How FM Sitharaman can draw the roadmap for India's manufacturing growth in sunrise sectors in Budget
Countries that adopted such a trajectory have manufacturing’s share at 20%+ of their gross domestic product.
Despite the reforms and initiatives, India’s manufacturing ecosystem continues to face challenges on key investment criteria on account of low labour productivity, high logistics and power costs, and limited innovation.
As a result, manufacturing growth has lagged services. Between fiscals 2011 and 2020, services GDP grew at 7.7% compound annual growth rate (CAGR) against 6.0% CAGR in manufacturing GDP.
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However, the tide seems to be turning.
Over the next five years, manufacturing GDP growth is likely to clock 9.1% CAGR, much higher than 6.9% CAGR in services. This will help India ramp up the share of manufacturing in GDP to 20%, from 17.2% in the previous fiscal. This will be achieved through a focused approach on sunrise sectors such as solar photovoltaics (PV), battery manufacturing and semiconductors. In our view, largely led by private sector, these sectors could witness capital expenditure worth Rs 5-7 lakh crore through fiscal 2028.
So, what has changed?
Is it only the outcome of global supply chain diversification, or are the government’s initiatives finally bearing
