Strong logistics infrastructure has to be the fuel for manufacturing growth in India

By V Kalyana Rama

In September 2014, the newly elected government announced a significant step towards making India a global superpower – Make in India campaign. The idea behind this program is to create a favourable environment for manufacturing in India and encourage companies in India and abroad to set up manufacturing processes in the country.

This has the potential to boost the economy significantly; however, it needs much work to be done in several aspects of the economy and industries. In the past four years, the government also has taken several steps to improve ease of doing business in the country with an aim to make the environment more conducive for manufacturing.

Indian Manufacturing Sector – Past to Present
If we talk about the manufacturing sector in the last 25-30 years, the industry grew at an average growth of 7% in the nineties and subsequently at 7.4% in the first decade of 2000s. The global slowdown in 2008-09 caused the growth of Indian manufacturing to moderate due to reduced exports, Eurozone crisis, moderation in domestic demand, rising inputs costs etc.

However, the sector showed swift recovery from the global slowdown towards the end of the last decade. Today, India has become the fourth fastest growing economy in the world with an expected growth rate of 7.2% in the current fiscal year owing to rising exports and increasing government spending, as per the latest edition of Global Economic Prospects by the World Bank.

India, however, is ranked 30th on a global manufacturing Index by the World Economic Forum (WEF) earlier this year which is much below its competitor countries like China and Thailand. Human capital and sustainable energy have been listed as the two critical challenges for the country while it had also stated that India needs to continue to raise capabilities of its relatively young and fast-growing labour force.

Improving the logistics infrastructure and providing cost effective and efficient logistics is also an important aspect in achieving the desired growth in the manufacturing sector in this ambitious ‘Make in India’ program.

The ‘Make in India’ campaign has been a significant step towards making India the manufacturing hub of the world and has had a substantial impact on the overall economy. In the last 4 years, since the launch of the initiative, it has received a good response and has seen several large global brands coming forward to express support.

Future of Manufacturing in India
While the sector is looking at fast growth in the near future, the support system for the sector – logistics infrastructure, also needs to be strengthened alongside. A robust supply chain infrastructure is a crucial requirement for growth in the manufacturing sector, and as a country, we need to concentrate on improving overall efficiency in the sector while trying to accelerate demand for logistics services. An improved supply chain infrastructure will directly result in improvement of ease of doing business, which will in-turn make India a lucrative market for manufacturing.

An Ecosystem for Manufacturers to Focus on Manufacturing 
Development of Integrated Logistics and Manufacturing Zones (ILMZs) are a perfect model which allows manufacturers and logistics players to co-exist and complement each other’s business without geographical factors that challenge smooth collaboration. CONCOR, for instance, has announced the development of an ILMZ spread over 1,000 acres in Andhra Pradesh. Aspects like rail and road connectivity will be planned and will be implemented so that the entire operation can function seamlessly. Such a model will allow manufacturers and logistics companies to work closely allowing manufacturers to concentrate on their core operations of manufacturing and bringing efficiencies in that while experts in that field handle the entire logistics.

As India gears up for the next phase of manufacturing growth, there is a definite requirement to explore newer models and ways that allow a collaborative business environment, enabling businesses to grow. Industries in India will be able to rapidly prosper when they can complement each other’s’ operations and function in a synchronised manner, which can become India’s answer to becoming a global manufacturing hub.

Source: Economic Times

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