7 December 2024 : The Hindu Editorial Analysis
1. Building on the Revival of the Manufacturing Sector
(Source – The Hindu, Editorial- Page No. – 6)
| Topic: GS3-Indian Economy |
| Context |
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Impact of the PLI Scheme:
- The PLI scheme has been pivotal in transforming India’s manufacturing landscape by boosting production, exports, and employment across key sectors, including electronics, pharmaceuticals, automobiles, and textiles.
- The Annual Survey of Industries (ASI) for 2022-23 reports a 21.5% growth in manufacturing output and a 7.3% increase in gross value added (GVA), indicating a positive correlation between the scheme and sectoral performance.
Sectoral Growth Trends:
- Specific sectors benefiting from the PLI scheme, such as basic metals, petroleum products, food products, chemicals, and motor vehicles, collectively contributed 58% to total manufacturing output.
- These sectors recorded an impressive 24.5% growth in output, demonstrating the scheme’s effectiveness in catalyzing manufacturing expansion.
Post-Pandemic Recovery:
- Despite a high base from 2021-22, the manufacturing sector exhibited a robust recovery, achieving double-digit growth (21.5%) in 2022-23.
- This recovery underscores the sector’s resilience and its potential to contribute significantly to India’s ambitions of becoming a global manufacturing powerhouse.
Expanding the Scope of PLI:
- To unlock new growth frontiers, PLI incentives should be extended to labor-intensive industries like apparel, leather, and furniture, and emerging sectors like aerospace and space technology.
- Reducing import dependency in sectors like capital goods by fostering domestic manufacturing capabilities can enhance resilience against global supply chain disruptions.
- Promoting green manufacturing and investing in advanced technologies will improve long-term competitiveness and sustainability.
Challenges in Input Costs and Value Addition:
- The divergence between output growth (21.5%) and GVA growth (7.3%) is attributed to a 24.4% rise in input costs during 2022-23.
- A streamlined import regime with lower tariffs (0-2.5% for raw materials, 2.5-5% for intermediates, and 5-7.5% for finished goods) could reduce production costs and improve India’s integration into global value chains.
Addressing Regional Disparities:
- Over 54% of manufacturing GVA and 55% of employment are concentrated in five states: Maharashtra, Gujarat, Tamil Nadu, Karnataka, and Uttar Pradesh.
- To ensure equitable growth, states need to implement key reforms in land, labor, and power markets, along with infrastructure development and investment promotion.
Focus on MSMEs:
- MSMEs contribute 45% of India’s manufacturing GDP and employ 60 million people. Tailored PLI incentives, such as lower capital investment thresholds and reduced production targets, can empower MSMEs to scale up, innovate, and integrate into value chains.
Enhancing Women’s Workforce Participation:
- Increasing female workforce participation in manufacturing could boost output by 9%, according to the World Bank.
- Developing supportive infrastructure like hostels, dormitories, and childcare facilities near factories can encourage greater participation, driving inclusive growth.
Future Goals:
- Sustained efforts could raise manufacturing’s share in India’s GVA from 17% to over 25% by 2030-31 and 27% by 2047-48.
- Improving ease of doing business, reducing operational costs, and leveraging policy measures will be crucial to achieving these targets.
Conclusion
India’s manufacturing sector is on the cusp of transformation, driven by robust policy support and impressive post-pandemic recovery. While the PLI scheme has laid a strong foundation, addressing challenges like high input costs, regional imbalances, and the underutilization of MSMEs and female workforce potential is critical. With sustained reforms and focused strategies, India can unlock its manufacturing potential, driving economic growth and achieving its vision of becoming a developed economy by 2047.
