The Indian manufacturing market has the potential to reach $1 trillion by 2025-26, with the sector witnessing a proliferating growth in investment, said a report by Colliers. As per the published dossiers by the Department for Promotion of Industry and Internal Trade (DPIIT), the manufacturing sector engrossed substantial Foreign Direct Investment (FDI), with FDI equity inflows tallying around $17.51 billion in the FY 2020-21 itself. “This surge emphasizes intensified investor confidence and exhibits India’s attractiveness as one of the most lucrative manufacturing destinations in the world,” said the Colliers report.
The ‘Make in India’ initiative has played a pivotal role in accelerating investments. Furthermore, with policy reforms and incentives, comprising of the Production Linked Incentive (PLI) scheme, the government has pro-actively incentivized various manufacturing industries, such as automobiles, electronics, and textiles, nurturing an environment conducive to augmented investment. Diode Laser Series
“The Indian government is actively fostering a conducive environment for global manufacturing companies through strategic initiatives such as the Bharatmala Pariyojana Project, the proposed DESH Bill, National Logistics Policy, appropriate taxation and incentives for various sectors, thereby enhancing opportunities in the industrial market. Emulating these measures, Indian states offer a myriad of advantages to industrial players, including incentives, subsidies, robust infrastructure, and essential utilities,” said Swapnil Anil, Executive Director & Head, Advisory Services at Colliers India.
Propelled by progression in significant sectors and urged by favorable megatrends, India’s manufacturing sector has started itself into new geographies and sub-sectors/segments. Emphasizing the competitive advantage of a skilled workforce and lower cost of labor, the manufacturing sector is also beholding an amplified inflow of capital investment and M&A activity, leading to a surge in manufacturing output and consequential increased contribution to exports. The manufacturing GVA at current prices was estimated at $110.48 billion in the first quarter of FY24.
The manufacturing sector contributes around 17 per cent to the GDP supported by robust physical and digital infrastructure which is expected to grow to 21 per cent in the next 6-7 years.
The automotive sector, a keystone of the country’s manufacturing prowess, has seen prominent interest from global players like Tesla and Ford, depicting intents for establishing or expanding their manufacturing footprints within the country. Electronics manufacturing experienced a rise in investments, particularly in the smartphone production domain, with major players like Apple establishing assembly units in India. Additionally, the textiles and garment manufacturing sectors have witnessed upsurge in investment activities, with several global brands reconsidering their sourcing strategies and investing in Indian textile units.
Meanwhile, the Government of India’s Ministry of Heavy Industries and Public Enterprises has launched SAMARTH Udyog Bharat 4.0 in 2021 as a strategic initiative intended to enhance the manufacturing sector’s competitiveness, predominantly in the capital goods domain.
MoUs in manufacturing sector by various states
There have been various MoUs signed by different states in India boasting industrial and manufacturing sectors. The Maharashtra government has signed 21 MoUs of Rs 88,420 crore at the World Economic Forum in 2023. Andhra Pradesh signed MoUs in Global Summit 2023 with 352 firms. In addition to this, Gujarat has signed 3 MoUs in Oct 2023 worth Rs 3,000 crore for textile, industrial park, engineering, including auto sector. Tamil Nadu has signed a total 79 MoUs in the year 2022-23.
Top regions to invest in India
A detailed study was carried out by Colliers across the states of Gujarat, Maharashtra, Rajasthan, Madhya Pradesh, Karnataka, Andhra Pradesh, Tamil Nadu, Telangana, and Odisha focusing on the Industrial Sector.
Gujarat ranked the first, marginally followed by Maharashtra and then Tamil Nadu.
Gujarat ranked first due to easy labour availability and at a cheaper cost along with the government supporting policies for the labour force. The state has cheaper land rates for industrial developments. The infrastructure availability in the state, which has such great last mile connectivity and presence of major ports, roadways, railways and also provides water, electricity and renewable energy resources at a cheaper rate compared to other states with very minimal energy dependence. Gujarat also has other financial offers to give to the developers setting up their business within Gujarat.
Maharashtra was ranked second due to the best policies, subsidies, and incentives offered by the state government. All major and competing businesses have at least a presence in Maharashtra and the state has the highest FDI inflow, industry GDP share, lower unemployment rate, higher number of healthcare and educational facilities, which all combine to make a better general economic scenario of the state. Maharashtra always offers a great deal of support infrastructure in terms of roadways, waterways and railways.
Tamil Nadu ranked third as the state has great availability of labor with cheaper rates and favourable labor policies. Tamil Nadu also has good policies, subsidies, and incentives for the industrial sector and has a fair presence of support infrastructure with many industrial companies having their footprint in the state.
Emerging manufacturing sectors in India
Exciting emerging themes in India’s manufacturing sector include advanced technologies, sustainable practices, Industry 4.0, local manufacturing focus, AI integration, 3D printing adoption, and IoT (internet of things) driven processes. The emerging sector includes semiconductors, agri tech, waste management particularly e-waste on which the government has also formulated various policy documents.
Colliers added that key indicators of economic growth include automotive and auto components, cement and capital goods, engineering, chemicals, pharmaceuticals, paper and paper products, and the paper and paper products industry.
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