- India’s transformation from post-colonial scarcity to a global manufacturing hub.
- Driven by policy reforms, skilled workforce, and technological advancements.
Key Factors Driving India as a Global Manufacturing Hub
- Policy Reforms and Ease of Doing Business
- Introduction of the Production-Linked Incentive (PLI) scheme across 14 sectors.
- Reduction in corporate tax rates to 15% for new manufacturing units.
- India ranks 63rd in the World Bank’s Ease of Doing Business report (2020).
- Infrastructure Development and Logistics
- Gati Shakti National Master Plan aims to integrate connectivity across transport modes.
- Initiatives like PM MITRA Mega Textile Parks and Dedicated Freight Corridors (DFC) enhance industrial clusters.
- Budget 2025-26 allocates ₹11.21 lakh crore for infrastructure.
- Technological Adoption and Industry 4.0
- Emphasis on automation, AI, IoT, and robotics.
- Plans to develop a semiconductor manufacturing hub and boost electronics manufacturing to $300 billion by 2026.
- Sustainable Manufacturing
- Initiatives like National Green Hydrogen Mission focus on eco-friendly production.
- Targets 50% energy from non-fossil fuels by 2030.
- Geopolitical Realignment
- U.S.-China tensions lead to increased investments in India.
- Major firms (e.g., Apple, Tesla) expand production in India.
Key Challenges Hindering India’s Emergence
- High Logistics and Supply Chain Costs
- Logistics costs range from 14-18% of GDP, above the global benchmark of 8%.
- Inefficiencies in transport and port congestion increase operational costs.
- Rigid Labor Laws and Skill Gaps
- Despite reforms, compliance burdens discourage labor-intensive industries.
- Need for 30 million digitally skilled professionals by 2026.
- Weak MSME Ecosystem
- Only 20% of MSMEs have access to formal credit.
- High-interest rates and delays restrict growth.
- Infrastructure Gaps
- Inconsistent power supply and poor urban planning hinder expansion.
- Delays in land acquisition affect new manufacturing setups.
- Dependence on China
- Heavy reliance on China for raw materials and components affects supply chain resilience.
- 70% of Active Pharmaceutical Ingredients (APIs) are imported from China.
- Slow Adoption of High-Tech Manufacturing
- Limited R&D spending (0.65% of GDP) compared to global standards.
- Global Trade Uncertainties
- Ongoing trade negotiations limit export potential.
- Economic uncertainties affect sourcing and market access.
Strategic Measures to Enhance Effectiveness
- Improve Logistics and Supply Chain
- Fast-track Gati Shakti and optimize transport networks.
- Streamline customs and approvals to boost efficiency.
- Labor Law Reforms and Skill Development
- Fully implement labor codes for compliance ease.
- Expand Skill India and vocational education aligned with Industry 4.0 needs.
- Support MSME Growth
- Streamline credit access through digital platforms and lower collateral requirements.
- Encourage local component manufacturing.
- Modernize Infrastructure
- Accelerate industrial corridor projects and establish plug-and-play zones.
- Invest in smart city initiatives and renewable energy grids.
- Boost High-Tech Manufacturing
- Increase R&D funding in critical sectors like semiconductors and electric vehicles.
- Foster public-private partnerships for innovation.
- Strengthen Trade Partnerships
- Finalize pending FTAs with major economies to expand market access.
- Diversify export destinations, particularly in emerging markets.
- Emphasize Sustainable Practices
- Promote carbon-neutral initiatives and green manufacturing standards.
- Establish frameworks for eco-friendly practices.
Way Forward
- India’s manufacturing growth is contingent on robust policy reforms, infrastructure upgrades, and technological advancements.
- By focusing on logistics, MSME support, high-tech R&D, and sustainability, India can solidify its position as a global manufacturing powerhouse.
Mains Answer Writing Practice Question
Discuss the significance of the ‘Make in India, Make for the World’ initiative in positioning India as a global manufacturing hub. What are the key challenges hindering its success, and what strategic measures can be adopted to enhance its effectiveness? (200 words)