Scaling up 11 key manufacturing value chains in India could generate around $320 billion more in gross value added (GVA), boosting the country’s power to operate in international markets, according to a report by McKinsey Global Institute. In fiscal year 2020, manufacturing generated 17.4 per cent of the country’s GDP, which is a little more than the 15.3 per cent it had contributed in 2000, said the research arm of US-based management consulting firm McKinsey.

The report comes at a time when the country’s GDP or gross domestic product shrank a record 23.9 per cent in the April-June period, and is on course to register its worst annual contraction in four decades. The country’s GVA declined 22.8 per cent in the quarter ended June 30. 

McKinsey identifies the following value chains in its report:  

• Vehicles and vehicle components
• Capital goods and machine tools
• Pharmaceuticals
• Chemicals and allied products
• Agriculture and food
• Metals and basic materials
• Apparel and textiles
• Furniture, leather and rubber
• Electronics and semiconductors
• Aerospace and defense
• Renewable energy

According to the report, about 80 per cent of that potential rests in six value chains: chemical products and petrochemicals; agriculture and food processing; electronics and semiconductors; capital goods and machine tools; iron ore and steel, and automotive components and vehicles. However, it also underlined that the country’s manufacturing sector needs to specialise to become its economic growth engine

Here are some other findings of the report: 

• India’s manufacturing growth has been slower than expected in the past
• From 2005-06 to 2011-12, manufacturing GDP grew nearly 9.5 per cent on year
• Growth came down to 7.4 per cent in the next six years
• COVID-19 exposed the vulnerability of the world’s supply chains for food, energy, vehicles, medicines, telecom, electrical equipment etc.
• However, countries like India, which are yet to realize their potential manufacturing promise, may not be ready to take full advantage of dynamic global shifts

With some relevant reforms and complementary actions by manufacturing companies, it is estimated that the identified manufacturing value chains can generate about $320 billion more in GVA within the next seven years, McKinsey Global Institute said in its report. 

The high potential value chains can more than double the country’s manufacturing GDP and could become an engine for economic growth, giving a boost to the employment sector, it added.