Global manufacturing and trade is shifting rapidly toward innovation-driven, medium-high- and high-tech products. It is driven by advanced research and development (R&D), technological sophistication, high skills and a complex network of supply chains. In addition, there are the current high tariffs introduced by the United States. It is likely to redefine the manufacturing sector. Irrespective of whether there are tariffs or not, the fundamentals need to be set right. This demands policies that address challenges squarely.
India has a challenge at hand. Realising the criticality of manufacturing in the economy, the country has been making consistent efforts since the economic reforms in 1991 together with renewed efforts using flagship programmes such as the National Manufacturing Competitiveness Programme (NMCP) in 2005 and Make in India in 2014. Multiple initiatives have provided impetus to the electronics, pharmaceuticals and automobile sectors.
A close examination of basic indicators such as per capita value added in manufacturing and productivity provide useful pointers. For India, in 2023, the per capita value added has been $0.32 K (K: 1000) and productivity stands at $8.9 K, while the same figures are $2 K and $32 K, respectively, for the world average, which are significantly high in comparison, as in World Bank data on manufacturing. The total value added for India stands at $461 billion, while that for China is $4,658 billion and the U.S. is $2,497 billion. On productivity linked to R&D and innovation, developed economies lead significantly ($159 K for the U.S., $103 K for Germany); Asian countries such as Taiwan ($79 K), Malaysia ($36 K), and China ($21 K) have moved ahead. Thus, it requires raising per capita value addition to expand and focus on enhancing productivity to be competitive.
New approach to technical education
The world over, manufacturing has leveraged R&D, skill development, and progressive university education. In India, engineering educational institutions have played an important role. Still, in response to emerging needs, there is a need to institute changes to advance innovation. There is a need to look at basic features such as how students are selected for admission, which laboratories and workshops are set up in departments, and which skills for medium- and high-tech manufacturing processes are imparted.
It should begin with the entrance examination. There is a need to move beyond the notion of how tough an entrance examination is. It should encourage interest in fundamental knowledge, creativity and problem-solving skills. During graduation, an over-reliance on heavy academic inputs, a culture of notes, and a focus on the 10-point grade take up most of the time and the energy of students, which should be also spent on creative problem solving. At the end of graduation, they are good at solving problems quickly that have defined contours or proven concepts. But there is also the need for an ability to visualise bigger engineering problems and undertake innovation, which demand higher-order thinking and research skills. The focus should be on the application of science and technology in solving industry problems. There should be more weightage (50%) given to practical work. This demands the development of advanced laboratories and workshops, which include tool rooms to impart skills for different manufacturing processes and product design and development. Assembly lines for select products should be set up for R&D.
Building core engineering
Semiconductor, information technology (IT), and artificial intelligence (AI) are of strategic importance. These are needed on the top of engineering systems. However, let us not get bogged down with AI and IT. These are imperative, but engineering is much bigger. Core engineering is a must. We need strong engineering skills in core streams such as civil, mechanical, automobile, production, electrical, electronics, chemical, metallurgy, textiles, and biotechnology.
There is a need in the country to have robust engineering units to build equipment and machinery first and then a focus on technical and management capabilities to develop a variety of products, infrastructure, and transportation systems at a much higher speed for different terrain – the plains, mountains, deserts, and oceans. It will necessitate big engineering and R&D infrastructure with a sophisticated supply chain.
Ecosystem for innovation
The success of the Silicon Valley in the U.S. is attributed to the innovation ecosystem, marked by high-skilled manpower and R&D infrastructure. Many East Asian countries have benefited from policies for the creation of an innovation system and industrial infrastructure. If one looks at the success of startups in the country, it is due to the existing ecosystem, mainly in the service sector. Similarly, an industrial ecosystem needs to be created for manufacturing, which will need more capital and entail a multi-pronged systemic approach.
State-specific manufacturing parks should be set up with state-of-the-art facilities to plug and play, or quick ways to set up new units. For developing prototypes, in-house capabilities should be created within parks. The facilities for design software, measurement instruments, performance testing and product certification should be provided. Engineering institutes should focus on enhancing R&D and aligning the curriculum with skill development and innovation. Manufacturing startups should be encouraged around engineering infrastructure and labs.
To transform manufacturing, the strategy should include, first, developing advanced research labs and, second, building industrial infrastructure. This will call for raising R&D expenditure from current 0.65% of GDP to 2%, besides additional expenditure of 1% of GDP for industrial infrastructure. Finally, it necessitates a sound policy system to design innovative policies in an evolving global environment.
D.N. Gupta is a former IAS officer and currently Adjunct Professor, National Institute of Advanced Studies (NIAS), Bengaluru. The views expressed are personal
Published – May 12, 2025 12:08 am IST