There are several factors that may make India an ideal manufacturing country. The country has a large base of educated workers, both low-skilled and high-skilled, as well as a huge market with 1.2 billion consumers. The country has a growing middle class, but much of the population still lives in poverty. Fortunately, the income levels of the poor are starting to rise.
Infrastructure development projects in India
The Indian government has committed to investing $1.5 trillion in infrastructure development projects by 2023. These include roads, railways, ports, airports, and industrial corridors. The country’s $100 billion Bharatmala project includes the construction of 65,000 kilometers of national highways. It also includes $7 billion for improving regional air connectivity.
Infrastructure development projects are an essential prerequisite for industrial development. The government plans to develop smart cities and industrial corridors, with state-of-the-art technology and integrated logistics arrangements. It also plans to upgrade existing infrastructure, and strengthen industrial clusters. The government is also upgrading its Intellectual Property Rights (IP) registration and fast-paced registration systems to foster innovation and productivity. Further, it is developing its workforce and establishing more dedicated industrial zones.
Successful infrastructure development projects can help boost a variety of sectors, including manufacturing, steel, cement, auto, and real estate. India needs US$1.5 trillion in infrastructure investments over the next decade. Unfortunately, even that amount won’t fill the deficit and leave room for future growth. In order to achieve this goal, the government must increase its investment in infrastructure.
Focus on green and sustainable manufacturing models
A manufacturing hub is a place that is focused on producing high-quality products with sustainable processes and a low environmental impact. India has a long way to go in becoming a global manufacturing hub, but there are several things that the country can do to improve its manufacturing capabilities. First of all, it should focus on implementing green and sustainable manufacturing models.
Asia is a key market for green technologies and is on the verge of a new era of opportunity. It has accounted for more than half of global CO2 emissions since 2019. More than 15 countries and 670 companies in the region have set emission reduction targets, creating new opportunities for green technologies and investment. In addition, Asia has a strong infrastructure base. In 2014, 53 percent of global infrastructure spending was in Asia, and Asian companies have proven their ability to attract capital and achieve scale in many industries.
Creating environmentally friendly and innovative products has a high cost. For example, the waste feedstock is twice as expensive as fossil fuel. But green businesses can overcome these costs by leveraging existing assets and introducing disruptive technologies. They can also capture the green premiums on sustainable products, which enables them to attract low-cost financing.
Availability of cheap and stable electricity in India
India is a large net exporter of electricity, with Himachal Pradesh and Rajasthan being the biggest exporters. Other large net importers of electricity include Delhi and Karnataka. In addition, states like Rajasthan have excellent renewable energy resources, which lowers the cost of electricity storage and transmission. However, states like Delhi and Haryana have limited renewable energy resources and rely on neighboring states to meet their electricity needs. In fact, the transmission line between Delhi and Haryana has the highest utilization rate across the year, supplying 121 TWh of electricity.
A large portion of India’s power generation capacity is provided by fossil fuels, which produce reliable, on-demand power. On the other hand, renewable energy is variable, only generating electricity when the sun or wind blows. In addition, the intermittent nature of renewable energy can put a strain on the power grid, which may require switching back to fossil fuel generation, increasing emissions and slowing the rollout of renewable energy.
Despite strong energy efficiency standards, India is still a long way from reaching developed world standards. For example, the average per capita electricity consumption in India is just under 1.2 MWh, compared with nearly three thousand kWh in the world. This figure does not include the cost of renewable electricity in other sectors of the economy.
Impact of the global slowdown on manufacturing in India
There has been some concern over the impact of the global slowdown on manufacturing in India, especially in the high-growth sectors. For instance, in the third quarter of 2018, Tesla Inc reported lower-than-expected deliveries of electric vehicles, saying that logistics problems overshadowed the record deliveries of the first quarter of the year. On a more general level, some analysts have expressed concerns about the slowdown in global demand for high-ticket items.
However, even if the global slowdown affects India, the economy is in a relatively stable position. For one thing, commodity prices and energy prices are likely to fall. For example, crude prices have dropped by as much as $25 a barrel due to fears that China’s economy is slowing. Moreover, it is important to remember that the world could go through a variety of forms of recession.
In fact, the slowdown in the global economy has affected not only China but also India and South-East Asia. Although global demand for manufactured goods has been slowed down, these countries have managed to stay ahead of the game by diversifying their supply chains. For instance, exports from China to America were up 18% in the first seven months of this year, while those from India and South-East Asia increased by 30%, 33%, and 41%.