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How infra creation, MSME financing and digitisation can help make India a manufacturing superpower

The COVID-19 pandemic has shown that achieving self-reliance is not a matter of choice but a necessity. With the global supply chain being in a flux, there is an opportunity for India.

India commands a three per cent share in the global manufacturing value chain while having the second largest population. From the manufacturing of pharmaceuticals, healthcare goods, chips, to electronics and white label goods, India needs to achieve self-reliance.

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The COVID-19 pandemic has shown that achieving self-reliance is not a matter of choice but a necessity. With the global supply chain being in a flux, there is an opportunity.

The first steps towards making India a manufacturing superpower were taken with the Supply Chain Resilience Initiative (SCRI) of the Quad. The SCRI shows the growing chorus asking for India's participation in an alternative global supply chain.

A three-pronged approach based on a foundation, a driver, and a multiplier can make this happen: infrastructure creation, MSME supplier financing, and digital transformation.

At 14 per cent, India has one of the highest logistics costs relative to GDP. Similarly, India's power cost as a percentage of GDP is also among the highest in the world.

This has limited the competitiveness of India's products in the past. For India to be a manufacturing global superpower, infrastructure creation is the foundation. It will serve two purposes.

First: As the infrastructure sector is labour-intensive, it creates a domestic economic growth model that will be insulated from global supply chain disruptions and business cycles. This is the key to realising the vision for self- reliance.

By connecting India's upcoming cities to better opportunities for domestic trade it will enable business continuity. Infra building initiatives like the 100 Smart Cities Mission and the PLI scheme covering 13 sub-sectors will enable Indian manufacturing to widen its footprint into tier-2 and tier-3 cities.

 

It will take the demographic load off the metro cities, cool real estate and raw material costs, and enable job creation.

Second, infrastructure creation will enable small and large manufacturers in India to connect to EXIM trade opportunities. Robust infrastructure for EXIM trade such as airports, ports, inland container depots, and logistics parks will allow Indian manufacturing to leverage the untapped potential of MSME suppliers through greater local capacity utilisation. Infrastructure creation alone can contribute 4.5 per cent to India's GDP growth rate every year.