 "Research and development, Industrial production, manufacturing")
A guided tour of the Dholera Special Investment Region (SIR) typically starts with a short audio-visual presentation titled “New Vision for New India”. It showcases a high-tech city of global standards that boasts 360-degree connectivity via air, rail, road, and ports.
Visualised as a showpiece manufacturing hub, this greenfield town of Gujarat has been in the making for the past many years. Now, finally, it is expecting an international airport sometime early next year, a broad-gauge railway line in the near future, and linkages with important ports such as Pipavav soon.
Located some 150 km from Ahmedabad, Dholera SIR, which has a Tata Electronics semiconductor fab plant as its marquee project, is likely to witness real transformation over the next five to six years, officials say. Perhaps, then the promise of the plug-and-play city, which the six-minute presentation makes, will come true.
Across several parts of India, such manufacturing ecosystems, especially around greenfield cities, are in a similar transitory phase. Be it Gujarat,
Maharashtra, Karnataka, Telangana, Andhra Pradesh, Tamil Nadu, Uttar Pradesh, or any other state, the competition to build factories for the world is gaining pace.
For a country where the manufacturing sector’s contribution to gross domestic product (GDP) has remained stagnant at under 15 per cent and its global merchandise at below 2 per cent, there’s hope that the call for a ‘product nation’ might finally move the needle. From the government to industry honchos and think tanks, everyone has been emphasising the need for this.
In 2021, for instance, Ajai Chowdhry, co-founder, Hindustan Computers Ltd (HCL), set up the EPIC Foundation, a not-for-profit aimed at making India a ‘product nation’ in electronics. In recent years, Union IT and Railways Minister Ashwini Vaishnaw has repeatedly reiterated that after its great success as a services nation, the next big leap for India has to be in the area of product development.
At Business Standard’s annual Manthan summit in March, Sunil Vachani, founder and chairman of Dixon, said: “We have the largest market for some of the products we manufacture, a large pool of labour, and we can excel in design and manufacturing. We have shown that our manpower can be the most productive in the world compared with many other countries, if given the right inputs.” And then he added that the questions to ask now are: “When do we deepen manufacturing? What will happen to the value addition in all the products? When do we start designing these products?’’.
Some states are already on this path. Tamil Nadu, for instance, is focusing on research and development (R&D) and the broader vision of product nation, as state industries minister TRB Rajaa pointed out at a Business Standard roundtable recently.
Expressing the goal in numbers while speaking at the Hoover Institution at Stanford University in
California, Finance Minister Nirmala Sitharaman said India would increase the manufacturing sector’s share from 12 to 23 per cent over the next two decades. She identified sunrise sectors such as semiconductors, renewable energy components, medical devices and batteries, among others, that would help achieve this ambition, which would also create jobs and robust global supply chains, while reducing import dependencies.
Getting there
The question now is: What must India do to become a product nation?
Ask policymakers, former bureaucrats, or industry stakeholders, and the top solution emerges as: More investment in R&D.
A senior official in the Ministry of Electronics and Information Technology (MeitY) puts the ball in the industry’s court. Industry must take risks, he says. “Only then can R&D increase.” This official is of the view that until recently, both the government and the industry were shortsighted on manufacturing, but things are coming together now. MeitY is the administrative ministry for a range of sunrise industries like electronics and semiconductors, which are big on manufacturing.
The rows of neon-lit factory buildings and the ecosystem around them – whether in Dholera, Sanand (Gujarat), Hosur (Tamil Nadu), or Sri City (Andhra Pradesh) — reflect this shift.
Deepak Jain, co-chair of the Council on Manufacturing Excellence at the Confederation of Indian Industry (CII), looks back. The young generation wasn’t interested in manufacturing at all, but that has started to change, he notes. To up the game, Jain, who is also chairman of the Lumax Group, says “the approach has to be multi-pronged”. Manufacturing, he adds, has to be for the world, and for India. “We have to get into it and create a global value chain.’’
