Gradual unlocking of the economy, record vaccinations, improvement in consumer demand, and continued policy support towards industries in the form of Atma Nirbhar Bharat Abhiyan have led to an upturn
The growth of the industrial sector in the first half of 2021-22, was 22.9 per cent vis a vis corresponding period of 2020-21 and is expected to grow by 11.8 per cent in this financial year says Union Minister for Finance and Corporate affairs, Nirmala Sitharaman while tabling the Economic Survey 2021-22 in the Parliament today.
Gradual unlocking of the economy, record vaccinations, improvement in consumer demand, continued policy support towards industries by the Government in the form of Atma Nirbhar Bharat Abhiyan and further reinforcements in 2021-22 have led to an upturn in the performance of the industrial sector.
The Economic Survey says the introduction of the production linked incentive scheme (PLI) to encourage scaling up of industries and major boost provided to infrastructure-both physical as well as digital-combined with continued measures to reduce transaction costs and improve ease of doing business, would support the pace of recovery.
Several initiatives such as National Infrastructure Pipeline (NIP), National Monetization Plan (NMP), amongst others, have been taken to propel the infrastructure investment. The Government has also heralded a major boost to the electronics hardware sector and brought in structural and procedural reform in the telecom sector.
The Index of Industrial Production (IIP) provides data for 23 subgroups of the manufacturing sector. In the period, April-November 2021-22, all the 23 sectors recorded a positive growth. This acceleration in ICI is mainly driven by improved performance in steel, cement, natural gas, coal and electricity.
Measures taken by the Government to put in place an enabling investor friendly FDI Policy has resulted in increased FDI inflows setting up new records. In the year 2021-22, FDI inflows grew by 4 percent in the first six months to reach US $42.86 billion as compared to US $41.37 billion for the same period of last year.
Sector Wise Performance:
Micro Small Medium Enterprise: The relative importance of MSMEs can be gauged by the fact that the share of MSME GVA in total GVA (current prices) for 2019-20 was 33.08 percent. As on 17.01.2022, 66,34,006 enterprises have registered on Udyam Portal out of which 62,79,858 are micro; 3,19,793 are small; and 34,355 are medium enterprises.
Textiles: In the last decade close to Rs. 203,000 crore have been invested in this industry with direct and indirect employment of about 105 million people, a major part of which is women. Despite the industry being deeply affected by the lockdown, it has shown a remarkable recovery with a positive contribution to growth as reflected by IIP, of 3.6 percent during April-October 2020.
Electronics: Government accords high priority to electronics hardware manufacturing. The Government has therefore notified the National Policy on Electronics 2019 (NPE-2019) on 25.02.2019 to position India as a global hub for Electronics System Design and Manufacturing (ESDM) by encouraging and driving capabilities in the country for developing core components, including chip sets.
Recently, the Government has approved an outlay of Rs. 76,000 crore (>US$ 10 Bn) for the development of Semiconductor and Display Manufacturing Ecosystem. Government’s intervention to boost this industry has come at a time when the global economy is facing an acute shortage of semiconductors due to severe disruptions in supply chains.
Pharmaceuticals: The Indian Pharmaceuticals industry ranks 3rd in the world in pharmaceuticals production by volume. India is the largest supplier of generic medicines with a 20 percent share in the global supply making the country the “Pharmacy of the world”.
Sector has seen a sudden spurt in 2020-21 vis a vis the previous year showing a 200 percent increase. The extraordinary growth of foreign investment in pharma sectors is mainly on account of investments to meet Covid-19 related demand for therapeutics and vaccines.
National Infrastructure Pipeline (NIP): The Public Private Partnership Appraisal Committee (PPPAC) which is responsible for the appraisal of PPP projects has cleared 66 projects with a total project cost of Rs 1,37,218 crores from 2014-15 to 2020-21. The government launched viability Gap Funding (VGF) scheme for providing financial assistance to financially unviable but socially/economically desirable PPP projects, up to 20 percent of the project cost is funded under this scheme as a grant.
In order to achieve a GDP of US $5 Trillion by 2024-25, India needs to spend about US $1.4 trillion over these years on infrastructure. Keeping this objective in view, National Infrastructure Pipeline (NIP) was launched with projected infrastructure investment of around 111 lakh crore (US $1.5 Trillion) during 2020-2025 to provide world- class infrastructure across the country. NIP was launched with 6,835 projects, which has expanded to over 9,000 projects covering 34 infrastructure sub-sectors.
National Monetization Pipeline (NMP): A robust asset pipeline, NMP has been prepared to provide a comprehensive view to investors and developers of the investment avenues in Infrastructure. Total indicative value of NMP for core assets of the Central Government has been estimated at Rs. six lakh crore over the 4-year period (5.4 percent of total infrastructure investment envisaged under NIP).
