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16 Jul

Manufacturing Exports Opportunity for India

Case Study #52

The Trillion – Dollar Manufacturing Export Opportunities in India

According to a report India is anticipated to increase its manufacturing exports to $1 trillion by fiscal year 2027–2028 due to Indian government favorable trends in manufacturing and priority industries.

Chemicals, Automotive, Electricals & Electronics, Pharmaceuticals& Medical Devices, Textiles& Apparel, and Industrial Machinery will be the six industries boosting export growth.

According to the report, Indian companies must concentrate on having a clear export strategy, the necessary execution skills, the appropriate partnerships to facilitate exports, and an ideal capital expenditure (capex) efficiency focus to expand manufacturing capacity in order to take advantage of this opportunity.

The automotive industry will see electric vehicles and components contribute up to $5 billion to this export growth as a result of rising interest in electric vehicles.

According to the report, six megatrends that have advanced quickly over the past two years have fueled India's export development. These include government initiatives to support manufacturing in the nation, capital expenditure infusion into manufacturing sectors, increased merger and acquisition (M&A) activity, and private equity/venture capital (PE/VC)-led investment in manufacturing. India also benefits from supply chain diversification in some manufacturing sectors.

India's export contribution to global trade is barely 1.6 percent, despite the country being the sixth-largest economy globally and making 3.1% of the world GDP. China, on the other hand, contributes 15% to global commerce, compared to the US's 8.3%, Germany's 7.9%, Japan's 3.7, and the UK's 2.3%.

However, India's manufacturing exports for FY21–22 hit a record $418 billion, an increase of almost 40% from the $290 billion in the prior year and the pre–pandemic high of $328 billion in FY18–19.

According to the paper, Government-PLI tied to production will aid in luring sizable investments throughout the manufacturing sectors, propelling both domestic growth and industry-driven exports.

The foreign direct investment (FDI) policy initiatives aimed at decreasing the FDI restrictive index have augmented the capital inflow, which is evident from the fact that FDI investments increased by about 65 percent between 2015 and 2020. The PLI outlay of $47.8 billion planned over five years, starting in 2021, has increased in-country production and helped manufacturing-led exports. Important free-trade agreements (FTAs), such as the Comprehensive Partnership Agreement (CEPA) between India and the United Arab Emirates and the Economic Cooperation and Trade Agreement between India and Australia, have been signed with the goal of fostering increased bilateral trade and exports, according to the report.

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