India can Double Manufacturing GDP: McKinsey Report

According to McKinsey, the manufacturing sector could become an engine for economic growth and jobs if it can specialise. India has a potential of US$ 300 billion opportunity and could double its manufacturing gross domestic product (GDP) in the next few years if it can improve the effectiveness of value chains.

In a few years, 11 high-potential value chains have the potential to double their GDP in production, Mr. Rajat Dhawan and Mr. Suvojoy Sengupta estimate.

In the manufacturing industry, most companies and industries have not produced strong returns on investment, he noted.

The report argued that in the current pandemic situation, there could be inherent advantages the nation could take. And while it may look like a disadvantage, in the long run, this could also be a unique advantage, particularly given the disruption of the global value chains. The natural resources and low-cost labour of India could spruce up production value chains if well managed.

McKinsey data demonstrates that about 700 leading companies produced yields that were even lower than their 2028 operating cost. “Between 2016 and 2019, the sectors that generated stronger returns saw increases in invested capital,” the report said.

The large number of well-trained workers in the country are lending strength to skill-intensive value chains such as pharmaceutical formulations, capital goods, and automotive components.

And several India’s value chains in manufacturing operate close to strong domestic markets. For example, manufacturers of fast-selling technology products enjoy ready access to millions of Indian customers,” the report said.

In order to support the development of India’s manufacturing value chains, the report established three priorities: increasing efficiency, securing know-how and technology, and analysing capital.

Source: IBEF