The Hindu Editorial Analysis- 7th December 2024 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Building on the Revival of the Manufacturing Sector

Why in News?

India is strategically positioning itself as a global manufacturing hub, leveraging policy measures like the Production Linked Incentive (PLI) scheme. The manufacturing sector, integral to economic growth and job creation, has shown substantial recovery post-pandemic.

• However, to fully realize its potential, challenges such as high input costs, regional disparities, and insufficient support for small enterprises and women need to be addressed.

Impact of the PLI Scheme:

• The PLI scheme has played a crucial role in changing India's manufacturing sector.
• It has helped increase production, exports, and jobsin important industries like:
  • Electronics
  • Pharmaceuticals
  • Automobiles
  • Textiles
• According to the Annual Survey of Industries (ASI)for the year 2022-23:
  • Manufacturing output increased by 21.5%.
  • Gross value added (GVA) rose by 7.3%.
• These numbers show a positive link between the PLI scheme and the performance of different sectors.

Sectoral Growth Trends:

• Specific sectors that are benefiting from the PLI schemeinclude:
  • Basic metals
  • Petroleum products
  • Food products
  • Chemicals
  • Motor vehicles
• Together, these sectors accounted for 58% of the total manufacturing output.
• These sectors experienced a remarkable 24.5% growth in output.
• This growth shows how effective the PLI scheme has been in promoting the expansion of manufacturing.

Post-Pandemic Recovery:

• Despite a high starting point in 2021-22, the manufacturing sector showed a strong recovery.
• It achieved a growth rate of 21.5% in 2022-23, which is considered double-digit growth.
• This recovery highlights the sector's strength and its ability to bounce back.
• The performance of the manufacturing sector is important for India's goals of becoming a global manufacturing leader.

Expanding the Scope of PLI:

• To explore new opportunities for growth, PLI incentives should be extended to industries that require a lot of labor, such as apparel, leather, and furniture, as well as to new sectors like aerospace and space technology.
• Reducing reliance on imports in areas like capital goods can be achieved by developing domestic manufacturing capabilities, which will help strengthen resilience against issues in global supply chains.
• Supporting green manufacturing and investing in advanced technologies will boost long-term competitiveness and sustainability.

Challenges in Input Costs and Value Addition:

• The difference between the growth in output, which is 21.5%, and the growth in GVA (Gross Value Added), which is 7.3%, is due to a 24.4% increase in input costs during the year 2022-23.
• Implementing a simpler import system with reduced tariffs can help lower production costs. The suggested tariffs are:
  • 0-2.5% for raw materials
  • 2.5-5% for intermediate goods
  • 5-7.5% for finished products
• This change could enhance India's participation in global value chains.

Addressing Regional Disparities:

• Over 54% of the manufacturing Gross Value Added (GVA) and 55%of jobs are found in five states:
  • Maharashtra
  • Gujarat
  • Tamil Nadu
  • Karnataka
  • Uttar Pradesh
• To achieve fair growth, states must carry out important changes in:
  • Land management
  • Labor policies
  • Power markets
• Additionally, states should focus on:
  • Developing infrastructure
  • Encouraging investment

Focus on MSMEs:

• MSMEs account for 45% of India's manufacturing Gross Domestic Product (GDP).
• They provide jobs for 60 million people.
• Special incentives under the Production Linked Incentive (PLI) scheme can help MSMEs.
• These tailored incentives include:
  • Lower limits for capital investment.
  • Reduced targets for production.
• Such measures can enable MSMEs to:
  • Grow and expand their businesses.
  • Innovate and develop new ideas.
  • Join and strengthen their position in value chains.

Enhancing Women’s Workforce Participation:

• Increasing female workforce participation in manufacturing could raise output by 9%, according to the World Bank.
• Building supportive infrastructure such as hostels, dormitories, and childcare facilities close to factories can help encourage more women to join the workforce.
• This can lead to inclusive growth, benefiting both businesses and the community.

Future Goals:

• With continuous efforts, manufacturing's contribution to India's Gross Value Added (GVA) could increase from 17% to more than 25% by the year 2030-31 and reach 27% by 2047-48.
• To reach these goals, it will be essential to:
  • Enhance the ease of doing business in the country.
  • Lower operational costs for manufacturers.
  • Utilize policy measures effectively.

Conclusion

• India's manufacturing sector is about to change significantly, thanks to strong government support and a remarkable recovery after the pandemic.
• The Production-Linked Incentive (PLI) scheme has created a solid base for growth.
• However, it is essential to tackle several challenges:
  • High input costs that affect profitability.
  • Regional imbalances that can lead to uneven development across the country.
  • Underutilization of Micro, Small, and Medium Enterprises (MSMEs), which are crucial for economic growth.
  • Unrealized potential of the female workforce, which can contribute significantly to the economy.
• By continuing with important reforms and implementing targeted strategies, India has the opportunity to fully realize its manufacturing capabilities.
• This growth can lead to enhanced economic development and help India achieve its goal of becoming a developed economy by 2047.