Manufacturing sector expected to reach $1 trn by 2025-26 led by Gujarat

NEW DELHI : The Indian manufacturing sector is experiencing a surge in investments, marking a significant milestone in the nation’s economic landscape. According to a report by Colliers, this has poised India’s manufacturing market to reach $1 trillion by 2025-26, with Gujarat becoming India’s manufacturing powerhouse, followed by Maharashtra, then Tamil Nadu.

India’s manufacturing sector has experienced remarkable growth with Foreign Direct Investment (FDI) hitting $17.51 billion in the financial year 2020-21 alone. This showcases the heightened global investor confidence. This success can be attributed to the government’s “Make in India” initiative to foster domestic manufacturing, as well as policies such as the production-linked incentive (PLI) scheme. PLI schemes have helped incentivise various manufacturing industries, including automobiles, electronics, and textiles.

Initiatives like the Bharatmala Pariyojana Project, the proposed DESH Bill, and the National Logistics Policy, have also helped enhance opportunities in the industrial market.

Contributing around 17 per cent to the GDP, the manufacturing sector is poised to grow to 21 per cent in the next 6-7 years, showcasing India’s potential to strengthen its position in global supply chains.

Explaining the impact of government policies on FDI, Swapnil Anil, the Executive Director & head, advisory services at Colliers India says, “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.”

Automobile, electronics and textiles leading in manufacturing

India’s manufacturing sector is witnessing an influx of capital investment and increased merger and acquisition activity. The manufacturing Gross Value Added (GVA) at current prices reached an estimated $ 110.48 billion in the first quarter of FY24. High investment has been witnessed in the automobile, electronics, and textile sectors, which show promising growth.

India’s automotive sector has attracted interest from global players like Tesla and Ford, reflecting India’s growing prominence in the global supply chain. Additionally, investments in electronics manufacturing witnessed a surge, especially in smartphones, with major players like Apple’s contract manufacturers establishing local assembly units, aligning with India’s competitive advantages.

Textiles and garment manufacturing sectors experience increased investment, with global brands reconsidering sourcing strategies and investing in Indian units.

Gujarat: Top regions for industrial investment

A detailed study by Colliers ranks Gujarat as the top state for industrial investment, followed by Maharashtra and Tamil Nadu. Factors include labour availability, government support, infrastructure, and financial offerings.

Toyota is set to invest around Rs 3,300 crore for a new plant, which may be operational by 2026. The Gujarat government has also granted a sizable 160,000 sq mtrs of prime land in Sanand, near Ahmedabad, for the establishment of an innovative concentrate manufacturing facility by the Coca-Cola company. Moreover, Gujarat signed three MoUs worth Rs 3,000 crore in October for textile, industrial park, engineering, including auto sector. 

Due to the robust policies, subsidies, and incentives offered by the state government, Maharashtra ranks second after Gujarat. The state has the highest FDI inflow, industry GDP share, lower unemployment rate, and all major businesses have a presence in Maharashtra. Maharashtra has 21 MoUs worth Rs 88,420 crore in manufacturing, making it the state with the highest number of MoUs in the sector.

Tamil Nadu ranks third due to its combination of favourable labour policies and affordable labour. Tamil Nadu also has the right policies, subsidies, and incentives for the industries. Tamil Nadu has signed a total 79 MoUs in FY23 worth Rs 1,65,748 crore, which will generate 9,000 jobs.

Emerging sectors in Indian manufacturing

The Colliers report notes that among emerging sectors, semiconductors, agri tech, and waste management show promise. Within waste management, e-waste is particularly garnering attention.

Advanced technologies, sustainable practices, Industry 4.0, local manufacturing focus, AI integration, 3D printing adoption, and IoT-driven processes are among emerging themes in India’s manufacturing sector.