Coordinated efforts from the government, private sector, academia, R&D institutions, and financial stakeholders are essential for India to achieve its goal of becoming a manufacturing powerhouse amid an uncertain global environment, the Economic Survey 2024-25 stated on Friday.
It also called for a "vigorous" focus on deregulation, appropriate skilling and employment strategies, and targeted support for smaller enterprises to enhance the competitiveness of Indian industry and prepare it to withstand global challenges.
Slowing global trade and aggressive policies from major economies have affected manufacturing and private sector investment.
"In a rather unsupportive global environment, it calls for lasting, synchronised efforts from all tiers of government, the private sector, the skilling ecosystem, academia and R&D institutions, as well as financial stakeholders to enable India to realise its ambition as a manufacturing powerhouse," the survey noted.
This suggestion holds particular significance as China rises as a global manufacturing hub, and its impact on the manufacturing aspirations of other nations, as well as the supply of minerals, materials, machinery, and equipment needed for energy transition, pose challenges.
"Amidst this, India is in the midst of a change that represents an unprecedented economic challenge and opportunity," it said.
The survey stressed that China is a dominant force in areas such as energy transition ecosystems, having gained a strategic advantage by leveraging its competitiveness and economic policy to access and control key resources recognised today as critical for global supply chains.
Hinting at India's dependence on China in certain sectors, the survey stated that India sources 75 per cent of lithium-ion batteries from China and has near negligible production capacity for key components such as polysilicon, ingots, and wafers.
The world is dependent on China for energy transition efforts.
Indeed, India has ambitious goals for energy transition despite being one of the lowest per capita emitters of greenhouse gases.
"Dependence on China-made goods to achieve that transition enhances the complexity of the challenge for India," the survey said, adding that China is a dominant force in the global manufacturing and energy transition ecosystems.
It has gained a strategic advantage by leveraging its competitiveness and economic policy to access and control key resources recognised today as critical for global supply chains.
"The effects of the rise of China as a manufacturing colossus are seen in automobile (especially electric vehicles) manufacturing, mining and refining capacity for critical minerals (Copper, Lithium, Nickel, Cobalt, Graphite, etc.), and in clean energy equipment," it said.
To support domestic industry in boosting manufacturing, the Survey suggested that the government accelerate and amplify the deregulation agenda.
"Additionally, every state in the country can learn from the best practices of other states in different areas so that all progress in unison," it said, adding that there is a need to focus on industrial strategies appropriate to unique geographies, such as the North East.
Four states—Gujarat, Maharashtra, Karnataka, and Tamil Nadu—account for about 43 per cent of the total industrial GSVA (Gross State Value Added). In contrast, six states of the Northeast (excluding Sikkim and Assam) account for only 0.7 per cent of industrial GVA.
Further, it stressed that states must focus on business reforms as a priority to achieve buoyancy in some industrial or service sectors where they have natural advantages.
"States should make it easier for businesses to commence operations, grow, and even close if deemed inevitable by the entrepreneur," it added.
On research and development, the Survey noted that in India, not only is industrial R&D low, but it is also sectorally concentrated.
Drugs and pharmaceuticals led the way, followed by information technology, transportation, defence, and biotechnology. Public sector R&D is primarily driven by the defence industry, followed by the fuels and metallurgical sectors.
Commenting on the survey, Sanjiv Malhotra, Senior Advisor at Shardul Amarchand Mangaldas & Co, said it identifies capacity building and institution building as the need of the hour, requiring government, private sector, and academia to work closely.
Rumki Majumdar, Economist at Deloitte, stated that the services industry has been a key driver of growth, while India’s exports, despite global challenges, have expanded into new and diverse markets.
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