Page 70 - Nuvama | IC Report 2023

• MANUFACTURING • NEW ENERGY • URBANISATION • CONSUMPTION PREMIUMISATION • EQUITY SAVINGS CULT

Manufacturing: Taking wings, finally?

Since the turn of the millennium, India’s economic pie has expanded rather well and per capita income
The shift in has shot up. Even so, India’s track record in manufacturing pales in contrast to Asian peers such as
India’s workforce China and Korea. These Asian peers have creditably lifted millions out of poverty led by huge job
from agriculture has creation in manufacturing—a quintessential industrial revolution. In India’s case though, a large part of
occurred towards the shift in workforce from agriculture has occurred towards construction and services—not so much
construction and towards manufacturing.
services—not so
much towards Services can surely help, but if India wants to reduce poverty meaningfully over the course of this
manufacturing decade or so, the manufacturing must expand. Why so? This is because India needs to migrate large,
cheap and unskilled labour from low-productivity sectors such as agriculture to higher productivity
segments, much like what was achieved in Asian countries such as China and Korea. These countries
have realised rapid productivity gains and sustained reduction in poverty. India can surely rely on
low-end services, but manufacturing is a must given the scale of its young and unskilled labour. It is
relatively easy to build productivity and scale in the manufacturing than services as the former is far
more globally tradable than services.
Herein China’s evolution from a largely agrarian society to a global manufacturing powerhouse
China’s is instructive. The country’s transformation over the last 30 years stands on its manufacturing-
transformation infrastructure nexus. Both developed hand in hand. In other words, China’s manufacturing edifice
over last 30 was built on both hardware (infrastructure) and software (enabling incentives and conducive policy
years stands on
manufacturing- environment). Does India stand a chance to invent or replicate such a hardware-software nexus?
infrastructure nexus

Exhibit 1:
Hardware- Manufacturing The reboot underway
software nexus Cementing infrastructure Renaissance
of India’s
manufacturing Hardware Software

National Infrastructure Pipeline PLI,, e,g.. electronics
Digital infrastructure De-globalisation/China + 1
Revamping railways Defence security
Source: Nuvama Research
Hardware (infrastructure): NIP is ready

India’s poor track record in manufacturing is largely attributable to its weak infrastructure and logistics.
Moving an item from warehouse to ports takes on average 7–10 days versus less than a day each in

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