Amrit Kaal 2047: Manufacturing A Prosperous Bharat

By Rahul Pandit – Member, CII National Committee on Logistics

Business Standard | November 17, 2023

The wise learn from their experiences, the wiser from those of others.?

India’s per capita income was $369 in 1990, China was $319. Today India is $2,600 and China $13,720. China’s goal of becoming a manufacturing superpower, supported by its accelerated hard and soft infrastructure development over the last 30 years has catapulted it into the developed league. With 80% of the global trade sea-bound, China’s expansion of its ports’ capacity to over 240 million TEUs (Twenty foot Equivalent Units), versus 20 million TEUs for India, is just one example of deliberate planning and focused execution.

At 14% manufacturing contribution to GDP, we punch below our weight. Indonesia at 19%, Malaysia at 24%, Vietnam at 25%, South Korea at 25% and China at 27% manufacturing muscle compete for superior returns.

The pandemic catalysed demand for diversified off-shore production hubs presents India a unique advantage, supported by the tail winds of its structural macros. Circa 2047, 20% of the global workforce will be Indians. However with unemployment running at 7.10% this demographic dividend can morph into a societal challenge if we don’t generate 10 million new jobs every year. Growing manufacturing to 25% of GDP will generate 100 million new jobs for India, in addition to the 407 million at present.

40% of the net value add in manufacturing today is from just 3 states – Maharashtra, Gujarat and Tamil Nadu. Just 5 states – Maharashtra, Gujarat, Tamil Nadu, Karnataka and Andhra Pradesh are currently expected to contribute about 50% of India’s GDP by 2030. The quest to attract capital and generate jobs cannot be a parochial fight, it has to be an inclusive national priority.

India needs a transformative environment for attracting capital and advanced technologies in core industries like Food Processing, Automotive, Pharma & Healthcare to amplify their export potential. We also need to urgently drive import substitution in the priority sectors of Defence & Aerospace, Green Energy, Bio Technology and Rare Metals. Let us consider four opportunities for this leapfrog agenda.

1. Incentivise green energy transition: USA passed the $369 billion IRA Act last year to deliver incentives, tax credits and research grants promoting switch to clean energy. India paid a $270 billion bill for coal and crude import in 2022.

a.????? Fuel is 50% of our logistics costs. Bringing fuel under GST will not only reduce the compliance and tax burden for companies but also drop costs for consumers and industry alike. ITC (Input Tax Credit) on fuel should be allowed for investment in migration to green energy.

b.???? Net metering of solar energy will buttress India’s energy future. Today many states don’t allow or restrict generation at scale. The country has a 2030 goal of 500GW clean energy. We however failed our 2022 milestone of 175GW. Logistics parks, factories and warehouses have millions of square feet of roof, that can be quickly converted into solar farms minus any concomitant CapEx for land and building. This will not only feed clean energy into the grid, but also make manufacturing competitive by providing power at rationalised rates.

c.????? India has the world’s largest reserves of Thorium to produce nuclear energy at scale. J&K has the 5th largest global deposits of Lithium, critical for energy storage. These advantages, backed by enabling policy, can rapidly transform India into a green energy hub by 2047.

2. Enable efficient logistics: Logistics costs 8% for mature economies, but 14% to India’s GDP. Shedding 6% inefficiency will save us $200 billion annually. The government’s ambitious Gati Shakti program for multi-modal connectivity is a progressive step in this direction.

a.????? Agri-logistics is a key impact area for such outcomes. India wastes more grain than Australia produces, wastes more fruits and vegetables than UK grows. US processes 65% of its agricultural produce, India does only 2.2%. Overcoming these challenges to enhance shelf life and market value could double India’s food processing to $600 billion by 2030. Availability of quality warehousing and efficient cold chains will not only strengthen our food security but also generate massive hinterland employment. Central and state governments will do well to work in PPP mode with industry. FDI can contribute technology and CapEx, with the government providing land and assured returns.

b.???? Urban areas constitute 3% of the land mass but contribute 70% to the GDP. Today 34% of India is in its cities. 50% of our population will be city dwellers by 2047. Zoning in-city logistics hubs, will not only drop supply chain and operating costs but also reduce traffic congestion, pollution and environmental attrition. Government can partner with developers to promote compliant urban logistics real estate, utilities and support infrastructure.

3. Double women in the workforce: India employs 24% women in its workforce, Indonesia 53%, Japan 54%, USA 56%, China 61% and Vietnam 69%. The formula for doubling India’s GDP is simple - double women in the workforce and plug this massive leak of the nation’s capital and talent pool. ?

a.????? The government will do well to offer Rs. 10 thousand stipend per month to women for pursuing vocational skilling at industrial training institutes. This initiative could be financed out of the CSR fund of India and will help achieve PM Modi’s target of 50% women in workforce by 2047.

b.???? USA’s $280 billion 2022 CHIPS act promoting in-country semi-conductor manufacturing demands on-premise child care facilities for receiving federal grants. While we have such templates to learn from, let us start with a positive bias - everything else being equal, recruit women.

4. Scale intellectual capital: India averages 75 thousand patents a year, South Korea 320 thousand, Japan 500 thousand, USA 840 thousand and China 1.6 million. Higher the intellectual capital generation, greater is the nation’s opportunities spectrum and richer is its economic value add.

a.????? The 2016 launched Atal Innovation Mission reflects understating of this opportunity. Incorporating research as a credit accretive discipline in school and university curriculum and supporting it with low risk financial grants will incubate wide and deep pools of intellectual capital across the country.

b.???? The Parliament will do well to set up a bi-partisan Standing Committee on Innovation, chaired by the Hon’ble Prime Minister. The committee should have inter-ministerial representation, besides industry and academia to frame India’s innovation master plan and monitor its implementation.

An integrated roadmap harnessing these four critical opportunities will catapult Bharat into a $30 trillion developed economy orbit of $18 thousand per capita income by 2047 – the Amrit Kaal of 100 year of our Independence.