India is well placed to gain from the redrawing of global supply chains, but high business costs, a shortage of mid-sized firms and difficulty in acquiring land are holding back a broader industrial transformation, S Mahendra Dev, chairman of the Economic Advisory Council to the Prime Minister (EAC-PM), said on Thursday.
“India is already benefiting from the shift in global production,” Dev said, speaking at an event organised by the Institute for Studies in Industrial Development (ISID).
Dev said changes in global supply chains, driven by tariffs and geopolitical developments, presented an opportunity for India as companies sought to diversify production towards large, stable and trusted partners.
“Companies that once relied on a single location are (now) diversified. So they are looking for partners that are large, stable and trusted. So this is also an opportunity for India because of the crisis; one can make use of it,” he said.
He pointed out that in just one year, India’s share of smartphones shipped to the United States rose from about one in eight to more than four in ten. Electronics exports have grown more than eightfold in a decade and are now among the country’s top three merchandise exports. “These successes show that Indian manufacturers can compete and win at the global frontier,” he said.
However, Dev cautioned that greater access to international markets alone would not guarantee export orders.
“Market access by itself does not win orders. Global buyers go to production systems that offer scale, competitive cost and consistent quality,” he said.
Noting that services were growing faster than manufacturing, Dev said India’s manufacturing sector was not stagnant, although its share in value added may have remained unchanged.
The cost of doing business, including power, logistics, input duties and compliance, is an area that requires improvement, in his view. “Every reduction here makes Indian firms more competitive across industries,” he said.
“India has millions of enterprises and our task is to help the best of them become medium and large firms,” Dev said. On what he called the “missing middle”, he said India has firms with 10 to 20 workers at one end and large firms at the other. “We don’t have middle firms like China and others where we have 500 to 1,000 employees in industries.”
Dev also flagged the growing capital and skill intensity of manufacturing as a challenge for employment generation. However, calling MSMEs “the backbone of Indian industry,” he noted that labour-intensive industries, including textiles, apparel, footwear, leather, toys and food processing, continued to offer opportunities for job creation.
On the constraints facing industrialisation, Dev said land availability was among the major challenges identified by industrialists.
“Some of the industrialists told me it is not the labour reforms, but the land availability is one of the big constraints for industrialization in India,” he said.
The EAC-PM chairman also identified agro-based manufacturing as a source of non-farm jobs in the countryside.
Outlining a three-pronged industrial strategy, Dev called for strengthening competitiveness across all firms, supporting both employment-generating and technologically advanced industries, and working through states, districts and industrial clusters.
He noted that support should be provided to both job-creating industries, such as textiles and food processing, and frontier industries, such as semiconductors and clean technologies.
“Support should be well designed, linked to clear goals and reviewed regularly. So that public resources achieve the greatest impact,” he added.
He reckoned that sustained reforms and closer cooperation between the Centre, states and industry could help India emerge as one of the world’s important manufacturing nations.
