MANUFACTURING · 2020. 10. 23. · By 2030, Indian middle class is expected to have the second largest share in global consumption at 17%. Investment in the Indian manufacturing sector

For updated information, please visit www.ibef.org September 2020

MANUFACTURING

Table of Contents

Advantage India…………………..…...……4

Market Overview …………….………….….6

Recent Trends and Strategies…….……..17

Growth Drivers and Opportunities…….....20

Industry Organisations …….......…………29

Useful Information……….……….......…...31

Executive Summary……………….………..3

For updated information, please visit www.ibef.orgManufacturing3

EXECUTIVE SUMMARY

Organised manufacturing is the biggest private sector employer in India. Overall, more than 30 million peopleare employed the sector (organised and unorganised) and will become the engine of growth as it tries toincorporate the huge available workforce in India, most of who are semi-skilled.

The sector will push growth in the rural areas where more than 5 million manufacturing establishments arerunning already. This will be an alternative available to the new generation of farmers.

Government aims to achieve 25% GDP share and 100 million new jobs in the sector by 2022.

Pillar for economic growth

India’s manufacturing industry is already moving in the direction of industry 4.0 where everything will beconnected, and every data point will be analysed. Indian companies are at the forefront of R&D and havealready become global leaders in areas such as pharmaceuticals and textiles. Areas such as automation androbotics also receiving the required attention from the industry.

Large international industrial producers such as Cummins and Abbott already have manufacturing bases inthe country.

Potential to become a global hub

India has all the necessary ingredients for its major industrial push – a huge semi-skilled labour force,multiple Government initiatives like Make in India, high investments and a big domestic market.

Necessary support infrastructure is being developed with areas such as power being the prime focus.

Government incentives like free land to set up base and 24*7 power supply is making India competitive on aglobal scale.

Competitiveness

Source: Central Statistics Office, FICCI, PwC, Economic Survey of India

Manufacturing

ADVANTAGE INDIA


ADVANTAGE INDIA

Huge domestic market with a rapidlyincreasing middle class and overallpopulation.

By 2030, Indian middle class is expectedto have the second largest share in globalconsumption at 17%.

Investment in the Indian manufacturingsector has been on ae rise, both domesticand foreign. Gross Fixed CapitalFormation, which represents netinvestment in fixed assets, stood at Rs28,36,661 crore (US$ 405.88 billion) inH1FY20.

Most sectors are open to 100% FDI underautomatic route.

Increasing share of young workingpopulation in the total population. Indiacan achieve its full manufacturing potentialas it looks to benefit from its demographicdividend and a large workforce over thenext two to three decades.

A resource-rich country with fifth largestreserves of coal in the world and immensepotential for renewable energy like solarand hydro is ready to meet the need ofgrowing industry.

National Investment and ManufacturingZones developed to create an ecosystemfor industries in India.

Initiatives like ‘Make in India’ and sectorspecific incentives to variousmanufacturing companies, aiming to makeIndia a global manufacturing hub.

Production Linked Incentive Scheme (PLI)for Large Scale Electronics Manufacturing

Skill India, a multi-skill developmentprogramme, was started to equip theworkforce with the necessary skillsrequired by the sector.

ADVANTAGEINDIA

Source: Brookings Institute, DPIIT, Economic Times, Make in India, Note: PE – Provisional Estimate

Manufacturing

MARKET OVERVIEW


Make in India campaign waslaunched to attractmanufacturers and FDI.

Government is aiming toestablish India as globalmanufacturing hub throughvarious policy measures andincentives to specificmanufacturing sectors.

70% of manufacturing unitsunder the private sector.

GVA at basic prices frommanufacturing grew at aCAGR of 0.3% to FY20SE atcurrent prices.

EVOLUTION OF THE INDIAN MANUFACTURING SECTOR

Source: data.gov.in, Central Statistics Office, Indian Express

Pre-Independence 1948–1991 Post 1991 reforms Present

Most of the products werehandicrafts and were exportedin large numbers before theBritish era started.

The first charcoal fired ironmaking was attempted inTamil Nadu in 1830.

India’s present-day largestconglomerate Tata Groupstarted by Jamsetji Tata in1868.

Slow growth of Indian industrydue to regressive policies ofthe time.

Indian industry grew duringthe two world war periods inan effort to support the Britishin the wars.

Focus of Indian Governmenton basic and heavy industrieswith the start of five-yearplans.

A comprehensive IndustrialPolicy resolution announcedin 1956. Iron and steel, heavyengineering, lignite projects,and fertilizers formed thebasis of industrial planning.

Focus shifted to agro-industries as a result of manyfactors while license raj grewin the country and publicsector enterprises grew moreinefficient. The industries losttheir competitiveness.

Indian markets were openedto global competition with theLPG reforms and gave way toprivate sector entrepreneursas license raj came to an end.

Services became the enginesof growth while the industrialproduction saw volatility ingrowth rates during thisperiod.

MSMEs in the country weregiven a push throughgovernment’s policymeasures.

