Indian Manufacturing Sector: a Perfect Place for Growth

India is emerging as leading player in innovation according to World bank. Today, many segments of Indian manufacturing sector are highly innovative. By 2022, Indian government aims to increase the share of domestic manufacturing to 25% of GDP and this will be possible by more innovation in the industry.

Indian manufacturing sector is focusing on research and development (R&D). Investment in R&D is showing a gradual rise trend over the years, but in fraction to GDP it is constant i.e. around 0.6% to 0.7% of India’s GDP but it is lower than other emerging market peers such as China. In India the traditional manufacturing way was use of machinery and labour but know the era has changed and technological innovation has taken place of traditional way. Other factor of innovation that have changed Indian industry is the use of automation in different tasks.

Today, manufacturing has become smarter than before and embedded knowledge plays an important role in producing goods. Technological development is also a crucial factor to become efficient and for competing with foreign firms but in India use of technology and industrial robots are not commonly used as used in developed economies. Still there are human workers used in some manufacturing processes. Technology capabilities are mostly classified in three levels: basic, intermediate and advanced. But most of the Indian firms that belongs to different industry in manufacturing sector lies in basic and intermediate level. But Indian government is playing an important role in transforming the manufacturing industry into technological and digitalisation through some schemes and initiatives taken by them.

“Make in India” is one of them which has helped the manufacturing industry to grow and progress is all ways and also helped in global competition. Since the launch of “Make in India” India is progressing on a faster pace than before and has also improved its ranking on Global Innovation Index (57th last year to 52nd in 2019) and Global Competitiveness index (dropped in 2019 to 68th position). India has a range of factors to its advantage such as massive and growing market and population with diverse skills which are demographically divided, world’s third largest start-up technology base, research and development centres of many top multinational firms and government focused initiatives to make the nation a business hub.

Despite these advantages and initiatives many industries and firms in the manufacturing sector still face some challenges. Even after digitalisation and the implementation of new technologies, many domestic firms still use old technology and machinery in the manufacturing process, making them less competitive in front of foreign firms. Another challenge or problem is less skilled workers availability. Firms in manufacturing sector requires an educated workforce with the necessary skills and training that will help them to grow and become more competitive. According to a writer Karishma, 62% of Indian population lies in working-age group and it is estimated that only 4.7% of workforce is skilled and less compared to other developing countries. Also, many industries now in India are transforming and making technological changes thus demanding trained and skilled workers. Hence the writer things that India should focus on improving skills and education according to the demands of the industries in manufacturing sector. Intellectual protection rights are also risky and expensive in India. Also, India’s spending on R&D (0.6-0.7% of its GDP) is less compared to other developing countries such as Israel (4.3%) or South Korea (4.2%).

To end up, government of India should concentrate more on industrial research and development and enhanced collaboration of the research institutes with the industries for better knowledge transfer which will help the industry to develop. Government should also encourage private companies to indulge in research and innovation by providing them incentives and other necessary facilities.