Manufacturing Export To Reach USD 1 Trillion By FY2028

India is expected to scale up its manufacturing exports to USD 1 trillion by fiscal year 2027-28 amid favourable trends in manufacturing and growth in priority sectors, said Bain & Company in a report titled, ‘The Trillion-Dollar Manufacturing Exports Opportunity for India’.

The six sectors driving export growth will be chemicals, auto, electronics, pharmaceuticals, textiles and industrial machinery.

According to Bain and Capital, in order to capitalise on this opportunity, Indian companies need to focus on having a clear export strategy, the right execution chops, the right partnerships for enabling exports, and an optimal capital expenditure (capex) efficiency focus to build manufacturing capacity.

With growing interest in electric vehicles, the automotive sector will see electric vehicles and components contributing up to USD 5 billion to this export growth.

According to the report, India’s export growth has been propelled by six megatrends that got fast-tracked during the last two years. These include supply chain diversification, advantages for India in certain manufacturing sectors, government initiatives to bolster manufacturing in the country, capital expenditure infusion into manufacturing sectors, heightened merger and acquisition (M&A) activity, and private equity and venture capital-led investment in manufacturing.

The Trillion Dollar Opportunity

Despite being the sixth-largest economy in the world and contributing 3.1 per cent to the world GDP, India’s export contribution to global trade is only 1.6 per cent. In contrast, China’s contribution to global trade is 15 per cent, while that of the US stands at 8.3 per cent, Germany at 7.9 per cent, Japan at 3.7 per cent and UK at 2.3 per cent.

However, India’s manufacturing exports for FY21–22 reached an unprecedented USD 418 billion, an overall growth of more than 40 per cent compared to the USD 290 billion from the previous year and the pre-pandemic peak of USD 328 billion in FY18–19.

While manufacturing exports have traditionally grown between 5 per cent and 10 per cent pre-pandemic, the sharp rise in exports last year — particularly the past few months — is attributable to the significant increase in share of manufacturing in the country’s exports.

Six megatrends shaping India’s Manufacturing Sector

Supply chain diversification

The report said that post-pandemic diversification of the global supply chain had a positive impact on the growth of India’s exports. While big Asian economies like Japan began looking towards India as an alternative to China for sourcing their requirements, American companies considered India among the top four destinations for relocation of operations.

Sectoral advantages

In chemicals, Indian manufacturers are consistently building on India’s cost advantage and strong supplier base, as compared to other manufacturing hubs, as well as strengths in research and development (R&D) capabilities. In pharmaceuticals, India’s manufacturing cost is about 30 per cent–35 per cent lower than that of the US and Europe.

In the automotive sector, several global companies are looking at export-oriented production in India because of the cost advantage over the US and Europe and strong manufacturing capabilities.

In electronics, manufacturers like Samsung, Wistron, and Foxconn are shifting production to India because of strong manufacturing and R&D capabilities, a growing supplier base, and strong policy support.

In industrial machinery, India is becoming a destination for exports thanks to low manufacturing costs and strong capabilities in technology.

In textiles, India has the cost advantage because of the availability of cheap raw materials and lower wages.