Note: MSME – Micro, small and Medium Enterprises, FDI – Foreign Direct Investments, SE- Second Estimate


SUB-SECTORS UNDER MANUFACTURING

Manufacturing

Food products Paper and paper products Fabricated metal products, except machinery and equipment

Beverages

Tobacco products

Textiles

Wearing apparel

Leather and related products

Wood and products of wood and cork, except furniture; manufacture of articles of

straw and plaiting materials

Furniture

Printing and reproduction of recorded media

Coke and refined petroleum products

Chemicals and chemical products

Pharmaceuticals, medicinal chemical and botanical products

Rubber and plastics products

Other non-metallic mineral products

Basic metals

Computer, electronic and optical products

Electrical equipment

Machinery and equipment n.e.c.

Motor vehicles, trailers and semi-trailers

Other transport equipment

Other manufacturing which includes jewellery, bijouterie and

related articles, musical instruments, sports goods, games

and toys, medical and dental instruments and supplies

Source: udyogaadhaar.gov.in

As per National Industrial Classification, following 24 activities make up the manufacturing sector in India:

Repair and Installation of machinery and equipment


GROSS VALUE ADDED BY MANUFACTURING

Source: Ministry of Statistics and Programme Implementation

India’s manufacturing sector has witnessed strong growth over thepast few years.

The sector’s Gross Value Added (GVA) at current prices wasestimated at US$ 397.14 billion in FY20PE.

GVA at current prices for FY20 grew 0.3% y-o-y.

Visakhapatnam port traffic (million tonnes)GVA of Manufacturing at basic current prices (US$ billion)

Note: FY – Indian Financial Year (April -March), PE – Provisional Estimate, RE-First Revised Estimates.

Chart1

FY16

FY17

FY18

FY19RE

FY20PE

Manufacturing Contribution to GVA (US$ billion)

327.8626642224

348.0500819794

393.359283287

395.8745170983

397.1365002146

Sheet1

Column1Manufacturing Contribution to GVA (US$ billion)Rs croreExchange RateUS$ croreUS$ billionSOURCE

FY12300.762011-12140998646.8830076.4931740614300.76http://www.mospi.gov.in/sites/default/files/press_release/FRE%20of%20National%20Income%2C%20Consumption%20Expenditure%2C%20Saving%20and%20Capital%20Formation%20For%202017-18_0.pdf

FY13289.60CAGR2012-13157283754.3128960.3572086172289.60http://www.mospi.gov.in/sites/default/files/press_release/FRE%20of%20National%20Income%2C%20Consumption%20Expenditure%2C%20Saving%20and%20Capital%20Formation%20For%202017-18_0.pdf

FY14284.25FY12-194.00%2013-14171345260.2828424.8838752488284.25http://www.mospi.gov.in/sites/default/files/press_release/FRE%20of%20National%20Income%2C%20Consumption%20Expenditure%2C%20Saving%20and%20Capital%20Formation%20For%202017-18_0.pdf

FY15307.63FY16-176.16%2014-15187836961.0630762.676056338307.63http://www.mospi.gov.in/sites/default/files/press_release/FRE%20of%20National%20Income%2C%20Consumption%20Expenditure%2C%20Saving%20and%20Capital%20Formation%20For%202017-18_0.pdf

FY16327.862015-16214618965.4632786.2664222426327.86http://www.mospi.gov.in/sites/default/files/press_release/FRE%20of%20National%20Income%2C%20Consumption%20Expenditure%2C%20Saving%20and%20Capital%20Formation%20For%202017-18_0.pdf

FY17348.052016-172,335,06867.0934805.0081979431348.05http://www.mospi.gov.in/sites/default/files/press_release/FRE%20of%20National%20Income%2C%20Consumption%20Expenditure%2C%20Saving%20and%20Capital%20Formation%20For%202017-18_0.pdf

FY18393.36= 300.76 / 390.84 = 4.462017-182,546,60864.7439335.9283286994393.36http://www.mospi.gov.in/sites/default/files/press_release/FRE%20of%20National%20Income%2C%20Consumption%20Expenditure%2C%20Saving%20and%20Capital%20Formation%20For%202017-18_0.pdf

FY19RE395.872018-19*2,766,76769.8939587.4517098297395.87http://www.mospi.gov.in/sites/default/files/press_release/Press%20Note%20PE%202018-19-31.5.2019-Final.pdf

FY20PE397.145%2019-20 H12,775,58769.8939713.6500214623397.14http://www.mospi.gov.in/sites/default/files/press_release/PRESS_NOTE_SAE_Q3_%202019-20_28022020.pdf

1,388,912697,8242,086,73669.8929857.4331091716298.57


MANUFACTURING SECTOR – PERFORMANCE IN COMPARISON WITH OTHER SECTORS

Source: Central Statistics Office, World Bank

Gross Capital Formation simply means capital accumulation over atime period through additions in physical assets such as equipment,transportation assets and electricity. This serves as an indicator ofthe investment activity in a sector.

At current prices, Gross Capital Formation of the sector increased toRs 9.84 trillion (US$ 140.83 billion) in FY19^ from Rs 6.15 trillion(US$ 128.26 billion) in FY12.

