Consumption, including that of services, has been the driver of India’s growth for several; years. Manufacturing was not at the forefront. Due to a better policy environment, PLI schemes, and similar initiatives, it (manufacturing) is now back on the radar, and many groups are actively evaluating which manufacturing spaces to enter.
Of course, as a percentage of GDP, it has not grown, but at an absolute level, it continues to grow. There have always been some strong areas like pharmaceuticals, auto components and auto industry, and so on. If you look at many of these industries, they have started with the end product. Now, we are moving into backward integration and the full-component industries. That is where holistic development will happen because, for true manufacturing growth, we can’t just be making end products. We need a full ecosystem, full supplier base, similar to the way Maruti drove the auto industry in India. We need the same kind of situation in electronics, consumer products, or renewable products. The key impediment is how our MSME sector evolves, because for full manufacturing depth to come in, this sector must also grow.
Q: How do you see the employment intensity and potential of manufacturing being retained in the era of automation?
The world is facing an ageing problem. Workforce participation and the number of people available for work are diminishing. India, however, will be blessed with adequate workforce, even a few decades down the line, because of our young population. That bodes very well for us. At the end of the day, manufacturing will need to be done across some parts of the world.
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Q: We have a large young population, but there is also the issue of skilling and employability…
Construction or real estate companies, who want to finish projects on time, are facing an acute shortage of labour. So, we have a paradoxical situation where some industries need manpower but don’t have it fully available, while a large number of people are still employed in agriculture. The key connecting dot is skilling. Much needs to be done here. Many industry bodies, private sector organisations, and government bodies are all focused on this. It is not an either-or situation. Some technology-oriented industries will grow, but that does not mean labour-intensive industries like petrochemicals, cement, steel, textiles, or gems and jewellery will not grow.
Q: If we want to truly equip our workforce, we have to invest more in fundamental education as well.
Our educational system needs reforms. There has to be greater government-industry collaboration, and the industry needs to play a more active role. If I take one example of where mass-scale skilling happened successfully in our country, it was in IT services. I see this as a very important subject today, actively debated by both government and industry bodies. I remain optimistic on this. These things take time to fully ramp up. In India, things always take a bit longer, but the direction is what matters the most. Many companies now reach out to explore where manufacturing can be done. Recently, another directional change is a strong emphasis on indigenisation.
Q: The window to make rapid progress in the manufacturing value chain may not be very long because the demographic dividend may fizzle out after a few years.…
That’s why an urgency is being felt. Take renewable energy, for example. It is a big growth driver, important for both climate and Atmanirbhar initiatives. We started by pushing solar parks and wind parks, and initially imported much of the equipment; now, most of the end equipment—the panels, modules—are locally made. Many companies are now setting up cell manufacturing plants, and over time, they will start making wafers. The whole value chain will get localised. Similar developments can be expected in electronics, moving from electronics assembly to chip design and local component manufacturing. We missed the bus on textiles a few decades ago, when there was a big shift in the global textile market, and our industry was not fully prepared, while many other nations were ready. In traditional industries, modern industries like auto or pharma, it is critical to strengthen both manufacturing and innovation/R&D.
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Q: How can we leverage our large market to facilitate technology transfer to India?
Many sectors, including semiconductors and EV manufacturing, do require technology transfer and collaboration. This has started happening, including in battery components. Global players are actively collaborating, and strong industry houses are partnering. I don’t see major hurdles in technology transfer. Over time, we also need to develop our own R&D and innovation. This will allow us to pioneer future products.
Q: What kind of strategy should we adopt for raw material supplies, like critical minerals for new-age industries?
It requires sustained effort, whether for components related to EVs and the renewable energy chain or for semiconductors. Some resources are available in India, many are not. Strategic ownership of critical assets across the world is essential. Players in these industries need active support and nurturing to build greater strategic independence. For years, oil was our biggest input, and we relied on other countries for it, which affected our trade balance. It is critical that we identify future critical inputs—whether chips, key chip elements, or key elements for new industries—locate them early, and secure strategic assets globally.
Q: What strategy, investment, and policy imperatives do you see for India to be integrated fully with the global supply chain of goods and services?
Many western players are keen to have a part of their supply chain in India, and there is active interest. Before talking about logistics, we first need competitive products—both in cost and quality. Factor costs sometimes hinder cost competitiveness. Power costs have improved due to renewable energy, but other factor costs like logistics remain significant. This needs to improve further to enable efficient domestic and international movement.
Q: What should be our (import) tariff policy?
Different countries are applying various protectionist measures. At the same time, bilateral treaties are also increasing. Previously, the focus was on producing goods where they were cheapest and supplying the world. Now, the focus is more on bilateral relationships between countries. India has signed free trade agreements with some nations, and many more are in the process of being finalised.
Regarding countries imposing flat tariffs, we have to observe how it evolves. Countries, including India, need to be adaptive and diversified in terms of supply destinations. Competitiveness remains critical.