Road Transport: Importance of road infrastructure is widely recognized as a potent means of socio-economic integration and is vital for the economic development of the country. There has been a consistent increase in the construction of National Highways/Roads since 2013-14 with 13,327 kms of roads constructed in 2020-21 as compared to 10,237 kms in 2019-20, indicating an increase of 30.2 percent over the previous year
Railways: In Railways, an average of 1,835 track km per year of new track length has been added through new-line and multi-tracking projects during 2014-2021 as compared to the average of 720 tracks kms per day during 2009-14. Indian Railways (IR) is adopting indigenous new technology such as KAVACH, Vande Bharat trains and redevelopment of stations to have a safe and better journey experience. During FY21, Indian Railways carried 1.23 billion tonnes of freight and 1.25 billion passengers.
Capex has been increased substantially for IR from an average annual CAPEX during 2009-14 of Rs. 45,980 crores to Rs. 2,15,058 crores during 2021-2022 (BE).
Civil Aviation: The domestic traffic in India has more than doubled from around 61 million in 2013-14 to around 137 million in 2019-20, registering a growth of over 14 percent per annum. Government of India took various initiatives to boost the aviation sector which included calibrated opening of the domestic sector as the first wave of the pandemic ebbed, introduction of air transport bubbles or air travel arrangements with specific countries, disinvestment of Air India, privatization and modernization/expansion of airports, boost to the regional connectivity scheme – UDAN, incentivization of maintenance, repair and overhaul (MROs) operations etc.
The Government has liberalized Drone Rules 2021 in August 2021 and released the PLI scheme for drones on 15 September 2021. The policy reforms will therefore catalyze super-normal growth in the upcoming drone sector. The total air cargo tonnage carried in October, 2021 reached 2.88 lakh MT which surpassed the pre Covid level (2.81 lakh MT).
Ports: The capacity of 13 major ports, which was 871.52 million tonnes per annum (MTPA) at the end of March 2014, has increased by 79 percent to 1,560.61 MTPA by the end of March 2021. In July 2021, the Union cabinet approved a scheme providing support of Rs. 1,624 crore to India shipping companies in global tenders floated by Ministries and CPSEs over five years to promote flagging of merchant ships in India.
With an objective of propelling India to the forefront of the Global Maritime Sector, the Maritime India Vision 2030 (MIV 2030), a blueprint to ensure coordinated and accelerated growth of India’s maritime sector in the next decade was released in March 2021. MIV 2030 estimates that development of Indian Ports will drive cost savings of Rs. 6,000-7,000 crore per annum for EXIM clients. MIV 2030 estimates the investment requirement for capacity augmentation and development of world class infrastructure at Indian Ports to the tune of Rs. 1,00,000 – 1,25,000 crore.
Inland Waterways: Regulatory amendment through the Inland Vessels Act, 2021 replaced the over 100 years old Inland Vessels Act, 1917 (1 of 1917) and ushered in a new era in the inland water transport sector.
Telecom: India, world’s second-largest telecommunications market, has a total telephone subscriber base in India that has increased from 933.02 million in March 2014 to 1,200.88 million in March 2021. In March 2021, 45 percent of subscribers were based in rural India and 55 percent in urban areas. Internet penetration in the country is increasing steadily with internet subscribers increasing from 302.33 million in March 2015 to 833.71 million in June 2021.
The number of mobile towers has also increased substantially reaching 6.93 lakhs towers in December 2021, reflecting that the telecom operators have well realized the potential in the sector and seized the opportunity to build up an infrastructure that will be fundamental in boosting the Government’s Digital India campaign.
Under the flagship BharatNet project, as on 27.09.2021, 5.46 lakh km Optical Fiber Cable has been laid, a total of 1.73 lakh Gram Panchayats (GP) have been connected by Optical Fiber Cable (OFC) and 1.59 lakh Gram Panchayats are service ready on OFC.
Government is implementing a Comprehensive Telecom Development Plan (CTDP) for the North-Eastern Region and Comprehensive Telecom Development Plan for Islands to provide mobile connectivity in the uncovered villages and along National Highways in the North-East. A number of measures have been taken to bring about structural and procedural reforms. The reforms are expected to boost 4G proliferation, infuse liquidity and create an enabling environment for investment in 5G networks.
Petroleum, Crude and Natural Gas: Crude oil and condensate production during the year 2020-2021 was 30.49 million metric tonnes (MMT). Natural Gas production during the year 2020-2021 was 28.67 billion cubic meters (BCM) as against production of 31.18 BCM in 2019-20. Crude Oil Processed during the year 2020-21 was 221.77 MMT as against 254.39 MMT in 2019-20 showing achievement of 88.1 percent of the target of 251.66 MMT for 2020-21.
Electricity: The total installed power capacity and captive power plant (industries having demand of 1 MW and above) was 459.15 GW on 31.03.2021 as compared to 446.35 GW on 31.03.2020 registering a growth of 2.87 percent.
Renewable Energy: India has witnessed the fastest rate of growth in renewable energy capacity addition among all large economies, during the last 7.5 years with renewable energy capacity growing by 2.9 times and solar energy expanding by over 18 times. In order to facilitate renewable power evacuation and reshaping the grid for future requirements, the Green Energy Corridor (GEC) projects have been initiated. The second component –Intra-state GEC with a target capacity of 9,700 ckm transmission lines and 22,600 MVA capacity sub-stations is expected to be completed by June 2022.