Greater manufacturing capacity and efficiencies hold the key to India’s growth and success in becoming the global leader. And recent initiatives by Government testify the country’s intent on claiming the mantle of the fastest growing manufacturing hub in the world. However, prioritizing the fastest growing manufacturing sector within the country (which is solar sector) and focusing on its growth (through domestic manufacturing) can help India reach great heights.
Present Status of Manufacturing Sector in India
Indian manufacturing sector has shown incredible growth in recent years. In the last 4-5 years India has executed nearly half of the 37 reforms, that were adopted in 2003. From facilitating the delays in getting construction permits, simplifying finance acquisition, registration of property, paying taxes, protecting minority investors, developing skill through training, resolving insolvency, and enforcing contracts; Government of India has acted aggressively on these issues, making the country a lucrative platform for manufacturing.
Recent Government initiatives have enhanced India’s manufacturing sector 7.32% at a CAGR of between FY12 and FY17. And in FY 16-17 the sector showcased an incredible growth rate of 7.7% over the previous financial year. The manufacturing goods highlighted 2.4% growth in wholesale price index between April 2016 and January 2017. Besides refinery products, steel, fertilizer, and cement, electricity generation also grew in India, and in FY 17-18, India is estimated to generate surplus of power for the first time in at least 13 years. Thermal energy capacity showed 60 GW growth and renewable energy capacity added 23 GW.
Foreign Investment Can Speed Up Growth
Government support and initiatives have also made way for foreign investments to reach the country. A total of 67% increase in FDI inflow into India has been witnessed in the last 3 years and near about $9.64 billion FDI inflow in August 2017 alone. And in 2018, India received more FDI inflow than China. This has great implications of making India more suitable to establish and enhance businesses has huge implications on the socio-economic growth of the country. It will create more jobs, improve industrial structure, improve R&D structure, and ultimately support domestic manufacturing, allowing India to reduce forex outflow and making the country a leader in the global trading arcade.
Although, Government initiatives and foreign investment present opportunities for India to scale great heights through manufacturing, there are challenges like-
- Lack of policy framework and delays in policy implementation
- Lack of demand creation
- Lack of investment in R&D
- Reducing rate of subsidies
Focusing on solving these problems and improving creating an environment for better technology usage and innovation can help India in becoming the manufacturing hub it aspires to become.
Recently released The World Bank’s survey report on ‘Doing business 2018’ has positioned India in the 100th position among top countries that have favourable environment for business. The current position is 32 places up from India’s last recorded position. It clearly endorses the economic reformation within the country and eagerness to become a knowledge based, technology driven economy.
Make in India program, launched by the Hon’ble Prime Minister of India, Mr. Narendra Modi has made quite an impact in improving the manufacturing scenario within India. Most notably, the solar sector has flourished and has become the perfect example of Indian manufacturing growth. Policy initiatives, supply side reforms, green corridors program, mandate enforcements, and solar parks policy favoured towards Indian solar energy sector saw huge growth in manufacturing and installed over 25 GW solar capacities in India.
And the current overall manufacturing growth rate of India is estimated to make India the fifth largest manufacturing country in the world by the end of 2020.
More Focus Will Yield Faster and Better Results
Government initiatives like- protecting MSMEs, opening up the economy to foreign budget (received US$ 70.51 billion FDI by June 2017), establishing Centres of Excellence (CoE) and R&D facilities for innovation, strategic partnerships with foreign companies to reduce learning curve, and offering subsidies to encourage growth have boosted the manufacturing sector in India. And as global consumption level is growing with population, this is the right moment for the country to focus more on manufacturing and claim the global export market, just like China, US have.
Dominant solar countries like- China and the US have aggressively expanded their domestic manufacturing capacity, which has helped them to control (lower) the price of manufactured products while improving quality. This simple equation has led China and the US to claim large portions of the global market through exports, and made them leaders in the global market. Manufacturing success of these countries is powered by a synchronized growth in skill development, financial investment and infrastructure quality improvement (R&D). This simple yet effective equation has helped them to control the global market and increase profits through exports.
Boost in manufacturing sector in India can help the country reach that position, but the focus has to be continuous and unwavering. Especially towards the most lucrative and in-demand sectors such as- solar energy sector. Domestic manufacturing of Indian solar sector is able to offer energy security, position in the export market, and stands to save India huge amounts of money ($42 bn by 2030 from solar imports), kicking back the profits towards socio-economic growth. So, priorities have to be set and more focus on ‘top of the list’ sectors is needed to help India rank with the top three growth economies and manufacturing destination of the world by the year 2020.