Indian Manufacturing Market Boosting the Potentiality by Investing on Infrastructure & Utilities

The manufacturing sector in India has been witnessing a proliferating growth in investment, depicting crucial phase in the country's economic arena. As per the published dossiers by the Department for Promotion of Industry and Internal Trade (DPIIT), manufacturing sector engrossed substantial Foreign Direct Investment (FDI), with FDI equity inflows tallying around USD 17.51 billion in the FY 2020-21 itself. This surge emphasizes intensified investor confidence and exhibits India's attractiveness as one of the most lucrative manufacturing destinations in the world, as per Colliers India.

A government-led campaign, The Make in India initiative, aimed at encouraging domestic manufacturing, has played a pivotal role in accelerating investments. Furthermore, policy reforms & incentives, comprising of the Production Linked Incentive (PLI) scheme, the government has pro-actively incentivized various manufacturing industries, such as automobiles, electronics, and textiles, nurturing an environment conducive to augmented investment.

The Executive Director & Head, Advisory Services at Colliers India, Swapnil Anil said, “The Indian government is actively fostering a conducive environment for global manufacturing companies through strategic initiatives such as the Bharatmala Pariyojana Project, the proposed DESH Bill, National Logistics Policy, appropriate taxation and incentives for various sectors, thereby enhancing opportunities in the industrial market. Emulating these measures, Indian states offer a myriad of advantages to industrial players, including incentives, subsidies, robust infrastructure, and essential utilities. These companies also assess critical factors such as Ease of Doing Business, government policies, economic conditions, pricing, labor availability, regulatory environment, supply chain efficiency, proximity to transport nodes, and raw material accessibility when considering entry into the Indian market.”

India’s manufacturing sector has started itself into new geographies and sub sector/segments owing to progression in significant sectors and successful megatrends. The manufacturing industry is witnessing amplified inflow of capital investment and M&A activity which is magnifying manufacturing output and contribution to exports.

The manufacturing GVA at current prices was estimated at US$ 110.48 billion in the first quarter of FY24. The manufacturing sector contributes around 17% to the GDP supported by robust physical and digital infrastructure which is expected to grow to 21% in the next 6-7 years. India is well-positioned to enhance its manufacturing sector, making considerable advances in global supply chains.

The global players of automotive sector like Tesla and Ford has showed immense interest in Indian Automotive industry. Electronics manufacturing experienced a rise in investments, particularly in smartphone production domain.

Major players like Apple's contract manufacturers established assembly units in India, implying their shift towards Indian manufacturing hubs.  Moreover, the textile and garment manufacturing sectors have already witnessed upsurge take providing advantage to India's competitive advantages in the said domain.

The Government of India's Ministry of Heavy Industries and Public Enterprises has launched SAMARTH Udyog Bharat 4.0 in 2021 as a strategic initiative intended to enhance the manufacturing sector's competitiveness, predominantly in the capital goods domain. The government is committed to fostering comprehensive national development by emphasizing the development of industrial corridors and smart cities. These corridors are intended to encourage the adoption of advanced manufacturing practices as well as to facilitate integration, monitoring, and the creation of a favorable environment for industrial growth with employment for more than around 27 million workers. With all the policy incentives and various initiatives, the Indian manufacturing market has the potential to reach US$ 1 trillion by 2025-26.

Various states in India, including Gujarat, Maharashtra, Rajasthan, Madhya Pradesh, Telangana, and Andhra Pradesh, have strategically implemented a range of incentives to attract and support manufacturing plants within their borders. In Gujarat, the government offers Common Environmental Infrastructure Facilities at 40% of the project cost up to Rs. 50 crore, along with a concessional rate for land use conversion for industrial purposes. Maharstra Govt. is providing lands in cnsessional rates to build manufacturing hubs. Rajasthan provides a substantial investment subsidy, covering 75% of the state tax due and deposited for a period of 7 years.

In Madhya Pradesh, financial assistance of up to INR 1 crore is provided for the development of power, water, and road infrastructure, along with support for the establishment or development of industrial parks, including a 15% assistance cap at INR 5 crores. Telangana focuses on easing the establishment of manufacturing units by providing doorstep access to essential resources like land, power, and water. Along with this they adopted cleantech and implemented  ‘Cleaner Production Measures’. Andhra Pradesh, anchor units receive the benefit of required land for their projects at 25% of the land prices, based on the appraisal from the Andhra Pradesh Industrial Infrastructure Corporation (APIIC).

As of 2023, the current size of the Industrial Warehousing and Logistics market is approximately 38.4 million square metres, which includes both Grade A and Non-Grade A developments. According to projections, the market will grow significantly, reaching around 69.7 million square metres by 2026, with Grade A developments accounting for 60% and Non-Grade A developments accounting for the remaining 40%. The manufacturing sector has shifted from traditional to cutting-edge technology-based facilities, attracting both domestic and international firms.

Consumers and manufacturers are making deliberate decisions to embrace EVs, resulting in rapid growth in the sector. Another factor that contributes to growth is infrastructure development initiatives such as the Bharatmala Pariyojana. The dynamic forces of e-commerce, technological advancements, the rise of electric vehicles, and strategic infrastructure development initiatives are driving the multifaceted growth of the Industrial Warehousing and Logistics market.

Gujarat topped the list of top regions to invest in manufacturing in India, followed by Maharashtra and Tamil Nadu. Toyota is set to invest approximately Rs. 3,300 crore for a new plant scheduled to be operational by 2026. The Gujarat government has granted a sizable 1.6 lakh sq. mtrs. of prime land in Sanand to establish an innovative concentrate manufacturing facility by the renowned Coca-Cola Company.

 The emerging sector includes semi-conductors, agri tech, waste management particularly e waste on which the government has also formulated various policy documents. Key indicators of economic growth include automotive and auto components, cement and capital goods, engineering, chemicals, pharmaceuticals, paper and paper products, and the paper and paper products industry. Startups received additional benefits, such as a tax deduction of up to 100% of profits and an extension of the period for carrying forward losses. The income tax rate for new manufacturing co-operative societies was reduced from 22% to 15%, with a 10% surcharge. M-SIPS, Electronics Manufacturing Clusters, and NPE 2019 have all aided in the growth of the Electronics System Design and Manufacturing sector.