FDI inflow into domestic manufacturing sector expected to rise; MoF

  • Industry News
  • May 27,24
As global economies aim to stabilise and grow, India's manufacturing sector stands to benefit from these developments, leveraging both domestic strengths and enhanced external support.
FDI inflow into domestic manufacturing sector expected to rise; MoF

According to a recent monthly economic review by the Ministry of Finance, there's a growing trend of organisations in the US and Europe focusing on reindustrialisation. These organisations aim to boost supply chain resilience, a strategy that could significantly benefit India's manufacturing firms under the China Plus One strategy.

India's domestic manufacturing sector is poised to receive stronger external support in the coming months as investment in the sector is projected to increase. The ministry's economic review notes that more organisations in the US and Europe are turning their attention to reindustrialisation, with a focus on enhancing supply chain resilience. This strategy presents a valuable opportunity for India's manufacturing firms as part of the China Plus One approach.

The review highlights that Western economies are diversifying their supply chains to reduce dependence on China by incorporating other countries, and India is a prime candidate for such diversification. India's exports have seen an uptick in April, attributed to modestly improve economic activity and consumer sentiment in Europe, as well as a stable US economy.

Both the industrial and service sectors of the Indian economy are performing well, driven by robust domestic demand and tentative external demand. This positive trajectory is expected to continue as global economic conditions improve. The EXIM Bank of India forecasts double-digit growth in merchandise exports in the first quarter of FY25, signalling strong prospects for India's manufacturing sector.

Increased investments and strategic shifts in global supply chains favouring India are contributing to this optimistic outlook. As global economies aim to stabilise and grow, India's manufacturing sector stands to benefit from these developments, leveraging both domestic strengths and enhanced external support.

In FY23-24, India registered record exports of USD 778 billion, with promising growth in sectors like smartphones and defence exports. Total foreign investments in the manufacturing sector from October 2019 to December 2023 amounted to USD 20.8 billion, with Maharashtra, Karnataka, Gujarat, Delhi, and Tamil Nadu emerging as the top recipient states.

Finance Minister Nirmala Sitharaman has also emphasised the need for a greater push to the manufacturing sector, underscoring its importance in India's economic growth. She stressed the importance of increasing manufacturing output and integrating India into global value chains through supportive government policies.
 (Source: TOI)

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