Why in the News?

Manufacturing output grew by 21.5% in 2022-23, but the GVA (Gross value addition) only grew by 7.3%. This is because input costs increased sharply by 24.4%, making production more expensive. As a result, even though industries produced more, their profits and value-added were reduced.

Note: GVA represents the value added by industries, while manufacturing output refers to total production. GVA reflects the economic contribution, factoring in costs like inputs.

What are the current challenges facing the manufacturing sector?

• Input Cost Surge: A significant challenge is the rising input prices, which increased by 24.4% in 2022-23. This surge has created a gap between manufacturing output growth and GVA growth, indicating that while production volumes are increasing, profitability is being squeezed due to higher costs.
• Regional Imbalance: Manufacturing activity is heavily concentrated in a few states—Maharashtra, Gujarat, Tamil Nadu, Karnataka, and Uttar Pradesh—accounting for over 54% of total manufacturing GVA. This concentration limits equitable development across the country.
• Skill Development Needs: There is a pressing need for skill enhancement to meet the demands of evolving manufacturing technologies and processes.

How can digital transformation contribute to the future of manufacturing?

• Adoption of Advanced Technologies: Digital transformation can enhance manufacturing efficiency through automation, data analytics, and IoT (Internet of Things) integration. This can lead to improved productivity and reduced operational costs.
• Supply Chain Optimization: Digital tools can streamline supply chain management, making it more resilient to disruptions and better able to respond to global demand fluctuations.
• Enhanced R&D Capabilities: Investing in digital technologies can foster innovation in product development and advanced manufacturing techniques, positioning India as a leader in high-tech manufacturing sectors.

What strategies can be implemented to stimulate growth in manufacturing? (Way forward)

• Expand PLI Scheme Scope: To further stimulate growth, the PLI scheme should be extended to include labour-intensive sectors such as apparel and furniture, as well as emerging industries like aerospace and space technology. This could unlock new growth opportunities and reduce import dependency.
• Streamline Import Regime: Implementing a simplified three-tier tariff system for imports—0–2.5% for raw materials, 2.5%–5% for intermediates, and 5%–7.5% for finished goods—could help lower input costs and enhance competitiveness.
• Focus on MSMEs: Tailoring PLI incentives for micro, small, and medium enterprises (MSMEs) by lowering capital investment thresholds could empower these businesses to scale up and innovate.

Mains PYQ:

Q  Can the strategy of regional-resource-based manufacturing help in promoting employment in India? (UPSC IAS/2019)

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