Indian manufacturing sector reflects changing trends

March 28, 2014 / By

India was hardly an industrialised country at the time of gaining independence, and the first step it took was to recognise the manufacturing sector as a very important instrument for the country’s economic growth. In every five-year plan, the country continued establishing the manufacturing sector, and encouraging and incentivising the private sector. As a result, manufacturing clusters have developed along major infrastructure corridors.

India is largely moving towards high-end manufacturing, while low-end manufacturing continues to grow, with the government announcing multiple reforms and policies in the sector. The Indian manufacturing industry is largely driven by low-cost skilled labour, adequate land laws and the reasonable cost of capital.

The government announced a national manufacturing policy in 2011 with the objective of enhancing the share of manufacturing in GDP to 25% within a decade and creating 100 million jobs, up from 58 million jobs in 2013. In order to achieve the desired growth rate for the manufacturing sector, it is necessary to have a high growth rate for the country’s exports as well. Considering this, the Department of Commerce has developed a strategy paper on doubling India’s exports to accelerate the rate of growth of manufacturing exports and reach a level of USD 534 billion by 2016-17.

Manufacturing occupiers seeking to buy land and construct their own facilities can find numerous opportunities in India. Land values are generally low in suburban locations of India. The rents for manufacturing land are also affordable compared to many other manufacturing destinations in Asia Pacific.

The cost competitiveness of labour is the key driver for the manufacturing sector in India. The cost of labour is cheaper than in many other countries including Japan, the USA, the UK, Poland, Korea, Australia, Germany, Brazil, Taiwan and China. In addition, rising manufacturing wages in China are likely to bring new entrants to India. Many multinational companies have already made a foray into high-end manufacturing and this trend is expected to continue.

Thus, India offers high growth opportunities for a wide range of manufacturing industries. The entry of foreign manufacturing companies with a technology-based orientation is helping India create a core and contemporary manufacturing sector, fed by ancillary manufacturers that rely on simple technical skills.


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