India could be sitting on a $300-billion opportunity and could actually double its manufacturing gross domestic product (GDP) in the next few years if it can unlock the potential of value chains, according to McKinsey, which recently said in a report that the manufacturing sector could become an engine for economic growth and jobs if it can specialise.
Eleven high-potential value chains could more than double its manufacturing GDP in a few years, the report by Rajat Dhawan and Suvojoy Sengupta said.India could be sitting on a $300-billion opportunity and could actually double its manufacturing gross domestic product (GDP) in the next few years if it can unlock the potential of value chains, according to McKinsey, which recently said in a report that the manufacturing sector could become an engine for economic growth and jobs if it can specialise.#
Most companies and sectors in the manufacturing industry have not delivered strong returns on invested capital, it noted.
The report argued that there could be inherent advantages the country could take in the current pandemic scenario. And while it may look as a disadvantage, this might as well be a unique advantage in the long run, especially given the disruption of the global value chains. India’s natural resources and low cost labour could spruce up manufacturing value chains if managed well.
McKinsey analysis showed that about 700 top manufacturers generated returns that were even less than their cost of capital of 2028. “By contrast, the sectors that generated healthier returns saw increases in invested capital during the four years from 2016 to 2019,” the report said.
“The country’s large numbers of well-trained workers lend strength to skill-intensive value chains such as pharmaceutical formulations, capital goods, and automotive components. And many manufacturing value chains in India operate in close proximity to strong domestic markets. The makers of fast-selling technology products, for example, enjoy ready access to millions of Indian consumers,” the report said.
The report identified three priorities for supporting the growth of India’s manufacturing value chains: raising productivity, securing know-how and technology and assessing capital.
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