Introduction

Manufacturing has emerged as one of the high growth sectors in India. Prime Minister of India, Mr Narendra Modi, had launched the ‘Make in India’ program to place India on the world map as a manufacturing hub and give global recognition to the Indian economy.

The Government of India has set an ambitious target of increasing the contribution of manufacturing output to 25 per cent of Gross Domestic Product (GDP) by 2025, from 16 per cent currently.

Market Size

India’s manufacturing sector has the potential to touch US $1 trillion by 2025. There is potential for the sector to account for 25-30 per cent of the country’s GDP and create up to 90 million domestic jobs by 2025. Business conditions in the Indian manufacturing sector continue to remain positive.

The Nikkei/Markit Manufacturing Purchasing Managers Index (PMI) for February 2016 was reported at 51.1, indicating expansion in Indian manufacturing activity for a second month in a row, as both domestic and foreign demand increased due to lower prices.

Investments

In a major boost to the 'Make in India' initiative, the Make in India week which was held in Mumbai between 13th to 18th February, received an overwhelming response from investors. The fair had closed with INR15.2 trillion (US $222 billion) in investment commitments.

With the help of Make in India drive, India is on the path of becoming the hub for hi-tech manufacturing as global giants such as GE, Siemens, HTC, Toshiba, and Boeing have either set up or are in process of setting up manufacturing plants in India, attracted by India's market of more than a billion consumers and increasing purchasing power.

India has become one of the most attractive destinations for investments in the manufacturing sector. Some of the major investments and developments in this sector in the recent past are:

• Airbus has procured more than US $500 million worth of supplies from India in 2015, registering a growth of 15 per cent annually and has targeted a cumulative procurement of more than US $2 billion over a period of five years up to 2020.
• Havells India Limited, one of the top Indian consumer electrical equipment producer, plans to set up a new manufacturing unit near Bengaluru by making an investment of Rs 1,059 crore (US $153.37 million), which would be its twelfth plant in India and its first outside north India.
• Global beverage company Pepsi plans to invest Rs 500 crore (US $73.36 million) to set up another unit in Maharashtra to make mango, pomegranate and orange-based citrus juices, while biotechnology giant Monsanto plans to set up a seed plant in Buldhana district of Maharashtra.
• Hindustan Coca-Cola Beverages plans to set up a bottling plant with an investment of Rs 750 crore (US $110.04 million) in phases at the first industrial area being developed by Government of Madhya Pradesh under the public private partnership in Babai village of Hoshangabad, Bhopal.
• Canada’s Magna International Incorporated has started production at two facilities in Gujarat’s Sanand, which will supply auto parts to Ford Motor Co in India and will employ around 600 people at both units.
• Swedish home furnishing brand Ikea has made a long-term plan of opening 25 stores in India by making an investment worth Rs 12,500 crore (US $1.84 billion).
• Siemens has announced that it will invest € 1 billion (US $1.13 billion) in India to add 4,000 jobs to its existing workforce of 16,000 in the country.
• US-based First Solar Inc and China’s Trina Solar have plans to set up manufacturing facilities in India. Clean energy investments in India increased to US $7.9 billion in 2014, helping the country maintain its position as the seventh largest clean energy investor in the world.
• Samsung Electronics has invested Rs 517 crore (US $75.85 million) towards the expansion of its manufacturing plant in Noida, Uttar Pradesh (UP). “Samsung India Electronics is committed to strengthen its manufacturing infrastructure and will gradually expand capacity at this plant to meet the growing domestic demand for mobile handsets, as per the company.
• Shantha Biotechnics Private Limited has started building a facility to manufacture Insuman, an insulin product to treat diabetes. Sanofi SA, which acquired Shantha Biotechnics, will invest Rs 460 crore (US $67.5 million) to build the facility.
• BMW and Mercedes-Benz have intensified their localisation efforts to be part of ‘Make in India’ initiative. "The localisation efforts will reduce the waiting period and accelerate the servicing process of our cars as we had to (previously) depend on our plants overseas for supply and will help us on the pricing front.”
• Suzuki Motor Corp plans to make automobiles for Africa, the company’s next big bet, as well as for India at its upcoming factory in Hansalpur, near Ahmedabad, Gujarat.
• Taiwan-based HTC has dCSIded to manufacture products in India. HTC is believed to have partnered GDN Enterprises, which has an assembly set up in Noida.
• Foxconn is planning an aggressive expansion in India, building up to 12 new factories and employing as many as one million workers by 2020
• The State Government of Tamil Nadu has signed investment agreements worth Rs 2,42,160 crore (US $35.53 billion) during a two-day Global Investors Meet in September 2015.

