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India Manufacturing Hub: Coordinated Efforts Needed

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By Rediff Money Desk, New Delhi   Jan 31, 2025 15:55

Economic Survey highlights the need for coordinated efforts from government, private sector, academia, and financial players to make India a manufacturing powerhouse, addressing challenges posed by China's dominance in global supply chains.
New Delhi, Jan 31 (PTI) Coordinated efforts from the government, private sector, academia, R&D institutions, and financial stakeholders are crucial for India to achieve its goal of becoming a manufacturing powerhouse amid an uncertain global environment, Economic Survey 2024-25 said on Friday.

It also called for "vigorous" focus on deregulation, appropriate skilling and employment strategies, and targeted support for smaller enterprises to improve the competitiveness of the Indian industry and prepare it to weather global challenges.

Slackening global trade and aggressive policies of major economies have affected manufacturing and investment by the private sector.

"In a rather unsupportive global environment, it calls for lasting, synchronised efforts of all tiers of governments, the private sector, the skilling eco-system, academia and R&D institutions, as well, and financial stakeholders to enable India realise its ambition as a manufacturing powerhouse," the survey noted.

The suggestion assumes significance because China is rising as a global manufacturing hub and its impact on the manufacturing aspirations of other nations, as well as the supply of minerals, materials, machinery, and equipment needed for energy transition, pose challenges.

"Amidst this, India is in the middle of a change that represents an unprecedented economic challenge and opportunity," it said.

The survey stressed that China is a dominant force in areas such as energy transition ecosystems as it has gained a strategic advantage by leveraging its competitiveness and economic policy to access and control key resources recognised today as critical for global supply chains.

Hinting about India's dependence on China in certain sectors, the survey said that India sources 75 per cent of lithium-ion batteries from China, and it has near negligible production capacity for key components like polysilicon, ingots, and wafers.

There is a dependency of the world on China for energy transition efforts.

In fact, India has ambitious goals for energy transition despite being one of the lowest per capita emitters of greenhouse gases.

"Dependence on China-made goods to achieve that transition enhances the complexity of the challenge for India," the survey said adding China is a dominant force in the global manufacturing and energy transition ecosystems.

It has gained a strategic advantage leveraging its competitiveness and economic policy to access and control key resources recognised today as critical for global supply chains.

"The effects of the rise of China as a manufacturing colossus are seen in automobile (especially electric vehicles) manufacturing, mining and refining capacity for critical minerals (Copper, Lithium, Nickel, Cobalt, Graphite, etc.) and in clean energy equipment," it said.

To support domestic industry in boosting manufacturing, it suggested the government to accelerate and amplify the deregulation agenda.

"Also, every state in the country can learn from the best practices of other states in different areas so that all progress in unison," it said adding there is a need for focus on industrial strategies appropriate to unique geographies like the North East.

Four states Gujarat, Maharashtra, Karnataka and Tamil Nadu account for about 43 per cent of the total industrial GSVA (Gross State Value Added). In contrast, six states of the Northeast (excluding Sikkim and Assam), account for only 0.7 per cent of the industrial GVA.

Further, it said that it is important that states focus on business reforms on a priority basis so as to achieve buoyancies in some industrial or service sectors where it has natural advantages.

"States should make it easier for businesses to commence operations, to grow and even be closed if deemed inevitable by the entrepreneur," it added.

On research and development, the Survey said in India, not only is the industrial R&D low, but it is also sectorally concentrated.

Drugs and pharmaceuticals led the way, followed by information technology, transportation, defence, and biotechnology. Public sector R&D is primarily driven by the defence industry, followed by the fuels and metallurgical sectors.

Commenting on the survey, Sanjiv Malhotra, Senior Advisor, Shardul Amarchand Mangaldas & Co, said it identifies capacity building and institution building as the need of the hour and thereby requiring government, private sector and academia to work closely.

Rumki Majumdar, Economist Deloitte, said the services industry has been a key driver of growth, while India's exports, despite global challenges, have expanded into new and diverse markets.
Source: PTI
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