Gross Capital Formation of Manufacturing Sector at current prices (in US$ billion)^

Note: ^Exchange rates used are average of each year – provided on page 33, **Third revised estimates, ***Second revised estimates, ^First Revised Estimates

Chart1

FY16

FY17**

FY18***

FY19^

Manufacturing

117.9025358998

117.3817260396

126.8780449961

140.826727715

Sheet1

Column1Manufacturing

FY12128.26

FY13119.19

FY14104.42

FY15113.41

FY16117.90CAGR

FY17**117.384.54%

FY18***126.88

FY19^140.83Page 11

Rs croreUS$ crorehttp://www.mospi.gov.in/sites/default/files/press_release/FRE%20of%20National%20Income%2C%20Consumption%20Expenditure%2C%20Saving%20and%20Capital%20Formation%20For%202017-18_0.pdf

2011-1261500247.95128.2590198123

2012-1364900354.45119.1924701561

2013-1463175160.5104.4216528926

2014-1569347861.15113.406050695

2015-1677179065.46117.9025358998

2016-1778751467.09117.3817260396

2017-1881772964.45126.8780449961

2018-19984,23869.89140.826727715

2,836,661


INDUSTRIAL PRODUCTION

The Index of Industrial Production (IIP) is prepared by the CentralStatistics Office to measure the activity happening in three industrialsectors namely mining, manufacturing, and electricity.

It is the benchmark index and serves as a proxy to gauge the growthof manufacturing sector of India since manufacturing alone has aweight of 77.63% in the index.

The manufacturing component of the IIP stood at 129.8 during FY20.

Strong growth was recorded in the production of basic metals(10.8%), intermediate goods (8.8%), food products (2.7%) andtobacco products (2.9%).

Source: Central Statistics Office

Annual Growth Rates of IIP (%) at Sectoral level

Chart1

FY16FY16FY16

FY17FY17FY17

FY18FY18FY18

FY19FY19FY19

FY20FY20FY20

Mining

Manufacturing

Electricity

4.3

3

5.7

5.3

4.9

5.8

2.3

4.5

5.4

2.9

3.5

5.2

1.7

-1.3

1.1

Sheet1

Column1MiningManufacturingElectricity

FY13-5.304.804.00

FY14-0.103.606.10

FY15-1.403.9014.80

FY164.303.005.70

FY175.304.905.80

FY182.304.505.40

FY192.903.505.20

FY201.70-1.301.10


PERFORMANCE OF EIGHT CORE INDUSTRIES

Source: Office of the Economic AdviserNote: MT – Million Tonnes, BCM – Billion Cubic Metres, MWH – Mega Watt Hour

The Index of Eight Core Industries (ICI) is an index reflecting the production performance of eight core industries – coal production, crude oilproduction, natural gas production, petroleum refinery processing, steel production, cement production and electricity generation.

The overall index stood at 131.9 during FY20. Growth in the index was supported by robust growth in steel, cement, natural gas and electricity.

Production Performance of Eight Core Industries

Chart1

FY15FY15FY15FY15FY15FY15FY15FY15






Natural Gas Production (in BCM)

Crude Oil Production (in MT)

Fertilizer Production (in MT)

Steel Production (in MT)

Petroleum Refinery Products (in MT)

Cement Production (in MT)

Coal Production (in MT)

Electricity Generation (in Million MWH)

32.7905974151

37.461213

38.5394

92.157

221.1355320075

270.938

620.782

1110.458

31.2424912823

36.941754

41.2436

90.98

231.923954299

283.457

650.791

1173.60197

30.9195380714

36.0088273

41.3294

100.748

243.260618466

279.975

671.531

1242.10577

31.826947

35.683863

41.3438

106.364

254.383862

297.564

688.406

1306.60248

32.0643

34.2033

41.4893

111.32

262.3613

337.322

739.4

1374.8948

30.25243

32.169295

42.5909

116.521

262.940301

334.482

736.154

1390.0217

Sheet1

Coal Production (in MT)Crude Oil Production (in MT)Natural Gas Production (in BCM)Petroleum Refinery Products (in MT)Fertilizer Production (in MT)Steel Production (in MT)Cement Production (in MT)Electricity Generation (in Million MWH)

FY12551.538.146.5203.238.875.7229.5877.0excel downloaded :)

FY13569.137.939.8217.737.581.7246.6912.1

FY14574.537.834.6220.838.087.7255.8967.2

FY15620.837.532.8221.138.592.2270.91110.5

FY16650.836.931.2231.941.291.0283.51173.6

FY17671.536.030.9243.341.3100.7280.01242.1

FY18688.435.731.8254.441.3106.4297.61306.6

FY19739.434.232.1262.441.5111.3337.31374.9

FY20736.232.230.3262.942.6116.5334.51390.0

Production of Coal (in Million Tonnes)Production of Crude Oil (in Thosuand Tonnes)Production of Natural Gas (in Million cubic meters)Production of Petroleum Refinery Products $ (in Million Tonnes)Production of Fertilizers (in Million Tonnes)Production of Steel (in Million Tonnes)Production of Cement (in Million Tonnes)Electricity Generation (in Million KWH)

2011-12(Apr-Mar)551.5538.0946.48203.2038.7875.70229.50876.95

2012-13(Apr-Mar)569.1337.8639.78217.7437.4981.69246.61912.06

2013-14(Apr-Mar)574.5437.7934.64220.7638.0587.67255.83967.24

2014-15(Apr-Mar)620.7837.4632.79221.1438.5492.16270.941110.46

2015-16(Apr-Mar)650.7936.9431.24231.9241.2490.98283.461173.60

2016-17(Apr-Mar)671.5336.0130.92243.2641.33100.75279.981242.11

2017-18(Apr-Mar)688.4135683.8631826.95254383.8641343.80106364.00297564.001306602.48

2018-19(Apr-Mar)739.4034203.3032064.30262361.3041489.30111320.00337322.001374894.80

2019-20(Apr-Mar)736.232169.330252.4262940.342590.9116521.0334482.01390021.7

April 2017- March 2018124.6

April 2016- March 2017119.4

Growth=(124.6/119.4) - 1


MANUFACTURING SECTOR PMI

The Nikkei India Manufacturing Purchasing Manufacturers Index(PMI) indicates the sentiments relating to manufacturing activity inthe economy.

