India's Manufacturing seeing success across Industries!

What’s the Point?

India’s manufacturing and goods exports journey is making rapid strides across sectors such as automobiles, pharmaceuticals, and electronics manufacturing. Periodic new announcements, investments and breakthroughs show our growing prowess in high tech and high precision manufacturing, along with the world gaining greater confidence in India’s manufacturing capabilities and friendly environment. India’s Manufacturing sector is expected to grow from 15% of the economy to 20% by 2030, propelling growth expectations in this segment. Growing consumption, investments, exports and emergence of India as a manufacturing powerhouse makes Indian Manufacturing a compelling multi-decadal investment opportunity.

Some Recent Manufacturing Success Stories

• Pharma Sector: 27 new Greenfield Bulk Drug Park projects and 13 Greenfield Manufacturing Plants for Medical Devices under the PLI Scheme were inaugurated over the last week, as per a release by PIB.

• While India has excelled in formulations, there has been import dependence for certain critical bulk drugs, due to cost considerations and shift of the industry towards the more profitable formulations business. A PLI scheme with an outlay of ₹6,940 crore incentivising production of these bulk drugs was implemented and has already seen investments worth ₹3,651 crore.
• India is amongst world’s fastest emerging Medical Device market – one of India’s sunrise sectors – with exports from the sector growing steadily at a CAGR of around 14% since FY2020. India’s medical device market in India, currently estimated to be at $11 billion, is expected to exceed $30 billion by 2050. The sector had low competitiveness due to lack of adequate infrastructure, domestic supply chain and logistics, high cost of finance, limited design capabilities, low focus on research and development (R&D) etc. Thus, a PLI Scheme towards this sector with an outlay of ₹3,420 crore was announced and is seeing success.

• Electric Vehicles: India’s new EV policy is a potential success, with brands such as Jaguar Land Rover agreeing to set up local manufacturing for these cars.

• The JLR plant could be set up with investment of $1 billion, reflecting heavy investments in this space.
• This would be the first group to use a new policy that allows limited import of vehicles above a certain value at a lower customs duty, if they agree to set up local manufacturing of these cars within a span of 3 years.
• Separately, Macquarie group launched a $1.5 billion fund towards India EV financing, with a focus on electrifying fleets of commercial vehicles. This could further accelerate EV adoption in India.

• Toy Manufacturing: India’s toy industry made rapid strides between FY2015 and FY2023 with exports increasing by 239% and imports declining by 52%, resulting in the country turning into a net exporter. A mandatory requirement of the Bureau of Indian Standards (BIS) approval for the sale of toys in India, protectionism, China-Plus-One strategy and an increase in import duty have led to a boom in India's toy industry.

• Going forward, more global toy makers are considering India as a manufacturing base. According to reports, while some global brands like Hasbro, Mattel, Spin Master, and Early Learning Centre already depend on India for manufacturing and sourcing, major manufacturers like Italian major Dream Plast, Microplast, and Incas are gradually shifting focus to India from China.
• As per IMARC$, this industry valued at $1.7 billion in India in 2023, could rise 2.5 times to $4.4 billion by 2032.

• iPhone Manufacturing seeing increasing localisation: India has gradually become a significant portion of Apple’s iPhone supply chain, accounting for 14% of its production. As per reports, this could move to 25% over the next few years.

• While Tata group had acquired the India operations of Winston in 2023, there are reports that another acquisition is under discussion. With this, they could control ~33% of Indian manufacturing of iPhones.
• Additionally, reports suggest that the Micron plant in Sanand in Gujarat could be providing chips to iPhones in India and the world. This could be a milestone for India’s semiconductor mission.

Conclusion

India needs Manufacturing to ensure economic growth in its Amrit Kaal, provide employment to the world’s largest workforce, and ensure macroeconomic stability. Consequently, an improvement in the manufacturing sector bodes well for India’s economy. It is equally noteworthy that the universe is broad and diversified providing investment opportunities across the economic landscape.   

*excluding Diversified FMCG and Personal Products. Source: Capitaline, AMFI, Bloomberg. Data as of February 29, 2024. Above list is for illustration purpose only.

To capture this opportunity, one could consider our NFO, HDFC Manufacturing Fund, that aims to invest at least 80% of its net assets in the manufacturing theme. The Fund shall have diversified exposure to companies that: (1) are engaged in manufacturing activity, (2) may benefit from Government’s Make-in-India initiatives, (3) are positioned to substitute India’s imports by manufacturing locally, (4) export goods manufactured in India and have the potential to increase employment in India. Visit www.hdfcfund.com or the product page to know more.

[NFO Period of HDFC Manufacturing Fund: April 26, 2024 to May 10, 2024] Sources: PIB, UBS Research, CMIE and other publicly available information ($International Market Analysis Research and Consulting)

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