Sambhav-2025

Approach Provide a brief overview of India’s manufacturing sector Discuss the challenges faced by India’s manufacturing sector. Suggest measures to enhance its global competitiveness. Conclude Suitably.

Introduction

India’s manufacturing sector is a cornerstone of economic growth, employment generation, and exports, contributing around 17% to GDP. However, its potential remains underutilized due to challenges in infrastructure, policies, technology, and skills. Addressing these gaps is crucial for integrating India into global value chains and enhancing its competitiveness.

Body

Challenges in Infrastructure:

• Transport and Logistics Deficiencies: High logistics costs at 13-15% of GDP (global average: 8-10%) hinder competitiveness.
• Overburdened roads, railways, and ports cause delays and inefficiencies.
  • Example: Freight movement is dominated by roads, raising costs.
• Unreliable Power Supply: Frequent power outages disrupt production, especially in industrial states like Uttar Pradesh and Bihar.
• Lack of Modern Warehousing: Inadequate cold storage and distribution networks lead to huge wastage of perishable goods.

Challenges in Policy and Regulation:

• Complex Regulations: Overlapping compliance requirements and frequent changes in GST increase uncertainty.
  • Example: Inconsistent labor laws deter long-term investments.
• Policy Instability: Sudden export bans on key products like onions and pulses disrupt industries and global trade ties.
• Limited Support for R&D: India spends less than 1% of GDP on R&D, limiting technological advancements in manufacturing.

Challenges in Technology:

• Outdated Machinery: Many MSMEs rely on traditional methods, reducing productivity and quality.
  • Example: The textile industry often uses manual looms.
• Slow Adoption of Industry 4.0: Low integration of Artificial intelligence (AI) and the Internet of Things (IoT), and robotics hampers efficiency.
• Weak Innovation Ecosystem: A focus on low-cost, mass production limits India’s presence in premium global markets.

Challenges in Skills:

• Skill Gaps: According to the 2022-23 Annual Report by the Ministry of Skill Development & Entrepreneurship (MSDE), only 2.2% of individuals aged 15-59 in India had undergone formal vocational training, causing shortages in sectors like electronics and automotive.
• Inadequate Vocational Training: Training programs often lag behind modern industrial needs, widening the skill mismatch.
• Low Labor Productivity: Lack of continuous skill development keeps productivity below global standards.

Measures to Enhance Global Competitiveness:

• Infrastructure Development: Modernize transport networks under the Bharatmala Project to reduce logistics costs.
  • Ensure stable power supply by promoting renewable energy investments.
  • Expand warehousing and cold storage through PM Kisan Sampada Yojana.
• Policy and Regulatory Reforms: Simplify regulations and ensure consistent industrial policies.
  • Incentivize R&D by increasing tax rebates for innovation-driven industries.
  • Stabilize export policies to foster long-term investor confidence.
• Technology Upgradation: Promote Industry 4.0 adoption through schemes like TUFS.
  • Create innovation hubs to collaborate with startups and research institutions.
  • Provide low-interest loans for replacing obsolete machinery.
• Skill Development: Align vocational training with industry demands via NSDC partnerships.
  • Focus on continuous learning and STEM education to bridge skill gaps in advanced manufacturing.

Conclusion

India’s manufacturing sector faces significant hurdles, but with targeted reforms in infrastructure, policy, technology, and skill development, it can achieve global competitiveness. By addressing these challenges, India can unlock its potential to become a manufacturing powerhouse, contributing to its vision of a $5 trillion economy.