A value above 50 reflects positive sentiments and potentialexpansion of the sector.

India’s manufacturing PMI stood at 51.8 in March 2020. Also,companies start to spend more on hiring and anticipate good growthin future prospect.

India’s manufacturing PMI stood at 52 in August 2020.

Source: IHS Markit

Nikkei India Manufacturing PMI 2020 (Monthly)

55.3 54.551.8

27.430.8

47.2 46

52

0

10

20

30

40

50

60

Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20


CAPACITY UTILISATION IN MANUFACTURING SECTOR

Capacity utilisation in the manufacturing sector is measured byReserve Bank of India (RBI) in its quarterly order books, inventoriesand capacity utilisation survey.

It indicates not only the production levels of companies but also thepotential for future investment.

As per the latest survey, capacity utilisation in India’s manufacturingsector stood at 68.9% in Q3FY20.

During the same period, average new order book of manufacturingentities reached Rs 143 crore (US$ 20.46 million).

Capacity Utilisation in Manufacturing Sector (in percentage)

Source: Reserve Bank of India Order Books, Inventories and Capacity Utilisation Survey

Chart1

Q4FY18

Q1FY19

Q2FY19

Q3FY19

Q4FY19

Q1FY20

Q2FY20

Q3FY20

Manufacturing Capacity Utilisation

75.2

73.8

74.8

75.9

76.1

73.6

69.1

68.6

Sheet1

QuarterManufacturing Capacity UtilisationQuarterPercentageLink

Q1 2016-1771.7Q1 2016-1771.7https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/OBICUS041020177DB0A79136B04FAE84EF2C0CECB2F6A2.PDF

Q2 2016-1772Q2 2016-1772https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/OBICUS070220189349854D121F48048CC908FF55F260AE.PDF

Q3 2016-1771Q3 2016-1771https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/OBICUS050418F828B5336708410FBD0545C59E5099DD.PDF

Q4 2016-1774.6Q4 2016-1774.6https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/OBICUS050418F828B5336708410FBD0545C59E5099DD.PDF




Q4FY1875.20Q4 2017-1875.2https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/OBICUS41_010820186C84162C00A54A8697980AC0FF6D0039.PDF

Q1FY1973.80Q1 2018-1973.8https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/OBICUS42_051020182FF228BBC8B540FDBA6CE318707292E9.PDF

Q2FY1974.80Q2 2018-1974.8https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/OBICUS43070220191822F8342EAE41CEA2F970D688ED939B.PDF

Q3FY1975.90Q3 2018-1975.9https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/OBICUS449C255DE7306F42A59ECCE9A76078B7C4.PDF

Q4FY1976.10https://www.rbi.org.in/Scripts/PublicationsView.aspx?id=18976

Q1FY2073.6https://www.rbi.org.in/Scripts/PublicationsView.aspx?id=19414

Q2FY2069.10

Q3FY2068.60https://m.rbi.org.in/Scripts/PublicationsView.aspx?id=19436


EXPORTS OF MANUFACTURED GOODS

Manufacturing is a key component of India’s merchandise export.

Merchandise export decreased by 4.78% y-o-y to reach US$ 314.31 billion in FY20.

Source: EEPC, DGCIS, GJEPC, CHEMEXCIL, PHARMEXCIL, News ArticlesNote: P- Provisional, * April 2019–February 2020

Export performance of select industries (US$ million)

Chart1

FY12FY12FY12FY12FY12








FY20*PFY20*PFY20*PFY20*PFY20*P

Engineering Exports

Petroleum Products Exports

Gems and Jewellery Exports

Pharmaceutical Exports

Chemical Exports*

58635.46

59318.9185369612

46849

13268

11742.815071

56819.87

58848.4124180296

43630

14663

11931.764684

61626.38

60664.4229689057

40237

14935

12561.802472

70769.99

47276.6045336208

40027.98

15433

12664.208532

58597.44

27059.3470744757

39286.5

16912

11684.644131

65239.2

29049.3721932982

43199.45

16840

12062.275996

76204.4

34939.7841283741

41020.7

17250

15914.601998

81017.29

38235

28600

14754.07

19091.12

64036.23

54705.3522358488

25113.47

13696.54

15675.18

Sheet1

YEAREngineering ExportsPetroleum Products ExportsGems and Jewellery ExportsPharmaceutical ExportsChemical Exports*

FY1258,635.4659,318.9246,849.0013,268.0011,742.8219464

FY1356,819.8758,848.4143,630.0014,663.0011,931.76

FY1461,626.3860,664.4240,237.0014,935.0012,561.80

FY1570,769.9947,276.6040,027.9815,433.0012,664.21https://commerce-app.gov.in/eidb/ecom.asp

