The Manufacturing Sector: Growth Story of India

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INDIA’S BOISTEROUS TARGET - MANUFACTURING @25% GDP BY 2025

India has laid out a target of ramping-up manufacturing sector’s share in GDP to 25% by 2025. Through policies such as the Make in India, which embodies erstwhile National Manufacturing Policy of 2011, the government intends to create favorable conditions that can foster public private partnerships, increase global competitiveness, create specialized manufacturing zones/hubs, enhance skillsets to make the workforce skilled in desired areas of manufacturing, etc. To further support the manufacturing sector of the country, government has also announced initiatives such as Self-Reliant India Mission and PLI Schemes . SELF-RELIANT INDIA MISSION In response to COVID-19 pandemic, the Indian government launched Atmanirbhar Bharat initiative in 2020. It focuses to achieve self-sufficiency in areas of national importance such as defence, renewable power, pharmaceutical, chemicals and semiconductors: SELF-SUSTAINABILITY IN DEFENCE - Identifying the requirement of large-scale modernization of armed forces, the Indian government has set policy actions to boost indigenous design and manufacturing of defence equipment in the country. • Revision made in Defence Acquisition Procedure (DAP-2020) to obtain critical capital goods for defence from indigenous market. • In 2020, increased FDI limit in defence sector from previous 74% to 100% (with government approval) wherever it is likely to provide access to modern technology. • Created a list of 2851 items of Defence Public Sector Undertakings (DPSUs) which would be prohibited from being imported. • Launch of an indigenisation portal like ‘SRIJAN Defence’ to promote Make in India together with the MSME sector. SELF-SUSTAINABILITY IN RENEWABLE POWER - In 26 th United Nations Climate Conference of Parties (COP) , India has committed to achieve 50% of installed electrical capacity (close to 500 GW) from non-fossil source by 2030. India is also targeting to become self-reliant in energy sector by 2047. To achieve this target, the government has pursued attracting investments in renewable energy sector i.e., solar, wind turbines, battery manufacturing etc. Under the PLI scheme, 100% FDI is allowed in renewable energy sector (generation and distribution) through the automatic route. SELF-SUSTAINABILITY IN PHARMACEUTICAL SECTOR - In FY 2019-20, bulk drug imports accounted for INR 40,000 Cr (USD 4.86 Bn), out of which many were critical ingredients for essential medicines. In the wake of COVID 19, a need emerged for creation of indigenous capacity for such critical compounds. The union ministry introduced four schemes to make India self-reliant in the production of 53 critical Active Pharmaceutical Ingredients (APIs) or Key Starting Materials (KSMs), and medical devices. SELF-SUSTAINABILITY IN SEMICONDUCTORS - Globaly a large amount of shortage in availability of semiconductor chipset was witnessed owing to COVID-19 and rise in demand for computing equipment. It had a negative impact on sectors such as automobile, defence, and consumer appliances. It is estimated that India’s own semiconductor requirement will reach USD 80 billion (INR 6581 Bn) by 2026 and USD 110 billion (INR 9,049 Bn) by 2030 from USD 24 billion (INR 1974 Bn) in 2022. Hence a focus on creating an eco-system to indigenously cater to this growing demand. SELF-SUSTAINABILITY IN CHEMICAL SECTOR - India is the sixth largest chemical producing country in the world and third largest producer in Asia. However, the country ranks 14th in exports from chemical industry excluding pharmaceuticals. The Indian chemicals market is projected to reach $850-1000 Bn (INR 69,929 Bn – 82,270 Bn) by 2040. With this potential as well as growing emphasis on China+1 strategy, India could grow as a hub for chemical manufacturing and exports. Considering this, the government has identified chemical sector under self-reliant India Mission and is working on initiatives like PLI, custom duty rationalization and more. 23

23 Economic Times- Chemical manufacturing in India

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Cushman & Wakefield

The Manufacturing Sector Growth Story of India

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