More bad news for India's manufacturing sector

Exim Bank pointed out that recent performance of the manufacturing sector in India is indicative of an underlying inertia.

The share of manufacturing in India’s gross value added (GVA) declined to 15.1 per cent in 2019-20, compared to 18.4 per cent in 2010-11.

This is despite the strong and growing private consumption demand in the country, said a study published by the Export-Import Bank of India (Exim Bank).

In a webinar on Tuesday, the bank pointed out that recent performance of the manufacturing sector in India is indicative of an underlying inertia.

This weakness has translated into greater dependence on imports to meet the growing domestic demand over the years.

India’s imports reduced by 8 per cent in 2019-20.

As a result, the $152.9-billion trade deficit in FY20 was much lower than $176.4 billion in the previous year.

The latest study titled Self-Reliant India: Approach and Strategic Sectors to Focus, has identified select sectors for import substitution and enhancing domestic production.

These include electronics, defence equipment, machinery, chemicals and allied sectors, pharmaceuticals and certain agricultural products.

Interestingly, the study also included sectors like auto components, and iron and steel where, though India maintains an overall trade surplus, it faces significant trade deficits in crucial sub-categories, particularly from China.

It has also included rare earth elements in the scope, as securing these strategic minerals is important for India to enter high-tech manufacturing.

These sectors account for more than $186 billion of imports by India, with a share of nearly 39 per cent in overall imports and 50 per cent in the non-oil imports.

Photograph: Amit Dave/Reuters