India Realizing $1 trillion Manufacturing: From hope to happening

To attain the target of USD one trillion manufacturing economy, an integral blend of policy interventions and firm level actions would be needed. At one end, we would work with government to create conducive eco-system as growth enabler, on the other end, we intend to work for ‘firm level interventions’ for businesses to get prepared and reap the benefit of an enabled eco-system. The following is the interview published in the Apr-Jun 2018 edition of CII Mission Manufacturing Quarterly newsletter.

 Q1. USD 1 trillion mark to be hit by the Indian manufacturing sector by 2025. What are your views on this push?

A trillion-dollar manufacturing sector is an imperative more than an aspiration for us as a country. Over the years, Indian manufacturing sector has remained around to 15-17% of the GDP and it is essential, as in strong global economies, to have a manufacturing sector in the range of 20-25% of the GDP.

This aspiration, to my mind, is quite realistic. Gross value added (GVA) in India’s manufacturing sector is valued at around USD 390 billion as of 2017-18. The growth in the manufacturing sector, Q4 2017-18, is estimated at 9.1 percent. With a usual growth of the industry we would attain this level by 2030.

With a little bit of stretch, we could easily attain this level by 2025, obviously it would be essential for all stakeholders to come together and leverage the inherent mega potential in our economy.

Q2. What is working for us to set this milestone? What could be the key enablers or the best strategy?

India is one of the top ten largest markets and with young & aspiring demographic, increasing per capita income with ever growing buying power, India has emerged as fifth most attractive market for investments.

In September 2014, our visionary PM initiated the mission mode program: ‘Make in India’ complimented & supplemented by programs such as, ‘Digital India’, ‘Skill India’, ‘Start-Up India’; as part of a wider set of nation-building initiatives.

The fundamental spirit of this visionary ‘mission mode programme’ is to emerge as strong global economy in all sectors, including manufacturing.

In this endeavour, Government is transforming itself from being merely a regulator to facilitator and focusing on many enabling policies. It’s evident as India leaped in the ‘Ease of Doing Business’ ranking from 142 in 2014 to 100 in 2017

Further, Implementation of GST, reduction of income tax for companies in phased manner, tax relief for start-ups, 100% FDI policy for many sectors, etc. are some of initiatives. These policies and their deployment is conducive to reduction in ‘cost of compliance’ and ‘cost of transaction’ and helping manufacturing, industries & businesses to be globally competitive.

To give a further boost to manufacturing, Government is working now on the new Industrial Policy and many sectoral policies that, we hope, would enable manufacturing sector to achieve new speed, scale and efficiency.

I would also underscore that both public spending and public private partnership projects e.g. Smart Cities, Bharatmala, Sagarmala, industrial corridors, etc. are also providing a great thrust to manufacturing to gain a roaring growth. These initiatives are enhancing the capacity and capability of overall manufacturing sector and are big growth enablers.

Being a Co-Chair for the B20 Digital Economy & Industry 4.0 Task Force, I see how manufacturing practices are being transformed by the digital wave. Newer technologies e.g. cloud, big data and analytics, Internet of Things, are going to have the greatest impact on the way we do business. There is high expectation for the business value of technologies, those are in earlier stages of adoption like robotics, Artificial Intelligence (AI), additive manufacturing, augmented reality and blockchain.

As per a World Economic Forum report on ‘readiness for the future of production’, India has been ranked at 30th position on a global manufacturing index. To improve this ranking, it is essential for Indian manufacturing to embrace newer technologies quickly in the most inclusive and optimum way, suited to unique Indian characteristics. Embracing these technologies would, undoubtedly, make a turn around to Indian manufacturing and thus I feel, should be taken as a strategic priority at national level.

Q3. In your capacity of Co-Chairman of CII Manufacturing Council, what areas would you primarily be focusing on while preparing for this agenda?

To attain the target of USD one trillion manufacturing economy, an integral blend of policy interventions and firm level actions would be needed. At one end, we would work with Government to create conducive eco-system as growth enabler, on the other end, we intend to work for ‘firm level interventions’ for businesses to get prepared and reap the benefit of an enabled eco-system.

