India’s Manufacturing Industry: A Booming Sector That’s Catching Investors’ Attention!

India is one of the fastest-growing economies in the world, with a GDP growth rate of 6.9% in 2021, despite the impact of the COVID-19 pandemic. The manufacturing industry in India is a critical sector that plays a vital role in driving the country’s economic growth. In this blog, we will discuss the factors leading to the growth of the manufacturing industry in India and the future growth prospects:

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India’s manufacturing sector is expected to be worth USD 1 trillion by 2030. This market is expected to grow at a CAGR of 11% between 2020 and 2030 driven by factors such as government initiatives, infrastructure development, increased skilled labour,  rising income levels, urbanization, and increased consumer spending.

The government’s Production Linked Incentive (PLI) scheme is a significant initiative by the Indian government that provides incentives to manufacturers in selected 13 sectors such as electronics, pharmaceuticals and textiles. The scheme has already led to an increase in investment in these sectors, with an expected production value of Rs 14.3 lakh crore over the next five years. This initiative shows that the government is committed to providing a favourable environment for manufacturing, and this is likely to continue in the future. 

The demand for skilled labour is another factor that is expected to contribute to the growth of the manufacturing industry in India. The government’s Skill India Mission aims to upskill 400 million people by 2022, and as of March 2022, the number of people trained under this mission was 8.7 million. The focus on upskilling the workforce to meet the demands of Industry 4.0 will ensure that the manufacturing industry has access to the skilled labour it needs to grow.

The adoption of Industry 4.0 technologies is expected to accelerate in the future, with an emphasis on increasing efficiency and reducing costs. Robotics and drones are two areas where India is expected to see significant growth. The spending on these technologies is expected to reach US$ 1.3 billion in 2023, growing at a CAGR of 17.8% from 2019 to 2023. The government’s National Policy on Advanced Manufacturing aims to promote the use of advanced technologies in manufacturing, and this is expected to further accelerate the adoption of Industry 4.0 technologies.

Infrastructure development is another crucial factor that is expected to contribute to the growth of the manufacturing industry in India. The government’s Bharatmala Pariyojana aims to develop 65,000 km of national highways, which will reduce transportation costs and improve connectivity. This initiative will make it easier for manufacturers to transport their goods and reduce costs, which will contribute to the growth of the manufacturing industry.

Finally, India’s large and growing population, coupled with a rising middle class, is expected to provide a favorable demand environment for the manufacturing industry. The United Nations predicts that India’s population will reach 1.5 billion by 2030, and the middle-class population is expected to grow from 600 million in 2020 to 1.3 billion by 2030. This significant growth in the middle class will result in an increase in demand for manufactured goods, creating a favourable environment for the growth of the manufacturing industry. 

In conclusion, the manufacturing industry in India is poised for significant growth in the coming years, driven by a combination of factors such as government initiatives, skilled labour, technology, infrastructure, and favourable demographics.

Think that the manufacturing industry in India is indeed going to grow? Then check out the Omkara Manufacturing smallcase

This smallcase invests in companies that are:

• Industry leaders with a great track record of execution and strong balance sheets.
• Majorly in the capital goods, engineering, industrials, auto and auto ancillary domain.

The smallcase has generated an alpha of 38%+ over the smallcap index in the last 1 year!

Want to know more about the growth in the manufacturing sector and the Omkara smallcase? Hear it directly from Varinder Bansal. Varinder has 15 years of work experience in equity research and was a Fund Manager at an AMC and prior to that, the Corporate Editor & Head of Research at CNBC – TV 18.