India over the last two decades has been the fastest growing economy in the world growing at an average of 6% to 7%.
India offers an ideal destination for investment for companies looking to manufacture for the domestic and export market. In the post Covid-19 scenario, India offers a one stop shop for companies that are planning to relocate or diversify manufacturing operations. The Government of India has recently revised its policies for electronics manufacturing and introduced schemes with attractive incentives while the State Governments have taken proactive measures to improve the ease of doing business scenario to make setting up of manufacturing units a seamless process.
Indian appliance and consumer electronics (ACE) market reached Rs 76,400 crore (US$ 10.93 billion) in 2019. Appliances and consumer electronics industry is expected to double to reach Rs 1.48 lakh crore (US$ 21.18 billion) by 2025.Electronics hardware production in the country increased from Rs 1.90 trillion (US$ 31.13 billion) in FY14 to Rs 4.58 trillion (US$ 65.53 billion) in FY19. Demand for electronics hardware in India is expected to reach US$ 400 billion by FY24. The National Policy (DNP) targets production of one billion mobile handsets by 2025. Indian aims to become a US$ 400 Bn market by 2025.
Aerospace and Defence:
India’s aerospace and defence sector continues to move forward with significant changes in policy measures being introduced in the FY 2020. The automatic route for approval for FDI (foreign direct investment) in aerospace and defence sector has been raised from 49% to 74% giving investors better control over management, processes and quality. Several reforms for the growth of defence exports have been taken. Defence exports have grown from INR 1,521 Cr in FY 17 to 10,745 Cr in FY 19. The MoD (Ministry of Defence) has set itself a target of achieving 35000 Cr, by FY 24. Institutionalising, streamlining and simplifying defence procurement procedures to boost Make in India initiative and promotion of indigenous design, development & manufacturing of defence equipment, platforms, systems and sub-systems are some of the new policy initiatives set in motion by the MoD (Ministry of Defence). Corporatization of the Ordinance Factory Board, Defence corridors and tax incentives are expected to boost private participation. India plans to spend $130 bn on military modernization in the next 5 years, as achieving self- reliance in defence production is a key target for the Government of India.
The Indian automobile industry is the fourth largest in the world with an annual turnover of $US 100 Bn and employs around 32 million people. The two-wheeler industry in India is the largest in the world. India is also the largest tractor manufacturer and the eighth largest commercial vehicles manufacturer in the world.
The automobile sector currently contributes about 50 per cent of the manufacturing gross domestic product (GDP) in India, 26 per cent of the industry GDP and 7.1 per cent of overall GDP. The total investment in this sector is around $40 billion in the last decade. The decade of 2001-2010 saw a compounded annual sales growth of 15.67 per cent, which included 10 per cent exports. The yearly growth of exports was 23 per cent from 2000 to 2015 due to constant government support. 100% FDI is allowed in the auto components and automobile manufacturing sector
The automobile industry includes two-wheeler, four-wheeler, passenger vehicle and commercial vehicles. In 2018-19, 4.06 million cars were manufactured and at present around 32 million cars run on Indian streets. The two-wheeler segment dominates the industry with a share of 80 percent.
Medical Devices :
The current market size of the medical devices industry in India is estimated to be $11 bn. Diagnostic imaging, consumables, and other medical devices form 86% of total export trade for Indian medical devices industry in FY 2016-17. India is among the top-20 markets for medical devices in the world. India is the 4th largest market for medical devices in Asia. 100% FDI is allowed Under automatic route for investment in the medical devices sector. U.S., Germany, China, Japan, and Singapore constitute the five largest exporters of high technology medical equipment to India.
India’s medical devices industry is poised for significant growth in the next five years:
- The Market size expected to reach $ 50 bn by 2025.
- Orthopaedic prosthetics and patient aids segments to be the two fastest-growing verticals by 2020 and are projected to grow at a CAGR of 9.6% and 8.8%, respectively
- Diagnostic imaging, dental products, and consumables are expected to grow at a CAGR of 7.1%, 7.4% & 7.1%, respectively during 2015-20
Warehousing sector has witnessed a boom in the last decade and with increase in e-commerce business, this sector is bound to grow leaps and bounds. The total warehousing space estimated to be 68 million sq m (739 million sq ft) in 2019 for the manufacturing sector which is projected to grow at a compounded annual growth rate (CAGR) of 5% in the next five years to 86 million sq m (922 million sq ft) by 2024.Total requirement of storage space in the Indian manufacturing sector accounts for 80% of the warehousing market today.
