Source: World Bank

The Government’s ongoing measures to facilitate business growth in India, increase value addition and promote exports of Indian manufactured goods, say via the Production Linked Incentive (PLI) scheme, could be given credit. New schemes like Remission of Duties or Taxes on Export Products (RoDTEP) have been launched to provide more relief to the exporters who manufacture within India.

Interestingly, Foreign Trade Policy 2023 has included certain manufacturing sector-specific boosting measures such as for apparel, EVs, etc. MSMEs, local businesses and small vendors are particularly given good priority, which is a welcome step and supports the Government’s ongoing efforts to create resilient domestic supply chains in manufacturing. So, there is perhaps a ray of hope among businesses that it is feasible to manufacture or make within the country if done strategically. Illustratively, India is now the second-largest manufacturer of mobile phones – the sector for which the first PLI scheme was launched.

To regain success in manufacturing, there needs to be a reorientation in mindset concerning the right conceptualizing and facilitation of ‘Make in India’ and ‘Manufacture in India’. Does it primarily mean import substitution or protection or decoupling from China? Because making in India is a more extensive work and a bigger responsibility for the nation as a whole. We need to be cognizant of the kind of products finally manufactured in India as they should be capable of clearly branding Indian culture, designing, IT and entrepreneurial skills, market capability, innovation, quality, scale, standards, labour usage, etc.

In other words, we need to develop ourselves and have homegrown confidence to have massive production so that domestic and export demands align more strategically, involving partners and stakeholders from businesses, Government, academics, etc.

This requires a more profound identification of sub-sectors in manufacturing as per our higher comparative advantages and export potential (as per partner countries) and their mapping with those sub-sectors within India, which can provide the required intermediate inputs to develop India’s own value chains. However, India can continue to source mostly those inputs globally available at lower costs.

We also need definite answers to these questions to rise as a manufacturing superpower: Are current improvements in infrastructure and support to start-ups enough to offer sustainable solutions? Are our businesses equipped to match international best practices regarding costs, Industry 4.0 standards, AI & innovations, and product quality? What about our stance on imports from China and the Rest of the World? Better data reporting and practical long-term resolutions are needed to build strong domestic manufacturing value chains.

The need of the hour is to boost the manufacturing sector’s competitiveness on a larger scale and fully utilize and brand the reputation of making in India for the world, especially if we are determined to achieve the ambitious target of India’s exports of $2 trillion by 2030.

Here are some of the specific Policy Options to boost manufacturing in India:

• As most government incentives for the manufacturing sector are now via the PLI scheme mostly for the new age segments, including electronic items such as mobile phones, hearables, wearables, IT hardware, high-efficiency solar PV modules, advanced chemistry cell batteries, speciality steel, electric vehicles, etc., Indian industry and policymakers should focus on building more new modern-facility based factories (as well as revamping existing viable ones) in these technology and innovation-driven sub-sectors.

• A larger scale of production should be the way forward. India has been mainly considered as the assembly centre or workshop. Still, in specific sub-sectors, such as mobile phones, it is ready to use its manufacturing capabilities to boost its exports further. For instance, manufacturing iPhones in India could help the country to move up the ladder to be both a manufacturing and export hub.

• However, the Indian manufacturing sector’s success should no longer depend solely on custom-duty changes.

• In the case of traditional sectors such as textiles and apparel (T&A), India has a presence in entire value chains. Thus, T&A can be one of the torchbearers to lead India’s self-sufficiency in production under the ‘Make in India’ agenda.

• Allowing a significant number of foreign players to invest in India may prove highly beneficial in creating a suitable ecosystem of supporting businesses, similar to the case of Samsung’s investment in Vietnam. Over time, by launching Technology Upgradation Programmes and Sourcing Fairs in collaboration with the Vietnamese Government, Samsung was able to secure linkages with Vietnamese firms and suppliers for obtaining intermediate goods. Further, government training and development programmes helped build a domestic ecosystem of ancillary suppliers in Vietnam. Similar activities could immensely boost manufacturing in India and help to create better linkages between local MSMEs and big local players as well as multinational companies.

• Better mechanisms are needed to encourage as well as reward those start-up manufacturing companies who bring innovative technologies on board and provide environmentally friendly sustainable products with higher value-added content domestically in terms of design, R&D, etc.

• More investment is required to regain power in the machine tool segment; More investment is needed to build world-class infrastructure and adequately implement the PM Gati Shakti Plan – the most important aspect for improving the business climate and strengthening the manufacturing base in India.

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Dr Neha Gupta is a Fellow of the International Council for Research on International Economic Relations (ICRIER). Views expressed are personal.