Manufacturing to outpace services sector growth; services to contribute 42% in India's GVA by 2030, says report

“We believe that a significant portion of this manufacturing-led growth will come from sunrise sectors,” the report, titled “Digitizing Make in India Report 2024,” said. These sunrise sectors are electronics manufacturing, electric vehicles ecosystem, renewable energy, and defence.

Also read: IT industry growth halves to 3.8% in FY24 vs 8.4% in FY23: Nasscom

The report forecasts that India will become the third-largest economy by 2030, trailing the US and China. The Indian economy is all set to become a $10-trillion economy over the next decade. Policy reforms,  such as the Goods and Services Tax, Insolvency and Bankruptcy Code, digital public infrastructure, etc., have positioned the country well for the next phase of growth, the report said.

It said performance-linked incentive (PLI) schemes for 14 different sectors, worth $25 billion, will lead to production worth over $370 billion in the next five years.

Electronics manufacturing

The end-market for electronics is estimated to be around $500 billion, with semiconductors expected to be a $120-billion market. The key growth drivers include manufacturing moving to India due to global supply chain shifts, strong regulatory tailwinds via central and state schemes, and demand led by digital revolution.

The sector will contribute 6.2 percent to Gross Domestic Product (GDP) by financial year 2030. It was 2.8 percent in FY2023.

However, certain risks to the sector are incumbent with scale efficiencies in major electronic manufacturing systems' end-use segments, such as mobile phones. Another risk is the large capital expenditure required in the sector and continuous innovation to compete with global players.

Green technology

The cumulative domestic market of green technology is expected to increase to $300 billion by FY2024-30 from the current $90 billion. India's renewable energy capacity will grow to 500 gigawatts (GW) by 2030, from 172 GW in 2023.

Some key growth drivers are solar manufacturing, driven by the PLI schemes, with an outlay of around $3 billion, solar installations propelled by PM Surya Ghar, and National Green Hydrogen Mission. The report says solar cells and green hydrogen electrolysers enjoy export potential.

Some risks that need to be managed are regulatory, policy, and supply chain challenges in the sector.

The International Solar Alliance (ISA), which came into existence in 2015, comprising over 120 signatory countries, is also driving demand for exports in the sector.

“It (ISA) is creating a bigger export opportunity both on the solar side as well as on the wind side. A lot of Indian players which are getting into manufacturing are already tapping into that,” said Ishang Jawa, Managing Director and Partner, BCG India.

Semiconductors

With several initiatives from the government to push semiconductor manufacturing in the country, the sector is poised to grow to $117 billion by 2030, from $44 billion currently. The key push comes in the form of the Semiconductor India Program, with an outlay of $10 billion for chipmakers across four verticals and a $200 million design-linked incentive scheme for fabless design companies.

Other growth drivers include huge customer demand across segments and cost advantage in labour, utility and tax.

However, it comes with a fair share of risk, including the long concept of the commercialisation cycle of three years and the need for continued customer-oriented backward innovation to keep up with global benchmarks.

Also read: Next version of India's semiconductor scheme to focus on chip design: Ashwini Vaishnaw

Other sectors

While the electric vehicle (EV) market will grow to $48 billion by FY2030 from the current $4 billion, the defence sector will grow to $43 billion by FY29-30 from the current $13 billion, the report said.

Policy intervention and promising demand are the key growth drivers in the EV space. On the defence side, 100 percent foreign direct investment (FDI) in domestic manufacturing companies and other policy interventions will propel growth.

The report mentions significant opportunity for startups in other sectors, such as specialty chemicals and agricultural technology.

Another emerging market is the building of cloud and large language models (LLMs). “We believe that, for India, with Indian language datasets and context, and Indian tokens, there needs to be more AI applications and AI LLMs coming out of India,” said Sudipto Sannigrahi, Managing Director, Matrix Partners.