Existing Government has understood the importance of building manufacturing scale and has left a clear mark by fostering socio-economic revolution through policy reformations and improving inner mechanisms. Initiatives like Make in India, GST, drafting National Policy on Electronics, increasing export incentives, launching phased manufacturing programme (PMP), Modified Special Incentive Package Scheme, and planning a new industrial policy have increased the FDI inflow within the country, leading the manufacturing sector to become $1 trillion industry by 2025.
Although, this indicates growth, I must highlight that in comparison with overall GDP growth, the progress in manufacturing does not appear satisfactory. Manufacturing industry, which in my opinion is the backbone of a country has only 16-17% share in India’s GDP. If we compare this with dominant economic super powers, we will see that manufacturing industries in China (~40%), South Korea (29%), and Thailand (27%) have much higher shares in their GDP than India. The reason behind this, is a clear understanding how focusing on manufacturing industries can support sustainable economic growth and create jobs.
Therefore, although existing Government has made headway into making India a manufacturing hub, more effort is expected and very much needed from the new Government if the country is to rank amongst the top three growth economies in the world.
How Domestic Manufacturing Can Help?
Manufacturing is not just another ideology that countries may or may not choose to practice. It is ‘the’ component for progress, growth, and positive change. And I believe, with the world quickly becoming an enormous trading arcade, focusing on manufacturing is necessity for every country.
How it can help? Well, building domestic manufacturing scale can beef up the industrial sector, which promptly leads to technological upgradation, urging skill development within country and creating jobs, as manufacturing capacity increases, the import expenses start to reduce and the country gains ever growing position in the export market, generating revenue to facilitate social, industrial, and economic infrastructural improvement. So, as it seems, focusing on manufacturing creates a cycle that runs on its own offering overall sustainability and progress to a country.
This battle tested strategy has helped countries like China, the US to become global suppliers, generating revenue and satisfying demands within the country.
Having enhanced manufacturing scale, China and the US have been able to control (lower) the price of manufactured products while improving quality. This advantage has helped them to claim large portions of the global market.
Manufacturing success of these countries can be replicated within India by investing in manufacturing. We should all appreciate Government of India’s efforts at transforming the country into a business hub, which resulted into India claiming 77th position in World Bank’s list of ‘Business Ready’ countries.
However, to match the progress with developed countries, more focus is needed in solving delays in policy development and enforcement, bureaucratic hurdles, lack of investment, lack of flexible financing etc.
India Can Succeed
Policy reformations and initiatives like Make in India are truly creating a conducive environment for manufacturing growth. As example, we can highlight that India has received nearly US$ 76.82 billion in the manufacturing sector from FDI during April 2000-June 2018. And Indian manufacturing sector has shown 4.34% CAGR growth from FY 12 to FY 18 due to these initiatives. Additionally, India having nearly 600 million people (more than half of its population) under 25 years (age), stands an opportunity to create a talent pool that can support and sustain manufacturing efforts, solving unemployment issues.
So, it is apparent that the country is growing and its focus on building manufacturing scale is undeniable. And the tools required to make changes happen are also available to India. However, the point I am trying to make is that we need a higher degree of effort in investment, policy creation, implementation, and internal process simplification to realize the potential.
Indian Government has supported several manufacturing industries and among many- steel, fertilizer, cement, refinery products and energy industry have shown considerable progress. However, it is important for the new Government of India to prioritize industries that present most lucrative opportunities for the country, and have the potential to shoulder overall growth. Fortunately, we are now standing at the beginning of green energy revolution. And since energy and economy are inter-related, this presents ‘the’ greatest opportunity India ever had to turn around its industrial, economic and social scenario through focusing on solar manufacturing.
As an industry, Solar is witnessing world wide acceptance, growing multiple folds each year. Investment in solar is quickly surpassing conventional energy, and renewable energy already accounts for 1/3 of global energy capacity. Additionally, solar driven renewable energy is expected to see 400% growth within 2040 and it’s not just the developed countries, developing countries are investing in solar as well.
Factoring in the scenario, I am sure that new Government of India would prioritize solar manufacturing to facilitate growth.
Domestic solar manufacturing can offer energy security, position in the export market, and stands to save India huge amounts of money ($42 bn by 2030 from solar imports, $100 billion spent in crude oil import in FY 18-19), facilitating socio-economic growth. Therefore, we are all hopeful that new Government in India will set priorities and take the right decisions in concentrating more efforts towards manufacturing within the best promising sectors for expected growth.