By Kulin Lalbhai, Vice Chairman, Arvind Limited
The rise of the Indian economy to the No. 4 position globally is a testament to the efforts and commitment of our policy makers, our vibrant and innovative companies and our workforce.
As a USD 4 trillion economy, we are on track to overtaking Germany next and becoming the worldโs third largest economy. Thereafter, the challenges are colossal. The US and China, the worldโs top two economies, are worth a staggering USD 30 trillion and USD 19 trillion, respectively.
How are we going to get anywhere close to these dizzying heights?
We need to manufacture and build at scale.
The growth momentum is with us. Indiaโs manufacturing levels showed a marked increase for the first time in almost a year this April, with the Purchasing Managers’ Index (PMI) at 58.2. India also recorded its second fastest upturn in exports since March 2011, with increased demand from Africa, Asia, Europe, the Middle East, and the Americas.
The government has always recognized the importance of economic growth and is lending support through policy and outlays. The PLI Scheme and the recently announced Rs 1-trillion Research, Development and Innovation (RDI) Fund are significant steps.
Beyond this, we will need a few things to fall in place.
Building large scale manufacturing will need a lot of capital. While our domestic capital formation needs to be 30%-plus to allow for a strong capex cycle, India will also need to attract FDI. The current levels of FDI are below 2% of GDP. They need to be doubled. With the world looking to diversify supply chains we have a once in a lifetime opportunity to convince the largest companies in the world to make in India.
India will also need to dramatically increase its share of global trade which is at a low 2%. While new trade agreements like the recently signed UK FTA will help us scale up, Indian companies need to become a lot more competitive. India needs to heavily lean into investing in automation and new technologies to build efficient manufacturing at scale.
Another critical aspect will be to position India well in the sectors of tomorrow. Renewables, electric mobility, robotics, drones and AI will take up greater market share of the global economy. The enablers to win here will be R&D and human capital.
The textile sector also offers great possibilities for India. Global supply chains are being upended and India is a sourcing destination of high interest for major brands. Exports along with a large domestic economy could make textiles a USD 300 billion sector by 2030.
To achieve this we will have to scale up last-mile garmenting. The task is Herculean. We will need more than 10 clusters of the scale of Tiruppur and dozens of billion-dollar companies willing to invest a large amount of capital.
The road ahead has hurdles, but also opportunities.