India's $10-trillion economy goal to be led by manufacturing push

India's aim to grow into a $10-trillion economy over the next decade will be fuelled by manufacturing in sunrise sectors such as semiconductors, electronics manufacturing, electric vehicles ecosystem, renewable energy and defence, according to a report by Boston Consulting Group and Matrix Partners.

The report estimates that the market for electronics is about $500 billion while semiconductors will become a $120-billion market by 2030. In the last few years, factors such as favourable government policies and strong domestic demand have already driven global leaders like Foxconn, Dell, Samsung, Micron, Renesas, and Microchip to set up units in India.

Within these sectors, there are immense design opportunities across building graphic processing units and microcontrollers in India owing to its lower cost structure, the report said. There is also significant headroom to localize manufacturing and assembly, enabling complete ecosystem indigenization for semiconductors.

As India progresses towards cleaner sources of energy production, it is undergoing a large-scale electrification of mobility. The report estimates 14 million units per annum of EV sales by 2030, driven by Faster Adoption and Manufacturing of Electric Vehicles in India (FAME) subsidies and the electrification of public transport while investments in solar energy will also be a key driver of renewable energy, with India planning to spend about $140 billion in the next 7 years.

The joint report further highlights the opportunities within manufacturing cells & cell components, design of customized powertrain components for Indian terrain and drive cycles, and the massive export potential in solar cells and green hydrogen electrolysers.

"As India shifts gears to become a major global manufacturing hub, we are excited about what the future holds for the business-to-business (B2B) sector," the authors said in the report. Matrix's managing director Sudipto Sannigrahi in an interview said that the venture capital firm has been a big believer in India's broader B2B journey and they have invested in over 15 companies in the last few years. Among them are Ofbusiness, and Captain Fresh.

Meanwhile, India's defence market that is expected to reach $43 billion by 2030 is another area that has immense potential to design & develop systems and equipment, manufacture and supply components like turbines, and heat exchangers for Tier-1 suppliers, as per the report.

Within these sunrise sectors, startup founders can leverage the gaps by building in industries with large profit pools, focus on sub-sectors where demand will exceed supply for the next 5-10 years and capture sufficient margin of safety to withstand downcycles.

Other sectors such as agriculture, speciality chemicals and railways, which are critical for India’s infrastructure and food resilience, will also contribute to the $10 trillion journey, the report said, adding that there is scope of innovation in developing tech-based solutions for streamlining supply chains and developing full-stack solutions for infrastructure projects.

Overall, B2B and manufacturing-tech sector have seen significant company creation and innovation, with multiple companies going public in the last 3-5 years, the authors said in the report. This sector has accounted for around 56% of the total number of mainboard IPOs in the last 5 years which has been a big value creator for this segment. In recent years, some of the companies that went public include Azad Engineering, Data Patterns, Divgi Torq, IdeaForge, and IndiaMart, among others.