What are some of the challenges faced by the manufacturing industry in India and what notable the solutions to them?

By Mr Kiran Rudrappa

Manufacturing is pivotal to India’s economic development, contributing approximately 17% to the GDP and driving growth by creating employment in various sectors, reducing reliance on agriculture, and enhancing exports. Recognizing its importance, the Indian government has launched initiatives like “Make in India” to transform the country into a global manufacturing hub. These initiatives focus on attracting foreign investments, simplifying trade regulations, and encouraging innovation.

Challenges Facing the Indian Manufacturing Sector:

Despite its potential, the manufacturing sector in India faces several significant challenges:

• Skill Gap: There is a noticeable disconnect between the skills imparted by educational institutions and those required in the industry, leading to a workforce that is only sometimes deployable. The education system often fails to bridge the gap between theoretical knowledge and the necessary practical skills, creating a bottleneck. Industrial jobs are often stereotyped jobs that offer limited career growth and lower wages that discourage young people from pursuing a career in the industry.
• Perception of Manufacturing Jobs: Often perceived as offering limited career progression and low wages, manufacturing jobs are less attractive to the youth.
• Regulatory Complexities: India’s complex regulations and licensing processes hinder business flexibility and investment decisions. Onerous regulations and bureaucratic processes deter investment and complicate business operations.
• Supply Chain Disruptions: Global events such as pandemics and political upheavals can disrupt supply chains, underscoring the need for strong inventory management and diversified supplier networks. Global events such as pandemics or political instability can disrupt supply chains and cause shortages of raw materials and components
• Limited R&D Investment: Inadequate focus on research and development hampers technological advancement and innovation, limiting competitiveness on the global stage. Limited investment in research and development limits innovation and technological advancement in Indian manufacturing. Compared to developed countries, India lags in RandD, which hampers the ability of domestic manufacturers to compete globally and adapt to emerging technological trends

Strategies for Enhancing the Manufacturing Sector

Several strategic measures are being implemented to overcome these challenges and stimulate growth:

• Enhancing Skills Development: Targeted training programs are being developed to bridge the gap between academic education and industry-specific skills, thus improving workforce readiness. Government and industry work together to create a future landscape, address current skills gaps, and prepare graduates for future challenges. Skills development programs are crucial to boosting business innovation and productivity, global competitiveness, and economic growth.
• Simplifying Regulations: The government is streamlining processes to ease the bureaucratic burden, thereby facilitating business operations and enhancing transparency and efficiency. Rules also aim to simplify to facilitate doing business, reduce bureaucratic barriers, and increase transparency and efficiency. It encourages investment and entrepreneurship, creating the basis for sustainable economic growth and innovation in the industry. Faster approvals and online processes offer multiple benefits to manufacturing facilities, such as speeding up the implementation of projects, reducing costs, improving operational flexibility, and attracting investment.
• Promoting Digital Transformation: The adoption of advanced technologies like artificial intelligence, automation, and data analytics is revolutionizing manufacturing processes, boosting productivity, and enabling access to new markets. Advanced technologies such as automation, artificial intelligence, and data analytics are increasingly used throughout the manufacturing value chain, revolutionizing processes and opening up new growth opportunities. Digital transformation is enabling Indian manufacturers to increase productivity, improve quality, and exploit new market opportunities.
• Upgrading Infrastructure: Investments are being made to improve transport networks, power supply, and logistics, which are essential for efficient movement of goods and overall productivity. This improves the movement of goods in the country and increases overall productivity. Skill development initiatives are needed to improve employability and promote human capital development in the country.
• Encouraging R&D Investments: Increased funding and incentives for research and development are being promoted to foster innovation, enhance product quality, and maintain a competitive edge globally.

These initiatives reflect India’s commitment to revitalizing its manufacturing sector and securing its position as a global manufacturing leader. Through innovative policies and collaborative efforts, India is poised to achieve sustainable growth and economic prosperity, benefitting from increased job creation, enhanced exports, and technological advancements across industries.

(the author is Mr Kiran Rudrappa, CEO and Co-founder of Posspole, and the views expressed in this article are his own)