Indian manufacturing sector


10:38 AM

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What’s in today’s article?

  • Why in News?
  • Manufacturing in India
  • Key highlights of the speech delivered by the Finance Minister

Why in News?

Recently, Finance Minister Nirmala Sitharaman said that Indian manufacturing needs to develop greater sophistication in its products and the government will assess how to provide policy support in this endeavour.

She made those remarks while addressing the annual business summit of the Confederation of Indian Industry (CII).

Manufacturing in India

  • Intro
    • Due to performance of key sectors like automotive, engineering, chemicals, pharmaceuticals, and consumer durables, manufacturing has emerged as an integral pillar in the country’s economic growth.
    • With 17% of the nation’s GDP and over 27.3 million workers, the manufacturing sector plays a significant role in the Indian economy. 
    • The Indian government hopes to have 25% of the economy’s output come from manufacturing by 2025.
    • India has the capacity to export goods worth US$ 1 trillion by 2030 and is on the road to becoming a major global manufacturing hub.
  • Performance – Statistics
    • The Indian manufacturing sector has performed well in FY 2023-24, with a growth of 11.6%.
    • Manufacturing exports have registered highest ever annual exports of US$ 447.46 billion with 6.03% growth during FY23.
    • Value added in the Manufacturing market is projected to amount to US$231.5bn in 2024.
  • Govt initiatives
    • The National Manufacturing Policy aims to increase the share of manufacturing in GDP to 25 percent by 2025.
    • The Production Linked Incentive (PLI) Scheme for manufacturing was launched in 2022 to develop the core manufacturing sector at par with global manufacturing standards.
    • India is planning to offer incentives of up to Rs. 18,000 crore (US$ 2.2 billion) to spur local manufacturing in six new sectors including chemicals, shipping containers, and inputs for vaccines.
    • Slew of measures were announced in the Union Budget 2023-24:
      • Startups incorporated within a time-period and meeting other conditions can deduct up to 100% of their profits;
      • The income tax rate for new co-operative societies engaged in manufacturing activities has been lowered from 22% to 15%.
    • Ministry of Defence has set a target of achieving a turnover of US$ 25 million in aerospace and defence Manufacturing by 2025, which includes US$ 5 billion exports.
      • A new category of capital procurement ‘Buy {Indian-IDDM (Indigenously Designed, Developed and Manufactured)}’ has been introduced in Defence Procurement Procedure (DPP)-2016.
    • By 2030, the Indian government expects the electronics manufacturing sector to be worth US$ 300 billion.
      • The PLI for semiconductor manufacturing is set at Rs. 760 billion (US$ 9.71 billion), with the goal of making India one of the world's major producers of this crucial component.
    • Initiatives like Make in India, Digital India and Startup India have given the much-needed thrust to the Electronics System Design and Manufacturing (ESDM) sector in India.
    • In September 2022, the National Logistics Policy was launched to ensure quick last mile delivery, end transport-related challenges.
    • The Mega Investment Textiles Parks (MITRA) scheme to build world-class infrastructure will enable global industry champions to be created, benefiting from economies of scale and agglomeration. Seven Textile Parks will be established over three years.
    • The 'Operation Green' scheme of the Ministry of the Food Processing Industry, which was limited to onions, potatoes and tomatoes, has been expanded to 22 perishable products to encourage exports from the agricultural sector.

Key highlights of the speech delivered by the Finance Minister

  • Greater sophistication in manufacturing is needed
    • Indian manufacturing needs to develop greater sophistication in its products and the government will assess how to provide policy support in this endeavour.
  • Manufacturing must increase its share
    • For India to become more self-reliant, manufacturing must increase, and with the help of policies, India must increase its share in manufacturing and global value chain.
  • Opportunities in India
    • The consumer market in India presents a $2.9 trillion opportunity.
    • Also, spending on food is expected to rise to $1.4 trillion while financial services will climb to $670 billion by 2031.
      • Together this would create another $1.39 trillion of opportunities.
  • India’s demographic dividend
    • India’s demographic dividend will persist for the next 30 years.
    • It comes with an added advantage of a historically lowest dependency ratio, means the net benefit is going to be towards more increase in consumption.
    • In order to reap the benefit, skilling is being ramped up.
  • India’s consistent high growth
    • India’s consistent high growth is a result of policy stability, absence of flip-flops, corruption-free decision-making combined with facilitation in legislative and legal frameworks.
      • These frameworks are based on industry feedback for rapid changes in the compliance regime.

Q.1. What is Production Linked Incentive (PLI) scheme?

The Production Linked Incentive (PLI) scheme is a performance-based incentive program by the Government of India that provides companies with incentives for increased sales of products made in India. The scheme's goal is to boost the manufacturing sector and reduce imports.

Q.2. What is the Confederation of Indian Industry (CII)?

The Confederation of Indian Industry (CII) is a non-profit, non-government, industry-led organization that works to create an environment for India's development. CII partners with the government, industry, and civil society through advisory and consultative processes.

Source: Indian manufacturing needs more sophistication: Finance Minister | IBEF | Statista