Which are the fastest growing manufacturing segments? How have private players and the government invested in their growth? How can FM aspire to grow alongside them? Here are all the answers.
A continuous change in consumption trends and the opening of newer markets for e-commerce has made agility a requisite for businesses; they need to scale up operations at short notice when necessary and scale down when numbers indicate their strategy needs reconsideration.
Third-party logistics (3PL) providers enable this agility, moving SKUs within a network of warehouses that is both widening and densifying. The National Logistics Policy and Gati Shakti scheme are driving investments in this sector, which have increased by over 40% in the past two years.
At the end of FY23, India should have 412 million sq ft across types of warehouses; the relative lack of high-quality warehouses foretells potential growth in this segment. Occupiers prefer Grade A properties, which accounted for 58% transactions of warehouse leases in 2023. This year alone, over 51 million sq ft of warehouse stock was picked up by the market, across the four metropolitan cities and Bengaluru, Pune, Hyderabad and Ahmedabad.
E-commerce reached its peak during the peak of the pandemic; while demand has now rationalised, it has by no means plateaued, and is only growing. As penetration reaches smaller towns and even villages, warehousing is one sector that will be geography- and climate-agnostic in its growth.
This presents numerous opportunities to FM. Warehouses are already using automation, AI and ML to pick and move products. Rooftop solar power and energy-efficient and cost-efficient LEDs for illumination will become must-haves rather than good-to-haves.
A subset of this segment is cold chain storage. According to FSSAI, one-third of all food is wasted or gets spoiled before it is eaten, and lack of refrigeration is one of the major causes. Since such clients need to invest in power generation/backup and cooling, they tend to opt for leases as long as 10-20 years – music to the years of the FM industry. Electronics
Two years ago, Apple manufactured just 1% of its iPhones in India; this year, the figure rose to 7%. By the end of FY23, one should expect a further, drastic rise.
Why? Because from November onwards, India’s Directorate General of Foreign Trade’s (DGFT) restrictions on importing seven items, including laptops, tablets and personal computers, will kick in. This will have a dual effect of incentivising indigenous manufacturers to scale up production, and compel global brands to set up or ramp up manufacturing units in India.
For many years, Indian electronics units assembled rather than manufactured products. The next step for Indian firms is to increase manufacturing capacity to capture higher value segments of the electronics value chain. The central government wants IT hardware manufacturers in India to achieve a localisation of approximately 80% in value addition for the production of computers and other IT hardware within the coming years.
The budget for this sector’s PLI scheme was recently increased to ₹170 billion – more than double the initial budget that was approved two years ago.
India is the world’s second-largest manufacturer of mobile phones; over 200 units have been established in just the past few years. However, many critical components of cell phones still need to be imported. But not for long.
The government has launched initiatives like the the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and the Programme for Development of Semiconductors and Display Manufacturing Ecosystem in India, providing capital incentives to the value and supply chain of semiconductor manufacturing, which has the potential to further substantially promote domestic manufacturing of mobile phones in India.
Under the EMC Scheme, the Central government will provide financial assistance to state governments for setting up of Electronics Manufacturing Clusters (EMCs) and Common Facility Centres (CFCs) across the country. These EMCs are expected to provide a package of best-in-class services to investors who plan to set up their manufacturing facilities within the country. 23 EMCs and three CFCs are being set up across India in sub-segments such as mobile phones, printed circuit board (PCB), consumer electronics, medical electronics, solar cells and modules, electronic components and automotive electronics.
Pharma & biopharma
Among all manufacturing segments, this one has shown the most uninterrupted, reliable growth. Over the past five years, the Indian pharmaceutical industry has logged a CAGR of 6-8%, driven by an 8% increase in exports and a 6% rise in the domestic market. It is expected to grow at 7-8% in FY25, supported by a 6-7% growth in exports and an 8-9% growth in the domestic market.
The largest number of FDA-approved pharma plants outside the US are in India, which is also one of the biggest suppliers of low-cost vaccines to the world. The Union Cabinet has recently approved the National Medical Devices Policy, and allowed up to 100% FDI through automatic route for greenfield pharmaceuticals projects.
Generic drugs account for 20% of the global export in terms of volume, making India the largest provider of generic medicines globally. The government has set a target to increase the number of Pradhan Mantri Bhartiya Jan Aushadhi Kendras (PMBJKs) to 10,500 by the end of March 2025; their list of products includes 1,451 drugs and 240 surgical instruments. The tilt towards generic medicines will catapult this sector into the next phase of intense growth.
The Automotive Mission Plan 2016-26 is a mutual initiative by the Government of India and the Indian automotive industry to lay down the roadmap for the development of the industry. India aims to double the size of its auto industry to ₹15 lakh crores by the end of FY24; correspondingly, over the past twenty-something years, FDI inflow to this sector has amounted to $33.77 billion.
By 2030, the Indian government has committed that 30% of all new vehicle sales in India would be electric, making it the largest market for EVs in the world. Over the next three years alone, EV manufacturing will grow at a CAGR of 36%; annual sales are expected to hit 10 million units at the end of this decade.
The Indian automotive industry is in the midst of increasing its export of vehicles by five times between 2016-26. The trucking market is expected to grow over 4x by 2050.
Intense cleaning and clean room maintenance are just some of the tasks for FM in this sector.
India is expected to become a $850-1,000 billion chemicals market by 2040, growing at 9-10% annually. Exports are projected to grow at a CAGR of 9.5-10% to $140-145 billion by the same point.
The fastest-growing segment among the three main segments of the chemical sector – inorganic, petrochemicals and specialty – the net exports of specialty chemicals are expected to rise around ten times, from about $2 billion in 2021 to $21 billion. Almost 80% of the exports in the segment will come from four sub-segments: agrochemicals, dyes and pigments, cosmetics and personal care and food ingredient chemicals. The rise in demand from end-user industries such as food processing, personal care and home care is driving development of different segments in India’s specialty chemicals market.