Bolster India’s Manufacturing Sector
The Union Budget 2024-25 is being presented at a crucial juncture of geopolitical uncertainties, geo-fragmentation, high interest rates, and slowing world economic growth. Calibrated steps to enhance domestic sources of growth would be crucial to maintain a higher economic growth trajectory. The global economy continues its gradual recovery from the impacts of the Covid-19 pandemic, the Russia–Ukraine war, the Israel-Hamas hostilities, and the challenges posed by the rising cost of living. IMF projections suggest that global growth is decelerating from 3.5 per cent in 2022 to 3 per cent in 2023 and further to 2.9 per cent in 2024.
Amidst all this, the Indian economy has proven resilient. Post-pandemic GDP growth has remained high. GDP grew 9.1 per cent in 2021-22 and 7.2 per cent in 2023-23. The NSO estimates strong growth of 7.3 per cent in 2023-24 in its first advanced estimates. With the high growth trajectory, India's commitment to a green economy was reflected in the Union Budget for 2023-24, which emphasised on renewable energy, reduced reliance on fossil fuels, and sustainability, aligning with a target of achieving net-zero carbon emissions by 2070.
India has emerged one of the most attractive destinations for new ventures and investments. The government has made tremendous efforts to improve the ease of doing business in India through various initiatives and budget allocations. There is a need for more emphasis on Tier 2 cities, rural areas, and expanding digital connectivity for enterprises.
The budget must focus on reducing the costs of doing business. The reduced costs of doing business and a level playing field in the country will increase the competitiveness of manufacturing firms and exporters, and reduce imports of the items where India has domestic capabilities. The budget must focus on reducing the costs of capital, costs of power, costs of logistics, costs of land /availability of land, costs of labour/availability of skilled labour and costs of compliance.
India is emerging as a startup hub with more than 1,00,000 startups. Moreover, India has over 100 unicorns, which is amongst the largest in the world. To sustain this trajectory of startups and unicorns, a great deal of handholding is required for enhanced access to the government e-marketplace (GeM), technology and AI-based development, and strengthening incubation framework.
The Logistics Backbone
The logistics sector is the backbone of the functioning of all the other sectors of India’s economy. To improve logistics development in the country, the application of advanced technology must be focused on, including rail-road connectivity, IoT, automation, blockchain and cloud computing, AI, and robotics.
The strengthening of the MSME sector, improving value chains, and increasing access to capital for small businesses would be crucial for their growth and contribution to the higher growth of the Indian economy. India's services sector, notably software exports, has grown significantly, and to progress further, digital infrastructure, literacy, and skill development must be prioritised. Developing state-of-the-art tourism infrastructure is crucial for increasing the sector's contribution to employment and MSMEs.
Agriculture's growth is dependent on rural infrastructure, private sector participation, and reduction of wastage. Infrastructure development is critical for India's overall economic growth, to accomplish the state-of-the-art infrastructure and India's development goals by 2047, infrastructure investment should account for at least 10 per cent of GDP.
To enhance the momentum in private investments, there is a need to support the consumption trajectory as this will enhance capacity utilisation in the factories. Percolation of ease of doing business at the factory level, rationalisation of cost of doing business, rationalisation of taxation, state-of-the-art infrastructure, enhanced incomes in the agriculture sector, inclusive health infrastructure, quality education, and employment creation in the economy will be crucial for India’s journey towards a developed economy by 2047.
India’s labour force is characterised by a high proportion of employment in agriculture and the informal sector with nearly half of its workforce classified as working poor. At this juncture, there is an urgent need to create a highly skilled talent base and to ensure the formation of a strong human capital base ready to serve the nation.
To ensure a strong health infrastructure, it is critical to address gaps in healthcare access, invest in highly competent medical professionals, and improve the quality of medical education. The strengthening of the healthcare personnel with specialised training and preparedness needs to be
To generate employment in the economy, accelerated reforms in the agriculture and food processing sector are needed with a great infusion of public investments in the agriculture infrastructure. Reforms in rural infrastructure logistics and cold chain are required as they would help in increasing the level of the food processing industry and rural entrepreneurship. This would lead to increased participation in global agriculture and food exports.
In a nutshell, time is most opportune to bolster the manufacturing sector with reduced costs of doing business and connect strongly with the global supply chains to strengthen India’s journey towards a developed economy.
SP Sharma, Chief Economist, PHD Chamber of Commerce and Industry (PHDCCI)
