The Prime Minister has envisioned India as a developed nation by 2047. NITI Aayog recently circulated a paper that envisaged India’s GDP in 2047 at $30 trillion from $3.6 trillion today. Further, our manufacturing sector has been stagnant at 13-17 per cent of GDP for over four decades. If we were to do some back-of-the-envelope calculations, the share of the manufacturing sector must grow from 13 per cent to a minimum of 20 per cent or preferably 25 per cent by 2047. That would make its contribution from $0.5 trillion today to $6-7.5 trillion in 2047, of which the capital goods (CG) sector would necessarily have to contribute $1.1-1.5 trillion from $75 billion to enable this output.
We, therefore, have to transform our CG sector, where government plays the role of an enabler through proactive policy-making, industry creates world-class globally competitive products steeped in technology and quality, along with the initial R&D taking place in our institutes of higher learning.
While each arm is taking concrete steps in tandem with one another, we will have to fast forward them synergistically by at least a factor of 10. We have the capability, the drive, the demographics and a strong industrial base. We must have the ambition.
In addition, we are in a sweet-spot geopolitically. As the world re-globalises and national security and industrial policy become meshed together to counter the uncertainty of the previous global system due to unanticipated geopolitical shocks, along with the weaponisation of energy and strategic commodities by certain countries, we are seen as a friendly country by most.
We, therefore, have further opportunity to create national champions in the CG sector, as is being done through the PLI schemes, to encourage domestic value addition and employment generation while integrating ourselves with global supply chains.
Some suggestions
The following seven-point agenda, in which the government, industry and academia have an enormous role to play, could have an exponential impact on the process of transformation of the CG sector.
Invest massively in R&D to innovate: This will form the foundation for the success of industrial development. R&D, which often remains in the laboratories, must be converted into commercial outcomes. India’s investment in R&D is only 0.7 per cent of GDP compared to 2.5 per cent of the developed world, which is what we should target. Of this, industry contribution must go up from 37 per cent to 60 per cent.
But as always, there is some good news. Under the Scheme for Enhancement of Competitiveness of the CG sector, the Ministry of Heavy Industry (MHI) is nurturing collaboration between industry and academia yielding remarkable results.
This should be scaled up 10x and taken to lesser known institutions around the country.
Innovation, domestic value addition, job creation will grow phenomenally as a result of a strong R&D.
Build a solid logistics and port infrastructure: The PM Gati Shakti Scheme for multi-modal connectivity is possibly one of its kind in the world. By 2030, it is expected that logistics cost will be reduced from an average of 13 per cent to 8-9 per cent and further to 6-7 per cent, which will make logistics globally competitive.
Focus on skill development and education: The existing workforce has to be re-skilled and up-skilled to remain relevant, while the new workforce needs appropriate education and vocational training. We have jobs and we have people. But most often we are not able to match them, which is counter-intuitive for the young demographics that we are blessed with.
To address this imbalance, the MHI, it is understood, has sanctioned over 50 qualification packages for the CG sector alone. Together, the three arms — the government, industry and academia — must massively scale up this effort with a sense of urgency by a factor of at least 100.
Build environmental sustainability and testing facilities: India must position itself as a responsible and sustainable contributor to global trade. This will not only align us with our own high expectations of ourselves, but also open up opportunities in countries or regions (the EU, for example) that will prioritise products with a low carbon footprint.
Also, it is required to ensure, especially for MSMEs, access to facilities for product testing, performance evaluation and validation of new technologies to meet required standards, and certification and performance criteria before commercialisation. Collaborations with national laboratories (CSIR, NPL, etc) that have huge facilities could be a solution.
Push digital transformation: Industry 4.0 emphasises the integration of digital technology into manufacturing processes. This will not only improve efficiency, but also enhance the CG sector’s capacity for innovation and adaption to changing market demands. ‘Samarth Udyog’, the MHI’s 4.0 initiative could possibly be expanded further through a special scheme for MSMEs through a cluster-based approach.
Encourage trade facilitation and export promotion: Tariff rationalisation, trade agreements and diplomatic efforts will have to go hand-in-hand. We should identify 10 specific countries to promote capital goods. Industry must have the confidence that its technology and quality will be the basis of our competitiveness.
Encourage global collaborations: We can still continue to benefit from JVs, technology transfers and collaborative research, until we genuinely begin “Creating in India”. Fostering exchange of knowledge should always be encouraged in our endeavour to be positioned as global player in the CG market.
The aforementioned steps will lead to attracting significant foreign and domestic investment both in the core and, more importantly, in emerging ecosystems of hydrogen, biofuels, renewables, etc.
These strategic measures will enable us carve out a competitive position for ourselves domestically and in the global CG market.
The writer is Chairman, CII National Forum on Industry-Academia Partnership, and former MD and CEO, Ashok Leyland and JCB India