Market Trends of India Manufacturing Industry
This section covers the major market trends shaping the India Manufacturing Sector Market according to our research experts:
Growing Government Spending to Boost the Manufacturing Sector
Manufacturing has emerged as one of the high-growth sectors in India. Prime Minister of India, Mr. Narendra Modi, launched the 'Make in India' program to place India on the world map as a manufacturing hub and give global recognition to the Indian economy. For instance, in August 2021, Wistron Corp. collaborated with India's Optiemus Electronics to manufacture products such as laptops and smartphones, which significantly boosts the 'Make in India' initiative and electronics manufacturing in the country.
During the second quarter of 2021, the contribution of India's manufacturing industry to the country's GDP was valued at over 6.7 trillion Indian rupees. Between April 2000 to June 2022, the automobile sector received FDI inflows of USD 33.53 billion. The chemical manufacturing sector (excluding fertilizers) received FDI inflows worth USD 20.41 billion. The drug and pharmaceutical manufacturing sector received FDI inflows worth USD 19.90 billion.
The Government of India has taken several initiatives to promote a healthy environment for the growth of the manufacturing sector in the country. In the Union Budget 2022-23, the government allocated Rs. 2,403 crores (USD 315 million) for the Promotion of Electronics and IT Hardware Manufacturing. The PLI for semiconductor manufacturing is set at Rs. 760 billion (USD 9.71 billion), to make India one of the world's major producers of this crucial component.
In April 2021, Samsung started manufacturing mobile display panels at its Noida plant and plans to ramp up manufacturing IT display panels soon. Samsung Display Noida, which has invested Rs. 4,825 crores (USD 650.42 million) to move its mobile and IT display manufacturing plant from China to Uttar Pradesh, has received special incentives from the state government.
In September 2021, Prime Minister Mr. Narendra Modi approved the production-linked incentive (PLI) scheme in the textiles sector for man-made fiber (MMF) apparel, MMF fabrics, and 10 segments/products of technical textiles at an estimated outlay of Rs. 10,683 crores (USD 1.45 billion). In May 2021, the government approved a PLI scheme worth Rs. 18,000 crores (USD 2.47 billion) for the production of advanced chemical cell (ACC) batteries; this is expected to attract investments worth Rs. 45,000 crores (USD 6.18 billion) in the country, and further boost capacity in core component technology and make India a clean energy global hub. Hence, government spending in India is expected to boost the demand for the manufacturing sector market during the forecast period.
Growth of the Automotive Industry is Driving the Market
In the Automobile market in India, Two-wheelers and passenger cars accounted for 76% and 17.4% market share, respectively. Passenger car sales are dominated by small and midsized cars. The export of the total number of automobiles increased from 4,134,047 in 2020-21 to 5,617,246 in 2021-22, registering a positive growth of 35.9%. India was one of the leading countries in the world in terms of vehicle production.
From April 2021 to March 2022, Passenger Vehicle Exports increased from 404,397 to 577,875 units (registering a positive growth of 42.9%), Commercial Vehicle Exports increased from 50,334 to 92,297 units, Three Wheeler Exports increased from 393,001 to 499,730 units and Two Wheelers Exports increased from 3,282,786 to 4,443,018 units in April 2021 to March 2022 over the same period last year.
The PLI scheme (outlay of USD 3.5 Billion) for the automobile sector proposes financial incentives of up to 18% to boost domestic manufacturing of advanced automotive technology products and attract investments in the automotive manufacturing value chain.
In the financial year 2022, the total production volume of vehicles in India was around 22.9 million units, which was an increase from the previous year. In 2020, the production value contracted for the first time. This was partially due to the introduction of the new Bharat Stage VI (BS-VI) emissions standards from April 1, 2020, and overall scaled-down production to the lower stock of the old BS-IV vehicles. Further decline in production was contributed by the coronavirus pandemic in India.
Two-wheelers have been the predominant vehicle type produced in India and also made up the majority of automobiles sold domestically. Two-wheelers in India are divided into three subcategories, namely, motorcycles, scooters, and mopeds. The future growth point of this sector is expected to be electric scooters and motorcycles and many leading manufacturers have already started producing electric vehicles. For instance, in January 2023, Mahindra and Mahindra Ltd, one of India's leading automotive companies, announced that their investment of Rs. 10,000 crores (USD 1226.74 million) for electric vehicles have been approved under the Maharashtra government's industrial promotion scheme for electric vehicles.
