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India: An emerging manufacturing hub
Articles- Apr 12,24
The contribution of the ‘industry’ sector – which includes manufacturing, mining and quarrying and allied industries – has been consistently around 25 to 30 percent in the last ten years, says R Jayaraman.
India has always been a promise yet to be fulfilled. After independence, we spent a lot of years to understand the newly emerged entity. Prior to independence, India was a loose federation of many states, kingdoms, etc. All of these were brought into one whole by the super human efforts of one man – Sardar Vallabh Bhai Patel. How he could unite some 30 plus languages, 400 plus dialects, several hundred eating habits and so on should have filled several text books and newspaper articles, but we didn’t see that many. We were still in the process of absorbing the new feeling of freedom. What began as a ‘tryst with destiny’, took a winding path towards a united future. Jeena Yahan, Marna Yahan.
It took us nearly 40 years, from 1950 to 1990, to realize that the path of socialism was not the right one. That poverty cannot be removed by praising it, celebrating it and perpetuating it. It cannot be erased by legislation, by increased agricultural output (of this, we have sufficient and more to feed our hungry billions, a stupendous success indeed, thanks to the green revolution), or by trading in spices. The world had changed and we needed to see the reality. All communist governments were tottering, and all social experiments had failed miserably. A system which does not configure how to support individual endeavour, but, stifle it in many ways, has no place on this earth.
The five-year plans, anchored by the famous statistician Mahalanobis were grand documents, and a lot of paper was produced to bring out these. Some read it, some acted on it, and some joined the activities of the country, whatever the direction. The option was to die in the streets. PL 480 was a disaster, and we learnt from it. The first rumblings of industry were rolled out by eminent personalities like Jamshedji Tata, TVS Iyengar, GD Birla, and many others, who chose to remain faceless, but with only one intent – to develop industries which could meet the basic needs of a growing country. To their immense credit, these and others overcame many hurdles which cannot even be imagined today. For example, many companies had to have an office in Delhi, manned by middlemen and company employees, whose only job was to chase government bureaucrats to obtain a license, some prevented others from obtaining the same, too.
Government ministries became the centres of bribery and collusion, while also getting some work done. Witness the establishment of the large integrated steel plants under SAIL, the super large Heavy Engineering Corporation – HEC for short, in those days – which were the modern temples of industrialization. Followed up by the IIT/s, and the IIM/s and the many engineering colleges, medical colleges (not that many). In spite of the heavy odds against their existence, exist and thrive, they did, and, over time, some of them attained international standards of excellence.
In the 1700’s and 1800’s India and China were the largest economies. While China remained a closed society, explored only by the Buddhist monks from India, who spread Buddhism to Japan, China and Korea, India was an open one, welcoming all those who were subject to persecution, typically for their religious beliefs. To the eternal credit of the then maharajahs, these displaced populations found sanctuary in a friendly land, where they mingled and became one of the hundreds of similar clans, tribes, etc. While India was not known as a manufacturing led economy, untold wealth, in the form of gold, diamonds, jewelry, rich textiles, spices, etc., was ubiquitous. Every corner of India had temples built by rich kings, who supported arts and culture. But no industrialization, in the modern sense, of mass production and distribution, to meet continuous consumption.
By 1947, the English had completed their task of loot, having filled their coffers with the output of the blood and sweat of Indian labour. They even exported Indian labour too! However, cotton and textile mills, railway lines, shipyards, ports were also left by them as a part of their legacy, apart from the English language. Indian industrialists started their journey in the early 1900’s, and then, after 1991, when PV Narasimha Rao pledged gold to pay for the deficit, they really got into action. Galvanized by the misery of the state of the country then, they showed their ‘animal spirits’ (a term coined by Sri Manmohan Singh, a former PM of India).
