3 Reasons Behind India’s Growth as a Production Hub
Since India’s 76th Independence Day is almost here — I thought we should take a look at India’s unprecedented growth, especially since the last decade. India is, at present, the fifth largest economy in the world, and looking back at where we started from — I feel nothing but pride for my country.
India’s manufacturing sector, particularly, has seen exponential growth in the last few years. India’s manufacturing exports for FY22 reached an unprecedented USD 418 billion. By 2030, India is expected to export goods worth USD 1 trillion. Even in a post-COVID world, when some first-world countries suffered losses in the manufacturing sector, India strutted on. India has emerged as one of the most sought-after manufacturing hubs worldwide.
Not just as a production hub, in e-commerce as well, India has maintained momentum. Economist R N Bhaskar and I discussed the possible reasons behind this growth. Let’s find out.
1. Government policies
The government’s flagship programs, such as Make In India, Digital India, Startup India, and Production Linked Incentive (PLI) scheme, have given a much-needed thrust to the industrial sectors, resulting in production growth. Many schemes have been inaugurated for the upliftment of the Micro, Small and Medium Enterprises (MSMEs) and that has been a boon for all small-scale businessmen. Their initiatives which suffered previously due to the lack of capital, have now rejuvenated. To make women and other minorities self-dependent, most state governments have launched schemes for the same.
We are all familiar with the concept of geographical indication (GI) tags. According to the World Intellectual Property Organization (WIPO), it is a sign used on products with a specific geographical origin and possesses qualities or a reputation due to that origin. Recently, a lot of products from India have received GI tags which include handicraft works as well, such as — Bhagalpur Silk of Bihar, Kutch Embroidery of Gujarat, and Mysore Traditional Paintings of Karnataka, among others. These have attracted foreigners and tourists to buy these indigenous products, which have contributed to the production sector and pushed the country’s economy.
2. Huge customer base
There is no point in production if there is no one to buy it. India is currently home to 1.41M people. And that is a huge number if you have the right product and if you market the product right. By 2030, the Indian middle class is expected to have the second-largest share in global consumption: 17%. So, we are no longer a third-world country with limited resources and a tumultuous economy. The middle class has slowly risen to affluence, and now the working generation has their priority sorted. They prefer comfort, luxury and will spend a few extra bucks for it. That has given rise to the trend of using products that were once considered out of reach of the Indian middle class.
We have a population that can serve as the manufacturing sector’s workforce and the consumer. Recently we saw Apple open its first commercial store in Mumbai. More and more foreign corporations are setting up manufacturing hubs in India because they want to sell their products to us.
3. Competitive advantage
The world has always looked up to China as the leader in consumerism. Their cutting-edge technology and innovations in R&D have always been path-breaking. But recently, the scenario has changed a bit. With COVID resurfacing, trade disputes, and border problems, China has had to take a back seat. Moreover, India is reorganizing its trade policy to take advantage of the popular China-plus-one strategy, where companies do not just invest in China but diversify their investments.
While China is still recovering from COVID effects, the US and Europe have gone head first into both a recession and the Russia-Ukraine war. India, meanwhile, has kept the show running.
By 2030, the Indian manufacturing sector might boost the world economy by more than USD 500 billion annually. In fact, India is most likely to emerge as the third-largest economy around the same time. Fintech, edutech, healthcare, and green technology adoption in India has made successful efforts in all directions and expanded globally.
To learn more about the Indian economy and its growth, tap here.
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