Government Initiatives

In a bid to push the 'Make in India' initiative to the global level, Mr Narendra Modi, Prime Minister of India, pitched India as a manufacturing destination at the World International Fair in Germany's Hannover in 2015. Mr Modi showcased India as a business friendly destination to attract foreign businesses to invest and manufacture in the country.

The Government of India has taken several initiatives to promote a healthy environment for the growth of manufacturing sector in the country. Some of the notable initiatives and developments are:

• Gujarat Government is planning to set up an electronics products manufacturing hub in the state, through its newly announced Electronics Policy 2016, which will generate about 500,000 jobs in the electronics sector in the next five years.
• The Ministry of Heavy industries and Public Enterprises, in partnership with industry associations, has announced creation of a start-up centre and a technology fund for the capital goods sector to provide technical, business and financial resources and services to start-ups in the field of manufacturing and services.
• The Government of India plans to implement a new Defence Procurement Policy (DPP) by April, 2016 under which priority will be given to the indigenously made defence products and 25 per cent share of defence production will be open to private firms.
• The National Institution for Transforming India Aayog (NITI Aayog) plans to release a blueprint for various technological interventions which need to be incorporated by the Indian manufacturing economy, with a view to have a sustainable edge over competing neighbours like Bangladesh and Vietnam over the long term.
• Ms Nirmala Sitharaman, Minister of State (Independent Charge) for Commerce and Industry, has launched the Technology Acquisition and Development Fund (TADF) under the National Manufacturing Policy (NMP) to facilitate acquisition of Clean, Green and Energy Efficient Technologies, by Micro, Small & Medium Enterprises (MSMEs).
• The Government of India has asked New Delhi's envoys in over 160 countries to focus on economic diplomacy to help government attract investment and transform the 'Make in India' campaign a success to boost growth during the annual heads of mission’s conference. Prime Minister, Mr Modi has also utilised the opportunity to brief New Delhi's envoys about the Government's Foreign Policy priority and immediate focus on restoring confidence of foreign investors and augmenting foreign capital inflow to increase growth in manufacturing sector.
• The Government of Uttar Pradesh (UP) has secured investment deals valued at Rs 5,000 crore (US $733.6 million) for setting up mobile manufacturing units in the state.
• The Government of Maharashtra has cleared land allotment for 130 industrial units across the state with an investment of Rs 6,266 crore (US $919.33 million)
• Dr Jitendra Singh, Union Minister of State (Independent Charge) of the Ministry of Development of North Eastern Region (DoNER), MoS PMO, Personnel, Public Grievances & Pensions, Atomic Energy and Space, Government of India, has announced the 'Make in Northeast' initiative beginning with a comprehensive tourism plan for the region.
• Government of India has planned to invest US $10 billion in two semiconductor plants in order to facilitate electronics manufacturing in the country.
• Entrepreneurs of small-scale businesses in India will soon be able to avail loans under Pradhan Mantri MUDRA Yojana (PMMY). The three products available under the PMMY include: Shishu - covering loans up to Rs 50,000 (US $735), Kishor - covering loans between Rs 50,000 (US $735) to Rs 0.5 million (US $7,340), and Tarun - covering loans between Rs 0.5 million (US $7,340) and Rs 1 million (US $14,700).

Road Ahead

The Government of India has an ambitious plan to locally manufacture as many as 181 products. The move could help infrastructure sectors such as power, oil and gas, and automobile manufacturing that require large capital expenditure and revive the Rs 1,85,000 crore (US $27.14 billion) Indian capital goods business.

India is an attractive hub for foreign investments in the manufacturing sector. Several mobile phone, luxury and automobile brands, among others, have set up or are looking to establish their manufacturing bases in the country.

With impetus on developing industrial corridors and smart cities, the government aims to ensure holistic development of the nation. The corridors would further assist in integrating, monitoring and developing a conducive environment for the industrial development and will promote advance practices in manufacturing.

Exchange Rate Used: INR 1 = US $0.0147 as on March 01, 2016

References: Media Reports, Press Releases, Press Information Bureau, McKinsey & Company

Disclaimer: Council for Start-up India is not responsible for any error in the information.