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The current push being given by India to the development of logistics infrastructure would serve as a strong foundation for the world’s fifth-largest economy’s target of increasing its share in manufacturing, a leading infrastructure sector analyst has said.
“[Here] we are talking about logistics as a bedrock that will support the government’s ambitions to increase the share of the manufacturing sector in the economy. You will be building for the domestic market, but you are also aiming to export to the global world. The key tailwind here is supply chain diversification,” Rahul Kapoor, global head of commodity analytics & research for maritime, trade & supply chain at S&P Global Market Intelligence, told Business Today in an interview.
Singapore-based Kapoor said that though this move towards diversification was already underway for the past few years, the Covid-19 pandemic helped accelerate it. And India stands to benefit since the shifting geopolitical environment had forced global manufacturing giants to seek alternative production sites.
Kapoor may have hit the nail on the head as two events stand out in this regard. The first was the launch of the Aatmanirbhar Bharat Abhiyaan (self-reliant India programme) in May 2020 during the first wave of the Covid-19 pandemic, which was followed by the announcement of the Production Linked Incentive (PLI) scheme for sectors ranging from electronics, renewables to drones. The other is the decision of global manufacturers such as Apple, Samsung and Boeing to move part of their production from China to India in view of the uncertainty caused by the former’s zero-Covid policy and its ongoing trade and technology war with the US.
He opined that as India continued developing policy initiatives such as the National Logistics Policy and Gati Shakti as well as enhancing the pace of infrastructure development such as the expansion of its inland waterways and road and highway network, this was only bound to gain traction.
“You are talking about containers being transported through rail transport, increasing port capacity, etc. All these are in bits and pieces and also, because we have a low base, the growth there is stronger. And with all of these coming together is the recipe for success in terms of getting to the government’s targets. Now, whether it takes a few years or is further out, it is the right path to take,” he declared.
The smartphone template: a model to emulate
Kapoor has highlighted some emerging themes in a chapter co-authored with Chris Rogers, the head of supply chain research at S&P Global Market Intelligence, in a recent study released by the data, analytics and research firm titled, Look Forward: India’s Moment.
Noting the incremental rise in smartphone manufacturing in the country, the authors write, “India’s policy interventions in the smartphone sector illustrate its ambitions for manufacturing as a conduit to service the domestic market as well as its geopolitical aims. Smartphones are among the most sophisticated manufactured products, and their ubiquity makes them a logical target for any country looking to extend its economic development.”
For instance, India’s export industry for telecom equipment, including smartphones, touched $11.8 billion in the 12 months to March 31, 2023, data from S&P Global Market Intelligence and Panjiva shows.
Kapoor, therefore, feels that the notable success achieved in smartphone manufacturing may well prove to be a template for not only achieving scale but also surmounting complex hurdles in other manufacturing segments for the country.
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