FY1658,597.4427,059.3539,286.5016,912.0011,684.64

FY1765,239.2029,049.3743,199.4516,840.0012,062.28

FY1876,204.4034,939.7841,020.7017,250.0015,914.60

FY1981,017.2938,235.0028,600.0014,754.0719,091.12

FY20*P64,036.235470525,113.4713,696.5415,675.18

SOURCES:

EEPC Export AnalysisPPACGJEPCDGCISCHEMEXCIL

27950983312795098331+10525302242+2241471205+294245306=158561170842795098331

4407543447311457110525302242

2241471205

294245306

15856.117084

DGCIS - PHARMA EXPORTS

april-june2019

commodityApril 19- july 19 (US$)BULK DRUGS, DRUG INTERMEDIATESKGS24157207293172110

H5BULK DRUGS, DRUG INTERMEDIATES64189507647870965DRUG FORMULATIONS, BIOLOGICALSKGS206141721167975450

H8DRUG FORMULATIONS, BIOLOGICALS242493316041296662AGRO CHEMICALSKGS31462144225565815

H4AYUSH AND HERBAL PRODUCTS7349516620874920SURGICALS33764198

I1SURGICALS7158393901720477573

sum3211907341110042547

3.2 billion11


ROLE IN EMPLOYMENT

New Subscribers under Employees’ Provident Funds Scheme* Manufacturing constitutes a significant part of employment in India.

The Employees' Provident Fund Organisation (EPFO) added 1.39crore subscribers in the last two financial years.

Around 24% of India’s total employed population was working in theindustrial sector in 2018.#

As per the Ministry of Statistics and Programme Implementation(MOSPI) report on Payroll Reporting in India, number of newsubscribers* under Employees’ Provident Fund Scheme reached4,01,949 in March 2020.

Source: MOSPI, World BankNote: #As per the World Bank, *Provisional Estimates, Updating of employee records is a continuous process, thus data gets updated in subsequent months

Chart1

43617

43647

43678

43709

43739

43770

43800

43831

43862

43891

New Subscribers

1192385

1462417

1338025

1223305

1272627

1470552

1318487

1219652

1156583

401949

Sheet1

MonthNew Subscribers

Dec-171242614

Jan-181236069

Feb-181114264

Mar-181109219

Apr-181348249

May-181286066

Jun-181402243

Jul-181405455Nov-171373094

Aug-1812032311242614Dec-171240538

Sep-1811614611236069Jan-181234022

Oct-1810028191114264Feb-181111426

Nov-189941441109219Mar-181106195

Dec-1810114361348249Apr-181337621

Jan-198595531286066May-181279126

Feb-198253711402243Jun-181390815Source:Pages 2 to 4

Mar-191444321

Apr-191,070,5871405455Jul-181391365http://www.mospi.gov.in/sites/default/files/press_release/Press%20Release_Employment_%20Outlook_24%20Jan19.pdf

May-191,015,2211203231Aug-181188432

Jun-191,192,3851161461Sep-181136497

Jul-191,462,4171002819Oct-18969872

Aug-191,338,025994144Nov-18943115

Sep-191,223,3051011436Dec-18851819http://www.mospi.gov.in/sites/default/files/press_release/Press_Release_Employment_25feb19.pdfpage 4

Oct-191,272,627859553Jan-19859553http://www.mospi.gov.in/sites/default/files/press_release/Payroll%20Reporting%20in%20India%20-%20An%20Employment%20Perspective%20-%20January%2C%202019%20_%20250319%20Release%20.pdfpage 4

Nov-191,470,552825371Feb-19825371http://www.mospi.gov.in/sites/default/files/press_release/Press%20Release_Employment%20Outlook%20-25%20April%2719.pdfPage 5

Dec-191,318,487Apr-19878197http://mospi.nic.in/sites/default/files/press_release/Press_Release_Employment_25june19.pdf2

Jan-201219652http://www.mospi.gov.in/sites/default/files/press_release/Press%20Release_Payroll_Reporting_25Feb2020.pdf

Feb-201,156,583http://164.100.117.97/WriteReadData/userfiles/Payroll%20Reporting%20%20-%20for%2024%20April%20'2020%20_Final-.pdf

Mar-20401,949

Manufacturing

RECENT TRENDS AND STRATEGIES


NOTABLE TRENDS IN INDIA’S MANUFACTURING SECTOR

Source: PWC India Manufacturing Barometer, FICCI, Bloomberg QuintNote: ISRO – Indian Space Research Organisation, * - by PWC, IISC – Indian Institute of Science

As per the India Manufacturing Barometer 2020*, 80% respondents were confident of India's export growth in the next 5years.

Going forward, business leaders expect global demand to play a major role in expansion of India’s manufacturingindustry.

Export-driven expansion

Additive manufacturing

Industrial internet of things (IIOT)

and industry 4.0

Advanced robotics

Popularly known as 3D printing, this new manufacturing technology uses digital models to create products by printinglayers of materials. This has huge potential in India with the rise of mega projects coming up.

With the rise of IoT in consumer tech, manufacturing sector has also started implementing this new network of sensorsand actuators for data collection, monitoring, decision making and process optimisation over internet infrastructure. Datais a huge component of this whole setup and Indian companies have a lot of potential in this area with many largecompanies already betting on big data and analytics. As an example, Indian Railways will be rolling out locomotives withsolutions like remote diagnostics and proactive predictive maintenance and these trains will be part of a widerecosystem connected to industrial internet.

