, stringent collateral requirements, and lengthy approval processes make it challenging for these businesses to secure the necessary funds for expansion and modernization.
Global Competition: India’s manufacturing sector faces stiff competition from countries like China, which have more developed manufacturing ecosystems.
- Lower production costs and better infrastructure in these countries make it difficult for Indian manufacturers to compete on a global scale.
Policy Implementation: While the government has introduced several initiatives like ‘Make in India’ and the Production-Linked Incentive (PLI) scheme, the implementation of these policies has been inconsistent.
- Bureaucratic delays and lack of coordination between various government departments often result in suboptimal outcomes.
Technological Adoption: The adoption of advanced manufacturing technologies such as automation, artificial intelligence, and the Internet of Things (IoT) is still in its nascent stages in India.
Limited investment in research and development (R&D) and a lack of awareness about the benefits of these technologies hinder their widespread adoption.
Environmental Concerns: Issues such as pollution, waste management, and sustainable resource use are critical concerns that need to be addressed to ensure the sector’s long-term viability.
Q. Consider the following statements regarding the current status and challenges of India’s manufacturing sector:
- The manufacturing sector contributes 25% to India’s GDP and employs over 27.3 million workers.
- Foreign Direct Investment (FDI) in India’s manufacturing sector has increased by 69% over the past decade.
- Key challenges include infrastructure deficiencies, regulatory hurdles, and limited adoption of advanced manufacturing technologies.
Which of the statements given above is/are correct?
a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2, and 3
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