India's manufacturing sector: Awaiting the budget's guiding hand

Navigating the challenges to embrace opportunities · - a pre-budget outlook from the industry leaderships.

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As India, a nation on the cusp of significant economic transformation, prepares for its annual budget in February, anticipation is building across the manufacturing sectors. This year's budget is expected to provide crucial insights into the government's approach to stimulate the economy, with particular focus on reviving the manufacturing industry, which has long been the backbone of India's growth story.

India, the world's fifth-largest economy by nominal GDP, has experienced significant growth in recent years. According to the Ministry of Statistics and Programme Implementation (MOSPI), India's GDP grew by 7.2% in FY 2022-23, following the recovery from the pandemic-induced slowdown. While the overall economic growth figures look promising, challenges persist, especially in key sectors like manufacturing. In 2023, the manufacturing sector accounted for 16.3% of India's GDP, according to the National Statistical Office (NSO). Despite the steady growth, India continues to face a sizeable gap when compared to global manufacturing giants, such as China, where the sector contributes more than 25% of GDP.

The government's "Make in India" initiative, launched in 2014, aimed at transforming India into a global manufacturing hub, has made strides in certain areas, but the sector still faces India's logistics costs are approximately 13-15% of GDP, compared to the global average of 8-10%. This makes products manufactured in India less competitive in global markets.