Against the backdrop of India’s bustling industrial landscape, the manufacturing industry and small and medium enterprises (SMEs) are playing a pivotal role in propelling the nation’s economic resurgence.
As India charts its course to becoming the world’s third-largest economy by 2027, surpassing Japan and Germany, the manufacturing sector stands as a cornerstone of this ambitious journey. The vision extends further, with India aspiring to be a developed economy by 2047.
Rumki Majumdar, Economist and Director at Deloitte India, emphasises the need for the country to leverage technology for accumulating and disseminating tacit knowledge, building high-end manufacturing capacity, and enhancing competitiveness through exports.
The Confederation of Indian Industry, a 9,000-member strong industry-led organisation, highlights that India’s share of manufacturing in GDP has consistently remained low, ranging from 15 to 18 per cent, even after the significant economic reforms in 1991, in contrast to other middle-income countries.
“The share of manufacturing in India’s GDP will have to increase significantly to provide good quality jobs to the youth as well as for inclusive growth,” says Chandrajit Banerjee, Director General of CII.
He points out that the vision is to elevate manufacturing’s contribution to 25 per cent of GDP by 2030-31 and 27 per cent by 2047, aligning with the total economy size of $40 trillion when India turns 100.
Banerjee explains that India’s emergence as a trusted global partner, coupled with the ongoing geographical diversification of supply chains, presents an opportunity for the nation to strengthen its domestic manufacturing base and attract global manufacturing majors.
The success story of India’s economy is propelled by corporate leaders who are actively embracing innovation to construct a sustainable future.
At the forefront of innovation
Nadir Godrej, Chairman & Managing Director of Godrej Industries Limited, talks of innovation as the foundation of growth, emphasising the company’s commitment to producing products in an environmentally friendly manner.
Godrej has incorporated automation, data analytics, and AI into the mix, aiming to enhance operational efficiency and generate high-skilled employment opportunities.
“Our focus on innovation, sustainability, and skill-building is what makes us tick – it’s not just about our success, but also about making India’s economic scene better, one innovation at a time,” he adds.
RPG Group, having maintained a manufacturing presence in India for over four decades across key sectors of the economy, emphasises that the manufacturing sector stands as a major driver of India’s economic engine. Beyond contributing over 15 per cent to India’s GDP, it plays a crucial role in employment generation.
“The government’s aim is to raise the share of manufacturing in overall GDP to 25 per cent by 2030. This will require over 15 per cent annual growth over the next seven years. But it is achievable because of the robust domestic markets and India’s emergence as a good quality, reliable, stable source for global markets,” says Harsh Goenka, Chairman of RPG Group.
He highlights technology’s role in boosting India’s manufacturing competitiveness and envisions smart factories with AI-enabled technology creating efficiencies, flexibility, and better products.
“The role of manufacturing as a hub for innovation and creativity has been one of the standout features in India and I expect we will take great strides in this area,” says Goenka.
RPG Group is constantly innovating and upgrading their processes, adopting Industry 4.0 technologies, and focusing on skill development to create an agile workforce. “Our Make in India commitment is unwavering, and we are actively looking at expanding our manufacturing capabilities both organically and inorganically,” Goenka adds.
Meanwhile, Vedanta Aluminium has undertaken several initiatives such as Make In India, Smart Cities, Power For All, and the push for smart infrastructure, and these are all geared to support the upward trajectory.
The company’s CEO John Slaven points out that this conducive environment will provide a boost to sectors like building and construction, transportation, electricals, defence, aerospace, and aviation, along with sunrise sectors such as EVs, renewables, and hi-tech manufacturing.
“In turn, this is expected to encourage a rise in the demand for sustainable materials such as aluminium, as producers look for more avenues to ensure greener operations,” says Slaven.
Special focus on SME sector
A driving force behind India’s economic progress, the SME sector has contributed significantly to job creation, technological innovation, and overall economic growth.
“MSMEs will be key in generating income, capabilities, capacities, and ecosystems needed for sustained growth in consumption and investment,” says Majumdar.
With an estimated 75 million MSMEs as of financial year 2023, Deloitte’s report shows that the SME sector contributes around 30 per cent to India’s GDP, 43.6 per cent to merchandise exports, and generates nearly 123 million jobs.
Godrej stresses the need to strengthen supply chains for SMEs, advocating for less reliance on imports and more focus on making in India.
“Small businesses deserve a fair shot with affordable access to technology and the know-how to work with automation,” he says.
Deloitte’s Majumdar notes that the MSME sector is emerging from the crisis, with parameters such as increased demand for loans and declining delinquencies indicating steady growth.
The CII Director General emphasises that the future of manufacturing lies in a fusion of innovation, automation, and sustainability, with interconnected, intelligent, and sustainable factories taking centre stage.
“Whether large or small, manufacturing companies must embrace these elements to stay competitive,” he adds.
Green transition
India’s green transition is articulated through the Panchamrit targets, including reaching 500 GW of non-fossil energy capacity by 2030 and meeting 50 per cent of energy requirements from renewable sources.
CII’s Banerjee mentions that the government has taken several steps to promote green practices within the industry, including sovereign green bonds, the green hydrogen mission, capital allocations for energy transition and net zero, as well as energy storage projects.
“These initiatives represent a comprehensive approach by the Indian government to integrate green practices within the manufacturing industry, reflecting a strong commitment to environmental sustainability and economic growth,” he says.
The commitment of the Indian industry to sustainability is demonstrated through tangible commitments, such as Ambuja Cements pledging a significant investment of Rs60 billion in green power projects by the financial year 2026.
Godrej emphasises his company’s commitment to sustainability, from reducing environmental impact to exploring new markets.
“Rigorous implementation is non-negotiable; it’s about aligning industries with sustainability,” he says.
Godrej Industries is investing in renewable energy, establishing solar power plants across its facilities, and transitioning to green electricity providers. Additionally, it is implementing water-efficient technologies and adopting closed-loop water management systems to reduce water consumption.
The company is keen on harnessing solar and wind power, aiming to significantly reduce carbon emissions in manufacturing.
As an early mover in sustainability, RPG Group has initiated various green initiatives across their facilities and products. “Each of our businesses has set its goals on reducing carbon footprint, invested in renewable energy, and adopted circular economy principles,” says Goenka.
The company is also actively working on water conservation and responsible waste management.
Vedanta Aluminium intends to sustainably grow its capacity to meet the emerging need for aluminum by promoting climate action and responsible business practices throughout its value chain.
“This is being achieved through a two-fold strategy involving carbon mitigation through enhanced manufacturing excellence, transition to renewable energy sources, and using low carbon fuels, as well as offsetting emissions through extensive carbon sinks,” says Slaven.
These efforts have led to a 28 per cent reduction in greenhouse gas intensity in FY23 compared to a FY12 baseline, coupled with a threefold increase in production.
As India strives to balance industrial growth with environmental sustainability, these manufacturing giants are at the forefront of adopting green practices.
The harmonious integration of economic development with environmental responsibility, as demonstrated by the industry leaders and enterprises, positions India as a global pioneer in the journey towards sustainable manufacturing practices.
