India Inc. is upbeat about the future of the economy as they expect growth to be driven by strong domestic demand and an increased focus on export markets, says a new survey of manufacturers by global consulting firm PwC and industry body Federation of Indian Chambers of Commerce and Industry (FICCI).
The study found that 74% of the manufacturers hope for a faster growth rate in their respective sectors over the next year, while more than half expect their sector to grow faster by at least 5% in the next 12 months.
The PwC-FICCI report, ‘Manufacturing Barometer’ also said that in the next one year, over 7% growth in the gross domestic product (GDP) looks achievable for the country.
“Key factors driving this confidence include strong public sector-driven infrastructure development, easing out of business and regulatory processes, and opening up of FDI in several sectors, including simplification of FDI rules for large investments,” the report said.
While 66% of the manufacturers said they believed that introduction of the goods and services tax (GST) will help attract foreign and domestic investments across new locations, 80% expect exports to increase in the next five years.
“The industry is expecting faster growth going forward due to government’s focus on ease of doing business and introduction of reforms such as GST. While the domestic market has been the main revenue source, in the future, exports will have a major role in promoting sector growth, both with the component as well as end product trade,” said Bimal Tanna, partner and leader, industrial products, PwC India.
He added that the industry is hopeful that the government will create an ecosystem to make export growth more sustainable. “Further, another positive for the sector is that industry is laying even greater emphasis on technology integration with a renewed focus on R&D (research and development) and innovation,” said Tanna.
The report suggests that to make export growth more sustainable, the industry requires an ecosystem that promotes manufacturing competitiveness and facilitates the production of goods of global quality standards at competitive prices. Stronger economic relations with focus countries in target sectors will enable the development of competitive supply chains beyond Indian borders, it said.
“As global trade has changed significantly in the past few years with new trade routes based on global value chains (GVCs), we need to provide Indian exporters the opportunity to contribute to align with these global value chains. I am sure India can globally lead in exports in a number of sectors like textiles, automotive, chemicals, leather, metals, and many more,” said Puneet Dalmia, chairman, FICCI Manufacturing Committee.
The report also suggests that with India aspiring to become a $5 trillion economy in the next few years, with manufacturing contributing $1 trillion. The backward integration with global value chains and increased use of technology would be required to increase export competitiveness of India’s manufacturing industry.