While standalone robotic workstations are already commonplace even in Indian companies, advanced robotics useenhanced senses, dexterity, and intelligence to automate tasks or work alongside humans.


STRATEGIES ADOPTED

Source: Annual Reports and Company Presentations

With the advent of digital age, Indian manufacturing companies have started adopting digital technologies in theirproduction processes, which will help in increasing efficiency. It is estimated that 65% of manufacturing companies willhave high levels of digitalisation by the end of 2020.

For its commercial vehicles, Ashok Leyland is utilising machine learning algorithms and its newly created telematics unitto improve the performance of vehicles, drivers and so on.

Digital technologies

Focus on forward integration

Forward integration strategies also help organisations to realise cost benefits.

Focus on backward integration

Backward integration helps manufacturers to increase efficiency and overall cost of products without sacrificing onquality. Various organisations are looking at backward integration as a means to reduce costs.

Collaboration The Government of India has been pushing for greater technology transfers and collaborations along with more FDI and

domestic production.

Manufacturing

GROWTH DRIVERS AND OPPORTUNITIES


GROWTH DRIVERS FOR MANUFACTURING IN INDIA

Growth Drivers

Government initiatives

Public Private Partnerships (PPP)

International investment

Huge labour pool

Domestic consumption


MAKE IN INDIA INITIATIVE

Source: Bloomberg, Economic Times

Make in India initiative was launched in 2014 to encourage Indian as well as multi-national companies to manufacture in India. After the launch ofthe programme, India became the top destination globally for FDI in 2015.

The programme initially focused on 25 sectors of the economy, however, its scope has been increased to 27 sectors. Various new sectorsincluding financial services, education services, environmental services, communication services, legal services, audio visual services, accountingand finance services, transport and logistics services, and medical value travel are now covered under the programme. Also, various existingsectors covered have been modified – ‘automobiles’ and ‘automobile components’ have been combined, ‘defence manufacturing’ has beenmodified to ‘aerospace and defence’, ‘chemicals’ sector has been modified to ‘chemicals and petrochemicals’, ‘pharmaceuticals’ sector has beenaltered to include ‘medical devices’ and ‘leather’ sector has been changed to ‘leather and footwear’.

Special cells called ‘Japan Plus’ and ‘Korea Plus’ have been made under the initiative to facilitate investment and fast track proposals from Japanand Korea, respectively.

Make in India and other initiatives have helped India to improve its ease of doing business rank from 142 in 2014^ to 73 in 2019^ in the WorldBank’s Ease of Doing Business Report.

In August 2019, the Government permitted 100% FDI in contract manufacturing through automatic route.

In September 2019, Mumbai got its first metro coach manufactured by state-run Bharat Earth Movers (BEML) under the 'Make-in-India' initiative.

In Union Budget 2018–19, the Government reduced the income tax rate to 25% for all companies having a turnover of up to Rs 250 crore (US$38.75 million).

Applications by Taiwanese giants Foxconn, Wistron and Pegatron, which are contract manufacturers for Apple and other electronic makers suchas Xiaomi, along with Samsung and other homegrown companies such as Lava, Dixon Electronics, Karbonn, Optiemus Infracom, and Micromaxhave been submitted under the Government’s ambitious Rs 41,000 crore (US$ 5.82 billion) production linked incentive schemes (PLI) for mobilemanufacturing in India.

Note: * By World Economic Forum (WEF), ^Release year of the report


SKILL INDIA INITIATIVE

Source: Budget, Economic Times, Media sources, Ministry of Skill Development and Entrepreneurship

Skill India Campaign was launched in 2015 with an aim to train over 400 million people in various skills. It involves various schemes such asNational Skill Development Mission, Pradhan Mantri Kaushal Vikas Yojana and National Policy for Scheme Development and Entrepreneurship.

Under the Pradhan Mantri Kaushal Kendras, 73 lakh people have been trained during 2016–20, while 723 Pradhan Mantri Kaushal Kendras havebeen established till Jan 2020.

As of August 2020, there were about 15,000 Industrial Training Institutes (ITIs) in India.

Under the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) 1.0, 19.85 lakh candidates were trained, of which 2.62 lakh (13.23%) got placements.PMKVY 2.0 (2016–20), which was launched in October 2016, had 94.17 lakh candidates trained as of April 2020, with a target to have 1 croreskilled candidates by October 2020.

The Government has introduced two new World Bank assisted projects, SANKALP and STRIVE, for skill development in the country. Both SkillAcquisition and Knowledge Awareness for Livelihood Promotion (SANKALP) and Skills Strengthening for Industrial Value Enhancement (STRIVE)aim to improve quality of skill development and reform institutions for skill development in India. The World Bank is going to provide a loan worthUS$ 250 million and US$ 169.91 million for the implementation of the scheme, respectively.


STARTUP INDIA

Source: Media sources

Startup India campaign was launched in 2015 to encourage start-ups in India and provide policy support to start-ups.

Under the Startup India action plan, a start-up is an entity which is headquartered in India, has been opened less than five years ago and has arevenue less than US$ 3.88 million.

There are various benefits offered to registered start-ups under the scheme:

• As per the scheme, no inspection regarding labor laws will be carried out for three years. Also, only self certification is required forenvironmental law compliance.

• Start-ups can claim 80% rebate on their patent costs and get protection for Intellectual Property Rights (IPR’s).

