India needs double-digit factory growth, Bank of America says
India’s manufacturing sector needs to grow at least 10% annually for 15 years to reach 25% of GDP, Bank of America estimates. That could create a $2.3-trillion manufacturing economy by 2040, but regulatory burdens, high power costs and a shortage of medium-sized firms remain major obstacles.
Bank of America economists caution that India must sharply increase manufacturing growth to realize its national aspirations and achieve its goal of becoming a developed economy by 2047. The bank's analysts estimate a 10% annual expansion of the manufacturing sector over the next 15 years is necessary for India's manufacturing share of the economy to rise to 25%.
By 2040, India's manufacturing sector could grow to nearly $2.3 trillion, up from $500 billion in 2024, and its share of global manufacturing could more than double to 6.3%. Currently, India's manufacturing sector accounts for only about 17% of GDP, a relatively low figure given the country's vast resources and workforce. Key constraints holding back growth include regulatory burdens and high power costs, with India's industrial users paying 10%-25% more for electricity than in neighboring countries like Vietnam.
India's economy expanded 7.8% in the July-September quarter, surpassing expectations, with manufacturing growth at 9.2%, a "herculean feat" according to Prime Minister Narendra Modi. However, the bank warns that without a substantial boost to the manufacturing sector, India's prospects for the "Viksit Bharat" vision will be diminished.
Written by urgent.news from The Economic Times - Economy's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
