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Boosting local manufacturing for import substitution: use of technology and localized manufacturing

2020 has been a watershed year that saw the economy facing perils never seen before. All sectors be it banking, education, manufacturing, or retail, saw a shift in their production techniques and quantity output. Government of India’s aggressive push for ‘Make in India’ to bolster domestic manufacturing and make its economy ‘self-reliant’ in the post-pandemic era is a welcome opportunity for India’s solar energy sector. It has not only encouraged local companies to increase captive capacity but also boost manufacturing capabilities. It has compelled businessmen to look inward so that corporates are now looking for more indigenous products. The whole year shed light on the importance of being financially independent through manufacture of products made in India in boosting the economy and simultaneously transforming the local businesses.

The pandemic proved to be an eye opener for a lot of business owners. It exposed the weaknesses in the supply chains and many companies started reconfiguring their sourcing and manufacturing footprints. With the use of localised materials and reinventing technology to suit manufacturing, companies have come a long way.

Despite making significant progress in solar power generation and emerging as world’s third largest solar market, India’s domestic solar equipment manufacturing industry has not been able to capitalise on the opportunity thus far. India imports 80 percent of components required for its solar energy production from China. This raises an important question: does India have the core competency, capital and capacity required to offer domestic manufacturing of solar power equipment at a scale that could substitute for its massive imports?

There is an urgent need to devise a policy framework that aims at creating a diversified domestic manufacturing industry for solar modules as well as ancillary products, that could significantly reduce its import dependence, ensure a self-sufficient, sustainable, and affordable machinery access, and generate greater employment opportunities. According to a McKinsey Report, many of India’s manufacturing value chains enjoy advantages that could help power them to rapid growth. India’s natural resources (for example, iron ore, bauxite, high solar insolation, and cotton) and low-cost labour are a boon to makers of basic metals, textiles and apparel, renewable energy, and chemical products. Further, 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. The makers of fast-selling technology products, for example, enjoy ready access to millions of Indian consumers.

In the 2020-21 budget, our Finance Minister emphasised the need to push our flagship programme ‘Make in India’ by incentivising manufacturing and providing a fillip to exports. Even with the emergence of digital factories and E-commerce platforms, buying trends are shifting online which makes the markets bigger in terms of consumers. Additionally, to tackle this factor, more and more workforce will be trained to build a digital workforce.

COVID-19 has certainly pushed us to the fore. Amidst this, one of the sectors that have been impacted are the local manufacturers. Going forward, India is set to be a future powerhouse in terms of manufacturing and exports. Consequently, the economy is set to grow in the coming years.

Highlights:

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