We need to work for targeted intervention for the high potential champion manufacturing Industries which may result in significant growth in output, employment generation, and India’s share of global manufacturing exports. Also, we need to work on new emerging future sectors, which promise superior growth.

Another focus area of the CII manufacturing council’s agenda would be helping the firms to ride the digital wave, to be a part of Global Value Chain (GVCs) and to leapfrog productivity, quality, speed and flexibility levels. To do so, Manufacturing Council needs to synergize with the Smart Manufacturing Council to quicken its adoption to yield its true benefits. Also, higher emphasis must be given on digital infrastructure building and digital skilling by both the government and the private organizations.

In addition, all attempts would be made to connect MSMEs and start-ups through digitalization and integrating them in the Global Value Chains, as this may propel the economic growth by leaps and bounds.

Q4. What challenges do you foresee through the projected years and what can be done to overcome?

The global manufacturing sector is likely to see obstacles over the next few years. A trade war has started amongst economies, making them increasingly isolated, and gains from globalization seem to be reversing.

Many developed countries have started implementing restrictive trade policies. Countries with strong local markets, including India, will likely continue to do well, while export-oriented manufacturers could face challenges. In such conditions, it is important for all of us to be ready for the disruption; to be able to adopt cutting-edge technologies and solutions to leapfrog businesses to the next level, and continuously identify and espouse new products and services.

The greatest challenge for us would be to balance the growth in the manufacturing using contemporary and emerging technologies, an imperative to remain globally competitive, while making sure we don’t lose focus on job creation.

While it is essential and critical to adopt technologies of smart manufacturing and enhance productivity & value-add, it’s is equally important to create jobs.

In fact, we have to aware of the risks of conventional job losses due to disruptive & rapid advancements in various technologies. Solution lies in skilling & re-skilling & building a future-ready work force. Industry too should be responsive by initiating, reskilling programs.

The job creation plan can be further fortified by promoting an accelerating ecosystem for start-ups and MSMEs to innovatively use available platforms for enhancing productivity and value creation through innovation.

It becomes quite evident that we also need to have relevant and timely policies and programmes which encourage right skilling and go beyond the arbitrage of using low-cost manpower.

The good news is that the, Government is sensitive to it & is putting in place schemes such as: Digital skilling programs, Atal New India Challenge and various digital skilling programs for both industry and at school level e.g. Atal Tinkering Labs are the way forward solutions.

Frugal innovation always remained our strength. With the right skilling and frugal innovation, we may develop a custom and unique smart manufacturing adoption model, to create a step change in Indian manufacturing competitiveness.

Last but not the least, the contribution of manufacturing industry while taking ‘services’ alongside would be paramount for bringing India’s quest of leapfrogging into the US$1 trillion manufacturing economy by 2025 into fruition.

Q5. What are the expectations from the government in this direction?

Government is driving well-defined initiatives to propel the manufacturing value chain as a growth engine for employment creation. For manufacturing sectors to grow, key role of Government is to create the right eco-system through policy intervention for ease of business, provide trade facilitation and promote innovations and start-ups and build both physical and digital infrastructure. In addition, Government should continue to work to encourage foreign trade and FDI in the country.

Digitalization and smart manufacturing has the potential to bring down the cost with higher productivity and catering to specific customer needs. Governments should support the creation of smart manufacturing ecosystem that fosters the adaption of these new technologies. Public-private collaboration through institutions such as technology centres or innovation hubs must be encouraged. Financial support and tax incentives are pivotal for development and roll-out of these new technologies.

Further, India has always accorded top priority for addressing its infrastructure deficit to sustain economic growth and Government has started a number of initiatives to improve overall infrastructure of the country. Other than physical infrastructure and affordable high-quality industrial infrastructure, it is also important to emphasize on digital infrastructure for new and emerging technologies, with a focus only on manufacturing & infra for Smart/Industry 4.0

MSMEs along with women are untapped mega force of productivity and job creation. To include them through digitization and creating an eco-system which encourages them to be a part of this growth story can be a major win for India.

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