• Income Tax exemption is available for first three years after obtaining certificate from Inter-Ministerial Board. Capital Gains Tax exemption isalso available if the funds are invested in a fund of funds recognised by the Government.

• Start-ups in manufacturing sector are exempted from the criteria of prior turnover/experience without relaxation in quality standards or technicalparameters in public procurement.

Japanese firm Softbank pledged total investment of US$ 10 billion in start-ups. It has already invested US$ 2 billion in India.

The Government of India has prepared the 'Startup India Vision 2024' document with tax incentives and other measures to promote new ventures.


NATIONAL MANUFACTURING POLICY


National Manufacturing Policy was introduced in 2011 to increase the share of manufacturing sector in India’s GDP to 25% and create 100 millionjobs by 2021.

The policy was introduced to create an enabling policy framework and provide incentives for infrastructure development on PPP basis.

Under the policy, National Investment and Manufacturing Zones (NIMZ’s) have been conceived as large industrial townships managed by aSpecial Purpose Vehicle (SPV). These SPV’s would ensure planning of the zones, pre-clearances for setting up industrial units and undertakingother specific functions.

Fourteen NIMZ’s have already been granted ‘in principle’ approval while four of them have been given final approval.

Central and State governments will provide exemptions subject to fulfillment of conditions by the SPV from compliance burdens for industrieslocated in these zones.

Exemption from Capital Gains Tax on sale of plant and machinery will be granted in case of re-investment of the capital gain amount for purchaseof plant and machinery within the same or different NIMZ within three years of sale.

A Technology Acquisition and Development Fund (TADF) has been launched for acquisition of appropriate technologies, creation of a patent pooland development of domestic manufacturing of equipment's for reducing energy consumption.


FOREIGN INVESTMENTS FLOWING INTO THE SECTOR

Source: DPIIT, UNCTAD

According to the United Nations Conference on Trade andDevelopment (UNCTAD), India ranked among the top 10 recipientsof Foreign Direct Investment (FDI) in South Asia in 2019, attractingUS$ 49 billion—a 16% increase from the previous year

100% FDI is approved in the sector through automatic route underthe current FDI Policy.

In August 2017, Department for Promotion of Industry and InternalTrade released the consolidated FDI Policy.

For the period between April 2000 – March 2020

• Automobile sector received FDI inflow of US$ 24.21 billion.

• Drug and pharmaceutical manufacturing received US$ 16.50billion.

• Chemical manufacturing sector (excluding fertilizers) receivedFDI inflow totalling US$ 17.64 billion.

Visakhapatnam port traffic (million tonnes)Total FDI Equity Inflow in the manufacturing sub-sectors during April 2000 – March 2020 (US$ billion)

Chart1

Automobile Industry

Drugs & Pharmaceuticals

Chemicals (other than fertilizers)

Food Processing

Electrical Equipments

Cement

Textiles (including dyed and printed)

Electronics

FDI

24.21

16.5

17.639

9.98

8.604

5.281

3.447

2.791

Sheet1

Column1FDI

Automobile Industry24.21https://dipp.gov.in/sites/default/files/FDI_Factsheet_27May2019.pdf

Drugs & Pharmaceuticals16.50PAGE 9

Chemicals (other than fertilizers)17.64

Food Processing9.98

Electrical Equipments8.60

Cement5.28

Textiles (including dyed and printed)3.45

Electronics2.79


IMPACT OF GST ON MANUFACTURING SECTOR

Goods and Services Tax (GST) is expected to provide a major boost to the manufacturing sector. It has subsumed various taxes that were earlierimposed on manufacturers. Some of the ways in which GST will help manufacturers are:

• Before GST, excise duty had to be paid as a specified percentage of Maximum Retail Price (MRP). However, under GST, the excise duty willhave to be paid on the ex-factory transaction value leading to lower tax burden.

• Pre-GST central taxes could not be offset against state wise taxes and there were cascading layers of taxation. With the introduction of GST,such issues get addressed as set-offs are allowed across the production and value chain.

• Subsuming of entry taxes for inter state transfers will reduce the cost of goods and services, thereby boosting demand.

• GST has provided a simple single point registration unlike the old regime in which each production facility had to be registered separately.

• Under the new tax law, manufacturers can claim input tax credit on input goods which will have positive impacts on cash flows.

• Another benefit has been the provision of a single Goods and Services Tax Identification Number (GSTIN) instead of the multiple registrationsrequired for service tax, VAT, CST.

• Manufacturers are also be able to optimise their supply chain for business efficiency. Warehousing and location decisions are taken based oneconomic efficiency such as costs and locational advantages instead of tax efficiency.

• Assessment of income of manufacturer by many separate authorities for VAT, Service Tax, Central Excise, etc. has been replaced by onlythree authorities – Central, State and Interstate.


OPPORTUNITIES IN MANUFACTURING

For creating an eco-system to make India a global hub for electronics manufacturing, a provision of US$115.62 million in 2017–18 was made in incentive schemes like Modified Special Incentive Package Scheme(M-SIPS) and EDF.

100% FDI is allowed under the Electronic System Design and Manufacturing Sector (ESDM).

In Budget 2020–21, US$ 65.37 billion was allocated to defence.

31% of India’s Defence Budget is spent on capital acquisitions.

It is estimated that India will spend over US$ 250 billion on defence in the next decade.

