Progressive policies of center and states spur investment across manufacturing sectors

India’s policy push to attain self-reliance, the progressive industrial policies of state governments and the global realignment of supply chain are some of the factors contributing to the pick-up in manufacturing investment in India. This article explores the recent policy initiatives of the central and state governments and key private sector investment projects that show early signs of new momentum in manufacturing investment in the country.

Last week, Government of India announced the development of seven PM Mega Integrated Textile Regions and Apparel (PM Mitra) Parks across Uttar Pradesh, Tamil Nadu, Madhya Pradesh, Maharashtra, Telangana, Gujarat and Karnataka. These parks, once implemented, will boost India’s textile exports, which currently stand around USD 40 billion, to around USD 100 billion by 2030.

The central government plans to provide Development Capital Support of Rs. 500 crore for every park, besides incentive support of Rs. 300 crore for units in these parks. The progressive role of state government will also determine the success of this project as they have to allocate adequate land, assured power connection, water supply and other infrastructure facilities.

Electronics is a major focus sector in the self-reliance strategy. The central government aims to expand domestic manufacturing by almost four times to Rs. 24 lakh crore by 2025-26. The aim of this initiative is to reduce import dependence for electronics as currently India imports Rs. 5.4 trillion worth of electronic goods as against domestic production of more than Rs. 6.5 trillion. Such a targeted production expansion is set to create more than 10 lakh jobs, according to government estimate.

In a major breakthrough to our self-reliance ambition, Taiwan’s electronic manufacturer has identified the Dholera Special Investment Region in Gujarat to set up a seminconduct and display production unit jointly with Vedanta. This investment of USD 19.5 billion is said to be the largest corporate investment in the history of Independent India and it will also be the first semiconductor manufacturing project by the private sector in the country.

On March 6, 2023, Taiwain’s electronics giant Foxconn Technology Co. Ltd. entered into an agreement with Telangana government to invest an undisclosed amount for manufacturing electronic goods in the state. According to the Government of Telangana, this is said to be the largest investment in electronics sector in India with the potential to employ 1 lakh people.

In the consumer electronics segment, Andhra Pradesh received Rs. 250 crore investment from electronics major Elista for setting up a manufacturing plant for LED monitors and television sets. The plant is expected to be ready by early 2024.

Apart from mega projects, India received Rs. 4,784 crore worth of investments under the PLI scheme for Large-Scale Electronics Manufacturing (LSEM) till September 2022, thereby generating Rs. 80,769 crore

worth of exports and 40,916 jobs. Building on the initial success of the PLI scheme, Government of India is reportedly planning to announce PLI scheme for premium smartphone components.

In other niche electronic areas, drone manufacturing is gaining momentum with the government’s thrust on import substitution and domestic manufacturing of unmanned aerial vehicles (UAVs). Bangalore-based Flying Wedge Defence and Aerospace invested Rs. 100 crore on a modern plant to manufacturing unmanned aircrafts and drones in Bangalore.

Electric vehicle is a major focus area for manufacturing as India plans to shift towards green vehicles to meet its climate goals. Around 26 states and union territories have announced Electric Vehicle policy to push for climate-friendly vehicles in the last five years.

Recently, Government of Tamil Nadu released Electric Vehicle Policy 2023 to transform itself into a manufacturing hub for these new age vehicles. The policy envisages Rs. 50,000 crore investment in electric vehicles in the next five years.

Ethanol production is another emerging area, which meets the twin goal of increasing farmers’ income and reducing emission from vehicle fuel. Leveraging its premier position in rice production, West Bengal announced Ethanol Production Policy in 2021 so that broken rice can be used for producing ethanol, which is demanded by oil marketing companies for blending with petrol and diesel. Since the introduction of this policy, the state received Rs. 1,860 crore worth of investment proposals from 10 manufacturing units and of which one has already started production.

Other states are also taking proactive steps to attract investment from private companies in the manufacturing, especially in the emerging sectors. Government of Rajasthan released Rajasthan Investment Promotion Scheme (RIPS) 2022, under which incentives are provided for eight setors, including start-ups, MSMEs, renewable energy plants and sunrise sectors. On March 18, 2023, the state approved customised packages for five investment projects worth nearly Rs. 7,000 crore across cement, hospitality, chemicals and auto-components.

Government of Madhya Pradesh, in its budget for FY24, announced to develop world-class skill parks in Rewa, Jabalpur, Gwalior and Rewa, besides establishment of 22 MSME clusters, multi-modal logistics park, medical devices park and Indore-Pithampur economic corridor.

Thus, the proactive industrial policies of various state governments, combined with the self-reliance initiative of the central government have spurred a renewed investment momentum in the manufacturing.