By Dhanendra Kumar
While countries compete for leadership in artificial intelligence and other critical technologies, manufacturing remains crucial for economic growth, especially for countries like India where job creation and greater exports are urgent. India’s ambition of Viksit Bharat@2047 envisions transforming the nation into a $30-trillion economy. For equitable growth, India’s per capita income will also need to rise from $2,392 to $18,000.
The government has been formulating policies to transform India into a manufacturing powerhouse. Initiatives like Make in India, production-linked incentives, PM Gati Shakti National Master Plan, and reforms like the goods and services tax and the Insolvency and Bankruptcy Code have created a supportive ecosystem.
The development of industrial clusters, parks, and corridors with integrated state-level policies is meant to revolutionise large industries, often acting as anchors and support for micro, small, and medium enterprises (MSMEs).
Industrial corridors like the Delhi-Mumbai Industrial Corridor and Chennai-Bengaluru Industrial Corridor are laying the foundation for integrated industrial ecosystems, bringing together transportation, logistics, and techno-production hubs. They will help improve connectivity between urban and rural centres, stimulating regional development and employment generation.
Similar approaches adopted in China, the US, and Germany have yielded spectacular results. For instance, China’s network of industrial parks and special economic zones such as Shenzhen has been critical to the country’s transformation. The US’ development of regional industrial clusters, particularly in tech (Silicon Valley) and automotive (earlier in Detroit) industries, spurred innovation and sustained economic growth. Renowned for its industrial hubs, Germany leverages infrastructure to support its world-class manufacturing sector. Drawing from these experiences, a focus on industrial corridors and parks can help spur economic transformation.
The Indian economy is dominated by MSMEs. According to official data, they contributed 30% to India’s GDP in FY23. Besides, MSME-specified products accounted for a whopping 45.79% of the country’s total exports as of May. The cumulative employment generated by MSMEs registered with the government from July 2020 to July 2024 stood at 20.39 crore. In fact, India’s goal of Viksit Bharat hinges on the growth and success of MSMEs. Industrial cities and corridors can provide essential infrastructure, resources, and markets for MSMEs. Additionally, MSMEs can benefit from logistics, warehousing, and transportation facilities which enhance supply-chain efficiency and reduce the cost and complexity of moving goods.
Continuing its focus on industrial development, the cabinet recently greenlighted 12 new industrial cities under the National Industrial Corridor Development Programme (NICDP) which entails an investment of Rs 28,602 crore to boost the manufacturing sector. The government seeks to develop these as “smart cities”, aiming to position India as a global manufacturing and investment hub. The NICDP is projected to generate substantial employment, up to 1 million direct and 3 million indirect jobs, contributing to the socioeconomic development of regions.
The NICDP focuses on 11 corridors from the national infrastructure pipeline that will support the industrial cities in its vicinity and attract investments. For instance, Ather Energy announced plans to invest around Rs 2,000 crore in Maharashtra’s Chhatrapati Sambhajinagar, which will act as an anchor project for the industrial city of Bidkin. Two corridors in Andhra Pradesh will have multiple industrial cities that are expected to attract investments from textile, apparel, automobile, pharmaceutical, and electronics manufacturing companies.
The private sector can also contribute to realising the government’s vision. Established businesses and conglomerates can be anchors within/for industrial cities, which will help attract MSMEs and other companies to set up operations around them. This can create demand for ancillary services, raw materials, and logistics, enabling the entire ecosystem to flourish. They can also encourage research and development through dedicated centres and innovation hubs, which can further collaborate with MSMEs and start-ups. Conglomerates can also deploy their resources to help develop the infrastructure necessary to create a conducive environment for businesses.
An example of promising the growth of MSMEs through industrial cities is Vedanta chairman Anil Agarwal’s recent announcement to set up two industrial parks, one for aluminium and the other for zinc and silver. Both parks will operate on a not-for-profit basis. The group plans to acquire ~1,500 acres, preferably within 50 km of its major operations in Rajasthan and Odisha. Considering the critical role of the three metals in areas ranging from renewable energy and electronics to driving sustainability, such clusters can act as the fulcrum of economic development for MSMEs and India’s start-up ecosystem that aims to capitalise opportunities in the downstream value chain.
Industrial cities offer an immense opportunity to pave the next phase of India’s growth. Corporate entities need to take the lead, creating a multiplier effect to accelerate industrial growth and economic transformation. Union commerce minister Piyush Goyal expects many firms to queue up and invest in industrial parks. He recently cited the example of Japanese auto major Toyota’s investment in Sambhajinagar, one of the 12 industrial cities.
Together the government, large businesses, and MSMEs can partner in speeding up the development of industrial cities and parks, generating economic activity and contributing to India’s aim of becoming Viksit Bharat.
The author Chairman of Competition Advisory Services India LLP (COMPAD).
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