India is the 9th fastest-growing nation in the world, with a GDP growth rate of 7.4% in 2015, according to the IMF World Economic Outlook (April 2016). Manufacturing is at the heart of India’s economic activity, providing a powerful multiplier effect. Manufacturing production processes increase the demand for raw materials, energy, and construction, as well as for services, from a broad array of supplying industries, leading to a healthy growth in output and employment creation. In fact, as per the Government of India’s National Manufacturing Policy 2011, ‘Every job created in manufacturing has a multiplier effect of 2-3X additional jobs in related activities.’
Manufacturing is thus rightfully at the center of the Prime Minister’s vision for the ‘Make in India’ campaign. For the target to increase the contribution of manufacturing to GDP from the current 16% to 25% by 2025 to translate into reality, the Indian manufacturing sector will have to grow by at least 12.7% year on year. In 2015-16, the manufacturing sector grew by 9.3%, while in 2014-15, the annual growth rate was 5.5%. Achieving this high growth trajectory (12.7%+ annual growth rate) will entail an integral blend of policy interventions and firm-level actions targeted at maximizing local value-add, creating scale, capturing global market share, and fulfilling India’s job creation needs.
‘Make in India’ has brought about a significant shift towards local value-addition, sustainable innovation and ease of doing business. It also aims at increasing federal and State alignment for coherent policy-making, and to position India as a global manufacturing hub.In line with this evolution, CII believes that it is time for the next phase of ‘Make in India’ or ‘Make in India 2.0.’
The CII Manufacturing Council has been working on an initiative to strategically identify specific ‘Champion Industries’ which have the potential to be number 1 or 2 globally over the next decade, and contribute to significant job creation.
CII initially identified a list of manufacturing sectors that contribute majorly to manufacturing GDP, such as aerospace and defence, auto and auto components, cement, chemicals, engineering, ESDM, pharmaceuticals, steel and textiles. Within these broad sectors, CII has identified 156 sub-sectors that comprise the universe of all major sub-sectors within these sectors. The commercial and strategic attractiveness of each of these identified 156 sub-sectors was analyzed across multiple relevant factors. Commercial attractiveness includes factors such as market attractiveness, competitive landscape, supply chain ecosystem, ease of doing business, favorable infrastructure, and human resource capital. Strategic attractiveness includes factors such as industry eco-system development.
On the basis of these factors, a detailed and extensive comparative analysis was undertaken to identify 26 leading ‘champion’ industries. The industries selected are: aircraft components, auto-electricals and electronics, automotive batteries, heavy commercial vehicles, passenger cars, two and three wheelers, cement, agro intermediates, agro chemicals, basic polymers and elastomers, construction chemicals, other performance chemicals, valves and pumps, construction machinery, machine tools, pressure vessels, solar photo voltaic cells, lighting (conventional and LED), mobile phones, printed circuit boards (PCB and PCB A), bulk drugs, pharma APIs, generic pharmaceuticals, flats, forgings and castings and longs.
For each of these industries, sectoral committees of CII have identified key interventions that would help give a fillip to that particular industry. Widespread consultations were held at each step to ensure accurate articulation of the recommendations. Common themes were identified that positively impact all of manufacturing, as well as the targeted sectors.
CII believes that championing manufacturing in India entails targeted interventions aimed at unleashing the basic building blocks of manufacturing such as cost, technology, manpower and a policy regime which, in turn, would support the drivers for championing manufacturing by assisting in building global scale and market share, platform innovation, brand, and sustenance. Using this framework, CII has identified key policy interventions at the overall manufacturing level, sector level and industry level. If pursued, these interventions will trigger significant industry actions translating to the creation of these champion industries, growth in output (from the current average sales growth of 8-10% to 15- 20%), employment generation (from the current levels of 0-5% to 5-10%) and increase in India’s share of global manufacturing exports (from 1.6% currently to 3-4%) in the next 10 years.
Complementing the ‘CII Champions of Manufacturing’ initiative at the industry level, is another initiative, the CII Recipe of Excellence, which applies at the individual firm level. This is an online tool developed by analyzing the performance of 32,000 companies. It benchmarks competitiveness and excellence across six key corporate functions – marketing, operations, supply chain, human resources and leadership, research development and technology, and environment sustainability and governance, to help identify a company’s weakest set of links. Based on this analysis, individual companies can take assistance from the various CII Centers of Excellence to close their specific performance gaps. This process can help companies become more competitive and enable them to transition from good to great.
The CII Manufacturing Council is in the process of sensitizing various stakeholders in Government, and has met with senior officials from the NITI Aayog, Ministry of Finance, Department of Commerce, Department of Industrial Policy and Promotion, Department of Heavy Industries, Ministry of Steel, and Ministry of Electronic and Information Technology. All the officials have been very supportive of the initiative. After obtaining an broad buy-in from the Government, the intent is to have an apex-level Government-industry forum, to monitor the execution of these interventions, and measure the results that are expected.
Anant J Talaulicar
Chairman, CII Manufacturing Council, and
Chairman and MD, Cummins Group India