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While India offers a “compelling growth story”, it needs to ramp up manufuactuing and raise its share of manufacturing in global value chains with the help of “best policy support”, Union Finance Minister Nirmala Sitharaman said on Friday. Without mentioning the name of former Reserve Bank of India (RBI) Governor Raghuram Rajan, Sitharaman in an indirect reference to his comments about the country not ramping up manufacturing, pointed to the gains made from the production-linked incentive scheme, especially in the electronics and smartphones sectors.
“Much against the advice given by some economist that India should no longer be looking at manufacturing, or ramping up manufacturing, I would like to highlight the fact that manufacturing must increase. India must also increase with the help of policies its share in manufacturing in global value chains. We need to have greater sophistication in our product manufacturing. We also need to see how best this can be given best policy support,” Sitharaman said at the Confederation of Indian Industry (CII) Annual Business Summit 2024.
Rajan had raised concerns about the union government extending heavy subsidies to big firms under the PLI scheme and substantial incentives for chip manufacturing. In a recent post on LinkedIN, Rajan, however, clarified that he is not against manufacturing or domestic defence production or making more in India. Instead, he does not advocate services at the expense of manufacturing. “I would love more Indians to have jobs outside agriculture, and manufacturing is certainly one important possibility…what I worry about is this government’s policies with regards to manufacturing, in which it has let the most labour-intensive parts of the manufacturing system shrivel, even while offering enormous subsidies to areas like chip manufacturing,” he said.
At the CII event on Friday, Sitharaman also said that expanding manufacturing will help India become self-reliant, Atmanirbhar Bharat, as it has helped reduce import dependency for mobile and electronics sectors. “Presently, the telecom sector’s PLI has actually helped India to become better Atmanirbhar. In that 60 per cent import substitution has been achieved in the telecom sector, that itself gives quite a big scope for our Indian industry. The PLI scheme is also transforming the mobile and electronics sectors. From 78 per cent import dependence in 2014, today 99 per cent of all mobile sold in India are made in India,” she said.
Value addition in electronics and smartphone manufacturing too have grown significantly, the Finance Minister said, adding that it has crossed 20 per cent from the negligible level of 2014-15. “India is becoming Apple’s second largest manufacturing hub for iPhones outside of China. iPhone exports nearly doubled in April 2024 reaching $1.1 million compared to $518 million in just the previous year. So that one-year rapid growth is very noticeable,” she said.
Citing recent observations made by the International Monetary Fund (IMF), Sitharaman said India story is a “compelling growth story” and India’s contribution to global growth for five years beginning 2023 is expected to be 18 per cent. She also mentioned projections made by S&P Market Intelligence, stating that the Indian consumer market is likely to double by 2031.
“I am not saying from where it is going to reach what level I am only highlighting the opportunity that lies in that consumer market doubling. A $2.9 trillion opportunity lies waiting in that. S&P also says consumer spending on food is estimated to rise $1.4 trillion,” she said.
She also said that there is a window of demographic dividend for the next 30 years, which will be the lowest on dependency. “So it comes with the added advantage that the demographic dividend will have the historically lowest dependency ratio, which means the net benefit is going to be more increase in consumption,” Sitharaman said.
So, the fastest growing economy will continue to be the fastest growing economy, with India’s transition towards green energy and green economy expected to create more job opportunities, the Finance Minister said.
She also pointed out that the twin balance sheet problem has now turned into a twin balance sheet advantage, the minister added. “From those days of twin balance sheet problems in 2013-14, today it is a twin balance sheet advantage situation. So the corporate sector’s, the government’s and the financial sector’s balance sheets have all now turned the corner and are now in the pink of health. If that is the case, the vibrancy with which investments can happen, expansions can happen and the banking sector can be buoyant enough to address the credit requirement, push the economy faster, make sure that the big and small all have credit access, and that the banks themselves would be able to be the track on which the economy can move fast,” she said.
Stating that they are confident that Prime Minister Narendra Modi is “coming back with a good majority”, Sitharaman said the fundamental basis for this consistent and steady growth and high growth is the policy stability, absence of flip flops, corruption-free decision making and making sure that the facilitation in the legislative frameworks are simultaneously going on.
