According to a report by Bain and Company, India’s manufacturing exports are expected to touch US$ 1 trillion by FY 2028 driven by production capacity expansion, government policy support, heightened M&A activity and investments.
According to the report titled “The Trillion-Dollar Manufacturing Exports Opportunity for India,” the growth would primarily be driven by chemicals, pharmaceuticals, textile, and electronics industries, which have been scaling up and expanding into new export markets.
India’s manufacturing exports stood at US$ 418 billion in FY22, rising at a compounded annual growth rate (CAGR) of more than 15% over the last two years.
According to the Bain analysis, the key sectors that are driving growth and will enable India to achieve USD 1 trillion in exports by FY28 include chemicals (USD 110-130B), Electrical & electronics (USD 120-145B), textiles & apparel (USD 95-110B), automotive (USD 45-55B), pharmaceuticals (USD 45-50B) and Industrial machinery (USD 70-75B).
The electronics sector is poised to witness the highest CAGR of 35-40% till FY28, followed by Chemical at 19-23% and Industrial Machinery at 18%- 20% CAGR. Automotive is another key sector and is expected to grow at 15%–18% CAGR to reach USD 45 billion–USD 55 billion by FY28.
With growing interest in EVs, the automotive sector will see electric vehicles and components contributing up to USD 5 billion to this export growth.
Despite possible recessionary and inflationary pressure, fundamentals for India’s manufacturing sector remain strong. The mega-trends will continue to play out during the course of this decade which will accelerate India’s manufacturing-led exports, said Deepak Jain, partner at Bain and Company and co-author of the report.
The manufacturing sector is also witnessing an increased inflow of Capex and heightened M&A activity, leading to a surge in manufacturing output and resultant increased contribution to exports. PE/VC-led investments are also having a cascading effect giving a boost to manufacturing-led exports. Last year, 18% of the total PE/VC investments were seen in the manufacturing sector, with the majority of them in the pharmaceuticals, and chemicals subsectors.
Industrial production grows at a year-high of 19.6%
Meanwhile, India’s index of industrial production (IIP) grew at 19.6% in May 2022 which is the highest in a year driven by strong performance in manufacturing, power and mining sectors.
According to the data released by the Ministry of Statistics and Programme Implementation (MoSPI), manufacturing sector witnessed a growth of 20.6% in May 2022, while the mining sector grew by 10.9% in May 2022, the power sector experienced a growth of 23.5% in May 2022 compared to 7.5% in May 2021.
The primary goods segment, which accounts for approximately 34% of the index, increased by 17.7% in May 2022 compared to 15.8% in May 2021. According to MoSPI, the growth rates over the corresponding period of previous year are to be interpreted considering the unusual circumstances on account of Covid-19 pandemic since March 2020.
