Table of Contents
Introduction to the Manufacturing Sector in India
- Key Economic Contributor: The manufacturing sector contributes approximately 17% to India’s GDP, making it a crucial pillar of the nation’s economy.
- Employment Generator: Employing over 27.3 million workers, the sector is vital for job creation and economic growth.
- Growth Potential: With ambitious goals, the Indian government aims to increase the manufacturing sector’s GDP share to 25% by 2025 through various policies and programs.
- Technological Advancements: The sector is embracing digital transformation and automation, enhancing efficiency, productivity, and global competitiveness.
- Export Potential: India is poised to export goods worth US$ 1 trillion by 2030, reinforcing its position as a significant player in global supply chains.
- Government Support: Initiatives like the National Manufacturing Policy and Production-Linked Incentive (PLI) scheme are driving the sector toward global standards.
- Industry 4.0: India is progressing toward Industry 4.0, focusing on modernizing its manufacturing processes to compete globally.
- Incentives for Growth: The government plans to offer incentives worth up to Rs. 18,000 crore (US$ 2.2 billion) to boost local manufacturing in key sectors such as chemicals and vaccine inputs.
- Job Creation in Mobile Manufacturing: The mobile phone manufacturing industry alone expects to create 150,000 to 250,000 jobs in the next 12-16 months, driven by government incentives and rising global demand.
- Strategic Global Position: With its industrial expertise, raw material advantages, and entrepreneurial spirit, India is well-positioned to capitalize on global market opportunities, including export growth, import localization, and contract manufacturing.
Market Size of the Manufacturing Sector in India
| Metric | Value | Notes |
|---|---|---|
| Highest Annual Exports (FY23) | US$ 447.46 billion | 6.03% growth over the previous year (FY22) exports of US$ 422 billion. |
| GVA at Current Prices (Q1 FY24) | US$ 770.08 billion | Represents the gross value added in the manufacturing sector in Q1 of FY24. |
| Projected E-commerce Exports (by 2030) | US$ 400 billion annually | Significant growth from the current US$ 1 billion, aiding in achieving US$ 2 trillion in total exports. |
| GDP Growth (Oct-Dec Quarter, Recent FY) | 8.4% | Driven by strong manufacturing (11.6% growth) and construction (9.5% growth) sectors. |
| Manufacturing Sector Potential (2025-26) | US$ 1 trillion | Targeted market size for the Indian manufacturing sector by FY26. |
| Global Manufacturing Hub Potential (by 2030) | +US$ 500 billion annually | Potential contribution to the global economy if India becomes a global manufacturing hub. |
| Estimated Employment in Manufacturing (2017-18) | 5.7 crore | Employment figures from the economic survey report. |
| Estimated Employment in Manufacturing (2018-19) | 6.12 crore | Reflects a steady increase in employment within the sector. |
| Estimated Employment in Manufacturing (2019-20) | 6.24 crore | Continued growth in manufacturing employment. |
| India’s Display Panel Market Growth (2021-2025) | From US$ 7 billion to US$ 15 billion | Projected growth in a key manufacturing segment. |
| Manufacturing GVA at Current Prices (Q1 FY24) | US$ 110.48 billion | Specific to the first quarter of FY24. |
Source: IBEF
Recent Investments and Developments
| Investment/Development | Details |
|---|---|
| Total FDI Inflow (FY23) | US$ 48.03 billion |
| FDI Inflows (April 2000-March 2024) | |
| – Automobile Sector | US$ 36.26 billion |
| – Chemical Manufacturing (excluding fertilizers) | US$ 22.14 billion |
| – Drug and Pharmaceutical Manufacturing | US$ 22.52 billion |
| – Food Processing Industries | US$ 12.58 billion |
| Manufacturing PMI (Nov 2023) | 56 (indicating expansion)* |
| EPFO Member Addition (FY22-23) | 1.39 crore net members (13.22% increase from previous year) |
| Mobile Phone Exports (August FY24) | Nearly doubled to US$ 5.5 billion |
| Projected Mobile Phone Exports (FY24) | Rs. 1 trillion (US$ 12 billion) |