He lists three key things that will drive manufacturing: Scale, innovation, and quality. “Fundamentally, we need a change in the landscape and embrace manufacturing,” he says. “R&D as a percentage of GDP has to go up substantially. There should be incentives for industry to pursue R&D.’’
India’s R&D expenditure, while growing, is below 1 per cent of the country’s GDP — much lower than countries such as China (around 2.5 per cent), the US (around 3 per cent), and South Korea (over 5 per cent).
Amitabh Kant, G20 Sherpa and former NITI Aayog CEO, agrees. “We have already announced a ₹1 trillion R&D fund, along with a DeepTech Fund of Funds,” he says. “Once these are operationalised, they will give a big fillip to India’s innovation ecosystem.’’ He also suggests that India should look at the Silicon Valley model of industry collaboration with academia to move towards the concept of product nation.
Along with industrial research, design will be a crucial component, Kant points out. “We need to inculcate design thinking and introduce product design across science, engineering, and business curricula.’’
American tango
All that may be well and good, but what about the Trump factor?
US President Donald Trump’s warning to Apple — that it will have to pay a 25 per cent tax if the iPhones sold in America are made elsewhere — doesn’t seem to augur well for India, which is looking to build factories for the world. Trump has clearly mentioned India as a no-go land for the Cupertino-headquartered company when it comes to manufacturing for US exports.
Will this force India to tweak its manufacturing or product nation strategy?
K M Chandrasekhar, who was Cabinet secretary from 2007 to 2011, says: “We must not put too much focus on what Trump has told (Apple CEO) Tim Cook. Trump is a short-term phenomenon.’’ Chandrasekhar, too, reiterates that India needs to spur investment in R&D. “In the 1980s and early ’90s, both China and India had 0.6 per cent share of GDP invested in R&D. Now, India remains
at the same level, while China’s investment has skyrocketed to 2.6 per cent of GDP.’’
China, he adds, is challenging the US, and is in many areas ahead of it. “Our corporate sector has been highly remiss in investing in R&D.”
Weighing in on the Trump debate, Kant says: “If we look at the high growth stories, especially in Asia, no country has grown by looking to manufacture for their internal consumption.’’ If South Korea or Japan, or even China, had manufactured for their own consumption, that scale of job creation and investments would never have been achieved, he says.
India is on the right path towards becoming a product nation, adds Jyoti Vij, director general at the Federation of Indian Chambers of Commerce and Industry (Ficci). “To fully realise that vision, it must prioritise key cross-sectoral enablers that drive productivity, innovation, and global competitiveness.’’ As the enablers, she lists: Ease of starting and scaling businesses; efficient, technology-enabled logistics and infrastructure; quality at scale; adoption of artificial intelligence; higher investments in R&D and innovation ecosystems; and accelerated digital transformation across enterprises.
Looking homewards?
In the product nation debate, where is domestic trade positioned?
The Confederation of All India Traders (CAIT), often a voice against foreign trade, including ecommerce and quick commerce, too, backs the idea of product nation, even though it’s a marquee American brand, Apple, which is currently the centerpiece of India’s electronics manufacturing ecosystem.
Praveen Khandelwal, national secretary general at CAIT and member of Parliament from Bharatiya Janata Party, says: “It’s a good idea for India to focus more on manufacturing, but not at the expense of its strong services sector. The two can complement each other.” He adds that while increased focus on manufacturing will enhance job creation and lead to economic diversification, India’s strength in services should not be ignored since the country is a global IT and backoffice services hub, earning valuable foreign exchange.
Ficci’s Vij, however, argues that while India has built global leadership in services, it is now imperative to place greater strategic emphasis on manufacturing to “achieve the inclusive vision of Viksit Bharat @2047’’.
CII’s Jain is looking at a more immediate goal. The window of opportunity is small for India, he says.
“We should target the end of this decade, and then stay with the momentum.’’ Becoming a product nation is a journey, not an end date, he says.
There is one more thing: For India to produce internationally recognisable brands, the regulatory environment has to be conducive and the tax regime consistent — apart from the focus on human capital and skill development. Also, the envisioned product nation has to evolve through partnerships — both within India and abroad.
