India’s contribution to global economy from manufacturing

India's contribution to the global economy from manufacturing is growing, with its global manufacturing share increasing to 2.8% and an expected annual contribution of over $500 billion by 2030. This growth is driven by sectors like pharmaceuticals, electronics, and textiles, fueled by government policies like the Production Linked Incentive (PLI) scheme, and a focus on improving competitiveness through measures like the Goods and Services Tax (GST).

India is projected to add more than $500 billion annually to the global economy by 2030 if it fully realizes its potential as a global manufacturing hub.

India is a global powerhouse, supplying over 50% of global vaccine demand and a significant portion of US generic drugs. The industry is projected to reach $130 billion by 2030.

India is becoming a major hub for mobile phone manufacturing and export, with a growing focus on end-to-end hardware component production. The country has also attracted substantial FDI in this sector, supported by initiatives like the Semicon India program.

Textiles sector is a major contributor to GDP, industrial production, and exports, and is expected to grow to $350 billion by 2030.

Automotive sector has strong export potential, especially in electric vehicles (EVs) and components, with a projected export growth opportunity of up to $5 billion.

India's manufacturing sector is attracting significant foreign direct investment, with manufacturing FDI accelerating by 18% in FY2024-25.

Micro, Small, and Medium Enterprises (MSMEs) play a vital role, contributing 33% of employment and 45% of exports. They are especially crucial in sectors like textiles, where about 80% of capacity is spread across MSME clusters.

The manufacturing sector is a crucial pillar in India’s growth story, acting as a catalyst for economic development, job creation and technological advancement. In June 2024, the Index of Industrial Production (IIP) indicated a year-on-year growth of 4.2 per cent, with the manufacturing sector specifically growing by 2.6 per cent. This growth is further supported by India’s increasing focus on high-value manufacturing, including mobile phone production, which has seen substantial export growth.

Moreover, the government's initiatives, such as the Production-Linked Incentive (PLI) schemes, have been instrumental in boosting manufacturing output and attracting foreign investment. The manufacturing sector contributes around 17 per cent to the GDP supported by robust physical and digital infrastructure which is expected to grow to 21per cent in the next 6-7 years.

The integration of digital technologies in manufacturing, known as Industry 4.0, is revolutionizing the sector. Indian manufacturers are increasingly adopting Internet of Things (IoT), Artificial Intelligence (AI), robotics and big data to enhance productivity, improve quality, and reduce costs.

With growing concerns over climate change, Indian manufacturing is gradually shifting towards more sustainable practices. Green manufacturing emphasizes reducing waste, conserving energy, and using environmentally friendly materials and processes.

The path to achieve the global leadership in manufacturing necessitates a structured methodology in approach across three levels (a) expanding the manufacturing base by increasing the speed and scale (b) gaining competitiveness at Global level so as to capture the global market and (c) claiming global leadership through branding.

To expand the Manufacturing base in India, the most important thing is to get the execution of all infrastructure projects well within time because Infrastructure is the mainstay spinal column of any economy, and is the single most important factor. Infrastructure not only make sure an effective supply chain and key inputs feeding into the manufacturing process, it also creates a unified link across production hubs and end markets both domestic and global.

To gain the Competitiveness in the global market, India needs to build an export eco-system so as to push the domestic manufacturing sector as well as to better cater to the domestic demand also. Those countries which are successful in manufacturing in today’s time, have also correspondingly boosted their share in global trade in past through pushing their exports.

There is an urgent need to expand infrastructure in coastal regions to boost the export in India so as to encourage country’s share in global trade

Ports infrastructure in India requires higher capacity and streamlined processes like linkages of Ports through roads for inland transportation for the seamless movement of goods.

Brand India would also need to be built and strengthened in such a way across the globe so as to enlarge the recognition of the ‘Brand India’ and to generate liking for ‘Made in India’ products.

Similarly, Electronics sector is also a perfect example of import-substitution driven opportunity. India imports most of its electronic necessities. The main reason for this has been underinvestments in research and development sector and a large skill-gap overcoming of which are vital for success in this sector.