The manufacturing sector has been firing on all cylinders in recent months. After clocking 13.9 per cent output growth in July-September 2023, it was a robust 10.4 per cent in October 2023. businessline spoke with new FICCI President Anish Shah, who is also Group CEO of the Mahindra Group and Managing Director of M&M, to better understand the manufacturing resurgence in the country. Excerpts:
Do you see the recent strong Q2 manufacturing performance of 13.9 per cent output growthsustaining?
If you look at the goals for Vikshit Bharat, it is an ambitious set of goals; it is very heartening to see this kind of ambition. If we have to get to a $30 trillion economy by 2047, manufacturing will have to play a significant role. Manufacturing will in fact have to grow faster than the rest of the economy because our manufacturing percentage as GDP is lower than what it should be. I expect it to continue to sustain its growth over time and expect manufacturing to grow faster than the rest of the economy.
What will drive manufacturing to grow faster?
There are two things that are happening. First is the China-plus one factor. There are a number of companies around the world that are looking at creating supply chains in India. That’s going to be a key factor of growth for the country.
Second, a number of Indian manufacturers are starting to create world-class products. For instance, in the auto industry, several manufacturers are beating global players with world class products. Those are products we will make in India and take it to rest of the world.
Do you think India can become a manufacturing hub for the world?
Yes. Absolutely. India will become the manufacturing hub for the world which is going to drive the manufacturing sector to grow faster.
When do you see this happening ?
The momentum is very strong now. A number of things that are required to happen such as infrastructure, ease of doing business is happening. And there is a lot of activity around digital and physical infrastructure which are being built today. As the world looks at India in terms of China-plus one, I am optimistic that it will happen in the next five years.
What kind of manufacturing growth do you envision in coming years?
If we want to take our manufacturing share in GDP from 16 per cent to 25 per cent by 2047, our manufacturing has to grow 15x. That is the kind of growth that we will have to see in manufacturing in coming years. With the momentum we are seeing, we are well on track to make it happen.
So are new capacities coming in, if so in which sectors?
There are sectors that are putting the capacities. For instance, in auto sector we (M&M) are doubling SUV capacity. We have almost completed it and in te next three months we will be there. There are other sectors (hotels, electronics) also where capacity expansions and new capacities are coming.
How do you see the private capex story unfolding? Current economic growth seems to be mainly due to government led Capex boost.
We are starting to see private capex boost in some sectors like in automobiles. Our sense is that other sectors will start investing more as well. As the economy grows at a faster pace, we are seeing challenges emerging globally. There is a lot of demand in hospitality especially for hotels. At our Club Mahindra (Mahindra Holidays) business, we are looking to triple capacity. We want to get to 300 resorts from the 100 now.
Sometimes there is a little bit of lag effect. But with the demand creation and growth we are seeing in the economy, I do see us being able to invest at higher pace as well.
If we were to look at the medium term, I would expect the private sector to make a comeback in a meaningful way, as I see the demand being strong, and the economy progressing at a good pace.
How is Indian industry faring on R&D?
We need more R&D. Certain sectors are doing it. We have created XUV700, Scorpio and Thar in India. They are beating everyone in the world. We are doing that with R&D in India.
R&D is an important element where industry has to do well. Industry has to put in R&D to create world class products to be able to win in India and then win around the world as well.
Indian players are beating overseas players with much lower R&D spend. That is not to say that our R&D is less than what others have done. It is better than what others have done. Take an example of ISRO; it has delivered lot more with a much lower R&D spend than what others have done.
How do you see India’s FDI story playing out?
Today India has become the destination for the world in terms of private equity funds and pension funds. In solar or renewable energy sector, creating an InvIT (infrastructure investment trust) is a great way to get capital. In Mahindra, we are setting up an InvIT and have applied for it. A number of global investors are coming into it. It’s the innovation that is taking place in India from a capital structure standpoint like InvITs and REITs. It is performance of companies in India, demand generated here that is creating FDI (Foreign DIrect Investment) opportunities in India and supply chain diversification opportunities.
How do you see the EV story playing out in India?
By 2027, we (M&M) should get 30 per cent EV penetration. By 2030, we hope to make a million EVs for India and for the world (Mahindra SUVs).
Inflexion point for industry is going to be when charging time comes down. At 30-45 minutes, it will still be not fast enough to charge cars. For the industry to take off, this has to come down to ten minutes.