- Warehousing sector has witnessed a boom in the last decade and with increase in e-commerce business, this sector is bound to grow leaps and bounds. The total warehousing space estimated to be 68 million sq m (739 million sq ft) in 2019 for the manufacturing sector which is projected to grow at a compounded annual growth rate (CAGR) of 5% in the next five years to 86 million sq m (922 million sq ft) by 2024.Total requirement of storage space in the Indian manufacturing sector accounts for 80% of the warehousing market today.
- The warehousing industry has witnessed massive participation from institutional investors, as well as developers, who have collectively invested over USD 6.8 billion since 2014, with an average investment per deal of USD 282 million.
- Private Equity funds had a 49% share of the total investments into the warehousing industry. This was followed by sovereign & pension fund at 31% and 20% of the pie belonged to the developers.
- 83% of the investments in warehousing assets went into new developments where as 10% went into ready assets and 7% into a combination of ready and under construction assets.
The investment committed by institutional investors alone, is estimated to create over 15 million sq m (158 million sq ft) of new warehousing space over the next few years.
Destination Andhra Pradesh
Andhra Pradesh is the 8th largest state situated on southeastern coast of India. The geography of the young state in-itself offers a strategic location for manufacturers as it has the 2nd longest coastline (974 km) and is the natural gateway to East and Southeast Asia. This is further complimented by the various initiatives taken by the Government of Andhra Pradesh to promote indigenous manufacturing such as Investor friendly policies, lucrative incentives, speedy single window fast-track approval processes, reliable infrastructure and cordial industry relations. All of these have been meticulously designed to address the needs and to attract Industries, generate local employment and improve imports/exports.
The state is very well connected internally and to other parts of the country through an extensive network of road and railways. There are 6 ports with 250 MMT existing capacity and 5 domestic & 1 international airports (functional) connecting Andhra Pradesh to the world. Andhra Pradesh is planning to add 8 ports & 7 no-frills airports to further improve the connectivity. In addition to this, the state also prides in its infrastructure as it offers 24X7 power supply and 24X7 water supply for industries and Optical fiber connectivity across the state.
The pro-active government envisions to be amongst the top 3 states in India by 2020 in areas including Industries, Infrastructure and Skill development. The state is leaving no stone unturned and as a biproduct have been ranked 1st for Ease of doing Business in India for the 4th consecutive year. Additionally, the state has three planned industrial corridors running through which will create a network of industrial hubs and is projected to create a GDP of USD 161.5 bn by 2035 and create 14 mn employment opportunities by 2045.
Today, Andhra Pradesh is the home to a large number of leading industrial houses across sectors i.e., Aerospace, Defence, Electronics, Automotive, IT, Textile, Energy and Pharma. In order to support these industries and create a growth environment for them, the state has devised industry specific incentives to cater to specific needs of the sector.
Incentives & Policies
Manufacturing sector in India is grossly inadequate in comparison to the demand for it. The major disabilities that bogs down this segment are
- High cost of power and finance
- High transactional costs
- Poor base of supply-chain.
To overcome this impediment and reckoning the fact of increasing gap between the demand and supply, the Government of India and State Governments are giving huge impetus on Make in India. Following are some of the highlights of the policies initiated by the government to establish manufacturing zones.
Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) helps to strengthen the electronics manufacturing ecosystem. The scheme will provide financial incentive of 25% on capital expenditure. The capital expenditure will be a total of expenditure in plant, machinery, equipment, associated utilities and technology, including for Research & Development (R&D). The Scheme will be applicable to investments in new units and expansion of capacity/ modernization and diversification of existing units. Application under the Scheme can be made by any entity registered in India. The Scheme is open for applications initially for 3 years from the date of its notification.
Production Linked Incentive Scheme (PLI) is for Large Scale Electronics Manufacturing investments in mobile phone manufacturing and specified electronic components, including Assembly, Testing, Marking and Packaging (ATMP) units. The scheme shall extend an incentive of 4% to 6% on incremental sales (over base year) of goods manufactured in India and covered under target segments, to eligible companies, for a period of five (5) years subsequent to the base year as defined.
Electronics Hardware Policy
This policy was notified on 9th September, 2014, by Government of Andhra Pradesh to enable companies to set up, sustain, function and grow operations in an investment-friendly, proactive, conducive and hassle free environment in the State. Under this policy Andhra Government has tried to fill the infrastructural gap by providing uninterrupted power, water and good connectivity. The other incentives provided under this policy are — subsidy on power, investment subsidy, grants on new employments & recruitment assistance, subsidy on implementation of green initiatives, tax incentives, etc.
Aerospace & Defence Manufacturing Policy
This policy was notified on 23rd July, 2015, by the Government of Andhra Pradesh. The Policy encompasses a holistic package of incentives which includes capital subsidy, fiscal incentives, transportation subsidy and aiding marketing, patenting, quality certification and Research & Development. The GoAP further provides special incentives on case-to-case basis for projects with more than 500 crore investment.