The FDI limit in the defence sector has been raised to 100%


In March 2020, the government approved the Production Incentive Scheme (PLI) for Large Scale ElectronicsManufacturing. The scheme proposes production-linked incentive to boost domestic manufacturing andattract large investments in mobile phone manufacturing and specified electronic components includingAssembly, Testing, Marking and Packaging (ATMP) units.

In February 2019, the Union Cabinet passed the National Policy on Electronics (NPE), which envisagedcreation of a US$ 400 billion electronics manufacturing industry in the country by 2025. 32% growth rate hasbeen targeted globally in next five years.

The electronic goods industry is one of the fastest growing industries. Demand for electronic goods isincreasing at a CAGR of 22% and is expected to reach US$ 400 billion by 2020.

The Government has launched various schemes to boost Electronics System Design and Manufacturing(ESDM) sector in India. M-SIPS is one scheme which aims to achieve ‘Net Zero Imports’ in the industry by2020. Under the scheme, subsidy for investment in capital expenditure is provided to the extent of 20%investment in SEZs and 25% investment in non-SEZs.

Electronics manufacturing is expected to increase at an annual rate of 30% over the next five years and clockRs 11.5 lakh crore (US$ 163.14 billion) additional production during this period.

Electronic goods manufacturing

Defence manufacturing

Government initiatives

Note: OFB – Ordinance Factory Board, DPSU – Defence Public Sector Undertaking

Manufacturing

KEY INDUSTRY ORGANISATIONS


INDUSTRY ORGANISATIONS

Visakhapatnam port traffic (million tonnes)The Textile Association (India) (TAI) All India Food Processors’ Association (AIFPA)

Address: 206, Aurbindo Place Market, Hauz Khas - 110016, New DelhiPhone: 011-26510860, 41550860 E-mail: [email protected]: www.aifpa.net

Address: 72-A, Santosh, Dr M B Raut Road, Shivaji Park, Dadar (W), Mumbai- 400 028Telefax: 91 22 24461145Website: www.textileassociationindia.org

Cement Manufacturers’ Association (CMA)

Address: CMA TowerA-2E, Sector 24, Noida - 201301, Uttar PradeshPhone: 0120-2411955, 2411957, 2411958E-mail: [email protected]: www.cmaindia.org

Automotive Component Manufacturers Association of India (ACMA)

Address: The Capital Court6th Floor, Olof Palme Marg,Munirka - 110067, New DelhiPhone: +91-11-26160315E-mail: [email protected]: www.acma.in

Manufacturing

USEFUL INFORMATION


GLOSSARY

BTRA: Bombay Textile Research Association

CAGR: Compound Annual Growth Rate

FDI: Foreign Direct Investment

FY: Indian Financial Year (April to March)

GOI: Government of India

Rs: Indian Rupee

US$: US Dollar

ACMA: Automotive Component Manufacturers Association of India

Wherever applicable, numbers have been rounded off to the nearest whole number


EXCHANGE RATES

Exchange Rates (Fiscal Year) Exchange Rates (Calendar Year)

Year Rs Rs Equivalent of one US$

2004–05 44.95

2005–06 44.28

2006–07 45.29

2007–08 40.24

2008–09 45.91

2009–10 47.42

2010–11 45.58

2011–12 47.95

2012–13 54.45

2013–14 60.50

2014–15 61.15

2015–16 65.46

2016–17 67.09

2017–18 64.45

2018–19 69.89

2019–20 70.49

Year Rs Equivalent of one US$

2005 44.11

2006 45.33

2007 41.29

2008 43.42

2009 48.35

2010 45.74

2011 46.67

2012 53.49

2013 58.63

2014 61.03

2015 64.15

2016 67.21

2017 65.12

2018 68.36

2019 69.89

Source: Reserve Bank of India, Average for the year


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MANUFACTURINGSlide Number 2EXECUTIVE SUMMARYADVANTAGE INDIAADVANTAGE INDIAMARKET OVERVIEWEVOLUTION OF THE INDIAN MANUFACTURING SECTORSUB-SECTORS UNDER MANUFACTURINGGROSS VALUE ADDED BY MANUFACTURINGMANUFACTURING SECTOR – PERFORMANCE IN COMPARISON WITH OTHER SECTORSINDUSTRIAL PRODUCTIONPERFORMANCE OF EIGHT CORE INDUSTRIESMANUFACTURING SECTOR PMICAPACITY UTILISATION IN MANUFACTURING SECTOREXPORTS OF MANUFACTURED GOODSROLE IN EMPLOYMENTRECENT TRENDS AND STRATEGIESNOTABLE TRENDS IN INDIA’S MANUFACTURING SECTORSTRATEGIES ADOPTEDGROWTH DRIVERS AND OPPORTUNITIESGROWTH DRIVERS FOR MANUFACTURING IN INDIAMAKE IN INDIA INITIATIVE�SKILL INDIA INITIATIVE�STARTUP INDIANATIONAL MANUFACTURING POLICYFOREIGN INVESTMENTS FLOWING INTO THE SECTORIMPACT OF GST ON MANUFACTURING SECTOROPPORTUNITIES IN MANUFACTURINGKEY INDUSTRY ORGANISATIONSINDUSTRY ORGANISATIONSUSEFUL INFORMATIONGLOSSARYEXCHANGE RATESDISCLAIMER

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