As we prepare for Union Budget 2022, the manufacturing sector – which accounts for roughly 20 percent of total GDP in India – will be watching with bated breath. The budget comes at a crucial for Finance Minister Nirmala Sitharaman as she is expected to steer the Indian economy towards its goal of 25 percent GDP growth in the next five to eight years from its current 17 percent growth rate.
The manufacturing sector’s target of reaching $1 trillion over a five-year period can only be met through a series of policy initiatives to augment the availability of products, maintain production costs, and create demand and jobs through ease of doing business.
The Union Budget will have to balance many moving pieces to go ahead in the correct path as we enter the second year of the pandemic. The manufacturing sector contributes to the economy by providing employment, securing investments, and advancing the country's industrial progress.
However, for the sector to grow, the government must incentivise and support investments in the manufacturing ecosystem, as well as stimulate local innovation among technology providers. If India aims to become a giant manufacturing hub – which implies making the country’s sector more competitive on a global scale and as a partner in the global economy, the country needs to focus on Make in India.
India requires a semiconductor strategy that spans 20 years. Currently, India's semiconductor demand is fully covered by imports. It is critical to consider the distinction between being able to produce one line of chips and reaching semiconductor self-sufficiency or even becoming a key manufacturer. T
here is no display Fab market in India, and now is the time to focus on developing this vital business in India. Given the rapid technological development when it comes to TV, mobile phones, and IT hardware production, we should aspire to construct a major display sector and create value in India.
Furthermore, improving the logistics infrastructure (better roads etc), and delivering cost-effective and efficient logistics are also critical components for attaining the needed development in the industrial sector under this ambitious 'Make in India' agenda.
A competitive manufacturing ecosystem would also require reduced permission bottlenecks and investments in better technological innovations. The creation of more jobs and skilled labourers is also a requirement as automation is making old jobs obsolete, indicating the need for new ones which require better technical know-how.
The creation of local design hubs needs innovative programmes like IMPRINT, UAY, and more that can lead to industry-academia collaboration for innovation. Tax SOPs for manufacturers on meeting set goals for productivity, green index, and safety, as well as enabling homegrown businesses to grow, would also exponentially increase technology adoption.
While the PLI Schemes (Make in India) aspires to effectively attract international investors to Indian shores who can grow their Indian capacities to attract investments, we must first develop our manufacturing technology as per international standards. Long-term policy certainty is critical for the growth of the investment ecosystem.
Initiatives are also required to create demand for the sector which would result in the creation of more employment. This will collectively help establish India as the manufacturing hub, and only then, will we be able to scale up the electronics manufacturing industry in India and explore export opportunities.
Rising economies raced to become the next global manufacturing powerhouse in the preceding year, with nations such as Vietnam, Thailand, and Taiwan earning a significant stake. India, too, must take decisive steps to capitalise on this opportunity. We must also emphasise on exports if the government intends to increase the production index and manufacturing sector to up to 25 percent of GDP.
The manufacturing business has undergone drastic changes as a result of the COVID-19 pandemic, which has disrupted established supply systems worldwide. The after-effects are still being felt and are likely to last longer until things finally settle on a global scale.
The emphasis should now be on reshoring production methods and re-establishing markets with speedier delivery times. The government’s programme inducing a push for local products also needs a thrust when it comes to policymaking by adapting to lower working capital and focusing on strengthening resilience.
While we wait for the budget, we expect that it will provide a boost to the manufacturing sector, therefore moving our total economy ahead.
Edited by Kanishk Singh
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)