[Yojana August 2023 Summary] Vision For Industry: Explained, pointwise

Introduction

India has become a major player in the global economy and it is time for the country to realise its potential and emerge as a world leader in this post-Covid New- World Order. According to a FICCI-McKinsey report, by 2047, a growing India is expected to become a high-income nation with six times its current per capita income and to create 60 crore jobs to gainfully employ its growing workforce. Achieving this potential will make India an approximately Rs 1500 lakh crore ($19 trillion) economy in real terms by 2047, with the economy growing at a real GDP growth rate of 7.7 percent. Industry will be the key lever to propel the economy towards this goal.

Favourable environment

Recent policy reforms like the GST, the launch of the National Single-Window System, and production-linked incentive (PLI) scheme have created a favourable environment for industrial growth.

The Centre’s other key initiatives, like the PM-Gati Shakti and National Logistics Policy, have also provided a facilitating environment for India’s manufacturing ecosystem to boom.

Manufacturing has the highest potential of all sectors to propel job growth, with the potential to create 60 million to 70 million jobs by 2030.

India could also boost its real GDP growth rate for manufacturing to 9-10% (from 7-8% in 2022). At the same time, India could aim to boost overall manufacturing productivity fivefold by 2030 (by tripling labour productivity and doubling capital productivity).

New-age Factory of the World: India’s chance to shine amid shifts in global supply chains

With the Covid-19 pandemic highlighting the vulnerabilities in concentrated supply chains, businesses worldwide are exploring alternative sourcing options to enhance their supply chain’s resilience. India could capitalise on this opportunity and capture an increased share of key global supply chains valued at between $800 billion and $1.2 trillion by 2030.

The Government has selected a diverse set of sectors for PLI incentives. It has selected multiple new-age sectors such as mobile phones, Advanced Chemistry Cell (ACC) batteries, high-efficiency solar PV modules, and drones. These new-age sectors would help India gain prominence as a manufacturing hub.

For instance, supported by the policy thrust, India has become the second-largest mobile phone producer in the world. Smartphones are now the fifth-largest export item in India’s export basket accounting for more than US$ 11 billion.

The aim should be to further increase India’s presence in five to six specific global value chains (e.g., electronics, chemicals, medical devices) by developing port-proximate clusters like the Mumbai—Thane—Raigad cluster for electronics and chemicals. State governments could support efforts by creating plug-and-play cluster zones based on their manufacturing strengths.

Multi-modal logistics parks being set up in several cities under the government’s ‘Bharatmala’ project could become world-class, efficient logistics zones for manufacturing (for example, electronics and aeronautics in Nagpur).

Additionally, adopting contract manufacturing to raise capacity utilisation to over 80%, launching supplier development programmes (e.g., innovation grants), and facilitating single-window clearance could raise India’s presence in these specific global value chains.

Embracing the Digital Revolution in Manufacturing

As per a recent NASSCOM report, the Indian manufacturing industry spent between US$ 5.5 and US$ 6.5 billion on Industry-4.0 solutions in FY21, driven by a combination of government regulations and private sector investments. Both large and small to medium-sized manufacturing businesses have the opportunity to transform their production processes by harnessing technologies such as IoT, AI, big data analytics, and robotics.

Digitisation could improve reliability and value chain resilience. Technology grants and international joint ventures could help secure technology expertise. The ongoing 5G rollout would also play a key role in their transformation to ‘smart manufacturing’. The key 5G use cases for Industry 4.0 include Connected Asset Monitoring, Connected Warehouses, Predictive Maintenance, Logistics and Fleet Management, and Quality Management.

Focus should be on technology development to support manufacturing industries. Also, a workforce with the right skills and capabilities would be essential. Support for skilling and upskilling initiatives will be needed for manufacturing MSMEs. India needs to invest in robust skill development programmes and collaborate with educational institutions and industry bodies to bridge this skills gap. Additionally, the government must incentivise technological investments, boost R&D, and expand institutional capacity. These elements could speed India’s industrialisation.

Leaping towards Sustainable Manufacturing Future

Manufacturing’s environmental impact, with GHG emissions and pollution, makes sustainability imperative. Customers seek eco-friendly practices and partners committed to green policies. Besides environmental responsibility, manufacturers benefit financially and enhance global competitiveness by prioritizing sustainability. Continuous innovation is essential to minimize environmental harm while pursuing industrial growth.

The Government is promoting sustainable manufacturing through initiatives like ‘Zero Defect-Zero Effect’ and ‘Digital India.’ Manufacturers should prioritize green alternatives, like bio-based materials and sustainable packaging, and work together to define industry standards for green labels and auditing processes for green products. Leveraging digital technologies and Industry 4.0 can align industrial processes with sustainability goals, fostering long-term economic benefits by creating efficient, environmentally friendly manufacturing systems.

Strengthening Infrastructure

India faces challenges in the efficiency and cost of goods movement in its industrial value chains. To address this, the government has initiated programs like the Industrial Corridor Development, PM Gati Shakti Master Plan and the National Logistics Policy.

Additionally, state and central governments could strengthen infrastructure in key manufacturing hubs through PPPs and special-purpose vehicles and expand smart-city coverage. Further, the sectors being considered for import localisation could be incentivised by providing plug-and-play infrastructure. Besides hard industrial infrastructure, widespread State-sponsored urban infrastructure development is crucial for leveraging the decoupling between China and the West.

Way forward

India has significantly enhanced its policy and regulatory framework, simplifying business establishment and growth. Ongoing reforms are set to accelerate, laying the groundwork for a world-class industrial sector that’s efficient, productive, sustainable, and export-focused.