Manufacturing industries were started up at many places and in many branches, such as, automobiles, textiles, iron and steel, aluminium, copper, zinc, two wheelers, machinery, railway coaches and bogies and couplers, and so on. The list grew substantially when the government, in its efforts to ‘liberalize’ the economy, threw open the telecom industry to the private sector. This was a seminal event in the history of Indian industry. A sector, which, till 2002, was under the thumbs of the government, and which exemplified the term ‘inefficiency’, was sold to private owners. While the Airtel group has been the pioneer in this area, the Tata group, through its acquisition of VSNL, also played a key role, not to forget the Reliance group. The world’s biggest refinery was built in Jamnagar by Dhirubhai.
With all these developments, manufacturing started contributing significantly to the GDP of the country. The contribution of the ‘Industry’ sector – which includes manufacturing, mining and quarrying and allied industries – has been consistently around 25 to 30 percent in the last ten years.
Figure 1: Sectoral Contribution to GDP, India
Source: Statista
If we look at the contribution of the manufacturing sector alone (Figure 2), it would be around 14 per cent to 16 per cent in the same period.
Figure 2: Percentage contribution of manufacturing in the GDP of India
Source: Statistics Times
These data indicate that manufacturing is not the most important sector in India, neither in the past nor at present. However, the contribution of about $ 1.2 trillion plus in the year 2023 from the industry sector, which includes manufacturing too, is significant. Two years back, the automobile industry in India set itself a target to contribute $ 1 trillion to the GDP, by 2025. The auto contribution to manufacturing is 50%, and, so, the industry contribution would need to be about $ 3.2 trillion, which would mean a GDP of around 9 trillion. Not possible by 2025, but a goal worth trying for. Reminds one of the BHAG’s, of Jim Collins fame.
There has been much action in the manufacturing industry in India in the last few years. One indicator of that is the earnings from exports.
Table 1: Earnings from exports
| 2022 | 2017 | |
Value (in $ million) | Value (in $ million) | Growth (in %) | |
9,597.94 | 3,223.05 | 198 | |
27,502.75 | 14,100.58 | 95 | |
26,573.97 | 8,232.02 | 223 | |
21,256.87 | 14,950.08 | 42 | |
98,472.28 | 32,435.65 | 204 | |
21,876.53 | 11,688.52 | 87 | |
19,799.95 | 12,930.48 | 53 | |
7,966.17 | 3,249.08 | 145 | |
6,942.55 | 6,611.05 | 5 | |
8,473.39 | 8,223.74 | 3 | |
6,020.98 | 4,705.34 | 28 | |
39,274.61 | 43,623.16 | -10 | |
Iron and steel | 15,198.28 | 8,682.99 | 42 |
Iron or steel articles | 9,898.01 | 5,916.09 | 67 |
6,771.67 | 5,501.05 | 23 | |
14,087.76 | 6,012.95 | 134 |
A 68% growth at the aggregate level is, over 5 years, is indicative of the seriousness with which the government of India has been pursuing the policy of becoming a manufacturing powerhouse of the world. No doubt, it is an ambition which is worth having, but one needs to work at it for a few more years, to reap the fruits.
The sectors which are expected to drive India’s ambitions include: chip manufacturing, EV batteries, EV Cars and Commercial vehicles, defence equipment, defence mobiles like tanks, trucks, ships, etc.; mobile phones, electric power plants, solar power generators, textiles, food processing, metals and minerals, commercial aircraft parts, and white goods.
Returning to the question or the proposition: India is/ will be a powerhouse of manufacturing in the world. It is nowhere near that now. It will not be there even in the next five to ten years. But beyond that, it can surely hope to be one. PM Modi has, in a recent statement, said that so far, it has been only a trailer, the real one is yet to start. Hopefully, after he re-assumes power after his victory in 2024, we will see a new India, which will be quite different from what we have been used to. And the word ‘Powerhouse’ may come to apply to many of the fields in which the country will soon be active in.
About the author:
R Jayaraman is the Head, Capstone Projects, at Bhavan's S P Jain Institute of Management & Research (SPJIMR). He has worked in several capacities, including Tata Steel, for over 30 years. He has authored over 60 papers in academic and techno economic journals in India and abroad. Jayaraman is a qualified and trained Malcolm Baldrige and EFQM Business Model Lead Assessor.
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