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NEW DELHI: Driven by production capacity expansion, government policy support, heightened M&A activity and investments, India's manufacturing exports are set to touch the $1 trillion mark by 2028, as per a report by Bain and Company.
The growth will largely be driven by chemicals, pharmaceuticals, textile and electronics industry which have been scaling up and expanding into new export markets, said the report titled ‘The Trillion-Dollar Manufacturing Exports Opportunity for India’.
India’s manufacturing exports stood at $418 billion in FY22, rising at a compounded annual growth rate (CAGR) of more than 15% over the last two years.
Accordingly to a Bain analysis, key industries driving growth include chemicals ($110-130 billion), electricals & electronics ($120-145 billion), textiles & apparel ($95-110 billion), automotive ($45-55 billion), pharmaceuticals ($45-50 billion) and industrial machinery ($70-75B).
Electronics exports are expected to record a CAGR of 35-40% till FY28, followed by chemicals at 19-23%, and industrial machinery at 18%- 20%.
Automotive exports are likely expand at a CAGR of 15-18% to reach $45 billion–$55 billion by FY28. With growing interest in electronic vehicles, the automotive industry will see electric vehicles and components contributing up to $5 billion to this export growth.
"The positive developments in the manufacturing sector, driven by production capacity expansion, government policy support, heightened M&A activity, and PE/VC-led investment, are creating a robust pipeline for the country’s sustained economic growth in the years to come." said Deepak Jain, partner, Bain and Company and co-author of the report.
“Despite possible recessionary and inflationary pressure, fundamentals for India’s manufacturing sector remain strong. The mega-trends will continue to play out during the course of this decade which will accelerate India’s manufacturing-led exports," Jain said.
Propelled by favourable megatrends in manufacturing, India is expected to scale up its manufacturing across the priority sectors. The country is on the cusp of structural shifts in manufacturing, enabled by a post pandemic global focus on supply chain diversification and complemented by the government’s robust policy initiatives like new free trade agreements, production-linked incentive (PLI) schemes to encourage local manufacturing, and fresh investments pouring into core industrial sectors.
The manufacturing sector has been witnessing increased capex inflows and heightened M&A activity leading to a surge in manufacturing output and resultant increased contribution to exports.
Private equity and venture capital funds-led investments have had a cascading effect, providing a boost to manufacturing exports. Last year, 18% of the total PE/VC investments were seen in the manufacturing sector, with the majority of them coming from pharmaceuticals, and chemicals.
“India’s $1trillion manufacturing exports will be driven by growth in the priority sectors over the course of this decade. Chemicals, auto, electronics, pharma, textiles & industrial machinery will lead the growth due to their readiness in terms of export potential and will contribute 50-60% share of manufacturing exports. This will be followed by metals & minerals, food and transportation," said Sushil Pasricha, expert partner, Bain & Company and co-author of the report.