| Manufacturing Purchasing Managers’ Index (PMI) (March 2024) | 59.1 (fastest expansion in 16 years) |
| Manufacturing PMI (Feb 2024) | 56.9 |
| Manufacturing PMI (FY23) | 55.6 |
| Index of Industrial Production (IIP) Jan 2024 | 153.0 |
| – Mining Sector | 144.1 |
| – Manufacturing Sector | 150.1 |
| – Electricity Sector | 197.1 |
| IIP (April-Jan 2024) | 143.4 |
| Combined Index of Eight Core Industries (April-Nov 2023) | 150.3 (8.6% increase from April-Nov 2022) |
| Capacity Utilization (Q2: 2023-24) | 74.0% (up from 73.6% in the previous quarter) |
| Overall Exports (April-Feb 2023-24) | US$ 709.81 billion |
| Exports (Feb 2024) | US$ 73.55 billion (14.20% growth from Feb 2023) |
| EPFO Member Addition (Dec 2023) | 8.41 lakh new members |
| – Female Workforce Participation | 2.09 lakh new female members (7.57% increase from Nov 2023) |
| Amazon Web Services Investment | US$ 13 billion (planned by 2030 for cloud infrastructure) |
| Semiconductor Plant Construction (Feb 2024) | Investments exceeding $15 billion (Tata Electronics, others) |
| Zoho Investment (Oct 2021) | Rs. 50-100 crore (US$ 6.7-13.4 million) for R&D in manufacturing |
| GDP Growth (Jan-Mar 2024) | 7.8% (manufacturing rebounded by 9.9%) |
| Wistron Corp. & Optiemus Electronics Collaboration | Boosting ‘Make in India’ initiative for laptops, smartphones |
| Samsung Manufacturing Expansion (April 2021) | Mobile and IT display panels in Noida, UP, with Rs. 4,825 crore investment |
| Bharti Enterprises & Dixon Technologies JV | 1.39 crore net members (13.22% increase from the previous year) |
Index of Industrial Production (IIP)
The Index of Industrial Production (IIP) is an important economic indicator that measures the short-term changes in the volume of production in various industrial sectors of an economy over a specific period. It reflects the overall industrial performance and helps in understanding the growth trends in the manufacturing, mining, and electricity sectors.
Definition: The IIP is expressed as a percentage and is calculated using the base year (currently 2011-12 in India). It tracks the production output across different sectors and compares it to the production levels of the base year to determine the percentage growth or decline. In India, the index is published monthly by the National Statistical Office (NSO).
Example: Suppose the IIP for the manufacturing sector in January 2024 stands at 150. This means that the production output in the manufacturing sector has increased by 50% compared to the base year (2011-12). Similarly, if the IIP for the mining sector is 130, it indicates a 30% increase in mining output since the base year.
Purchasing Managers’ Index (PMI)
*The Purchasing Managers’ Index (PMI) is an economic indicator derived from monthly surveys of private sector companies. The PMI is used to gauge the health of the manufacturing and service sectors.
The PMI is a composite index, typically calculated from five major indicators:
- New Orders – Indicates the level of demand.
- Inventory Levels – Reflects stock levels.
- Production – Measures output.
- Supplier Deliveries – Tracks delivery speed of suppliers.
- Employment – Assesses employment trends within the sector.
The PMI is expressed as a number from 0 to 100:
- A PMI above 50 indicates an expansion in the sector compared to the previous month.
- A PMI below 50 indicates a contraction.
- A PMI of 50 suggests no change.
Example
Let’s say the Manufacturing PMI in India for February 2024 is reported to be 56.9. This means that the manufacturing sector is experiencing growth and expansion compared to the previous month. A PMI of 56.9 indicates that new orders, production, and employment in the sector are all improving, signaling strong business conditions.
In contrast, if the PMI had been reported as 45.0, it would have suggested that the manufacturing sector was contracting, with potential decreases in new orders, production, and employment.
The PMI is closely watched by economists, investors, and policymakers as it provides timely and relevant information about economic activity and trends.