Going beyond areas of expertise such as artisanal textile and jewelry production, cutting-edge software development and Computer Numerical Control (CNC) machinery manufacturing, global leader India has achieved even greater success. 

The manufacturing sector in India, with a Gross Value Add (advance estimates) of ₹27,88,056 crore in FY 2023-24, contributes around 17% to the country’s GDP and is projected to grow at an annual rate of 8.21%, offering a promising and exciting landscape for foreign investors. 

In this article, Invest India explores some of the great places for the manufacturing and production sector in India. In recent years, India has emerged as a rising star in petrochemicals, automobiles and automotive parts, steel and its ancillary industries, along with metal fabrication and shipbuilding, among others.  

The vanguard of manufacturing in India 

• Maharashtra is the undisputed preferred destination for global investors with a Gross State Domestic Product (GSDP) of ₹38.79 lakh crore in 2023-24 and the highest Foreign Direct Investment (FDI) inflow of $15.1 billion in FY’23. Here, conducive policies, best incentives, world-class infrastructure, industrial readiness and skilled workforce are some of the key investment drivers. Its state capital Mumbai is India’s commercial, financial and entertainment capital and a stronghold to several international banks and financial service providers. It’s also home to Jawaharlal Nehru Port — the nation’s largest container port — facilitating exports, which include precious and non-precious stones, gold, pharmaceutical formulations and sugar. Another region in this state that’s swiftly emerging as an industrial hub is Aurangabad, which contains seven Special Economic Zones (SEZs) and several industrial areas. Similarly, from an industrial point of view, the Pune-Khed-Chakan-Talegaon is rich with its automobile and IT sectors. This region tops the number of industrial units in the Maharashtra Industrial Development Corporation belt with 15,687 entities.  
• Delhi is among the fastest-growing manufacturing and export hubs even after being landlocked without port facilities available. With a reported GSDP at current prices of ₹11,07,746 crore in FY 2023-24, the capital of India is one of the major centers of merchandise manufacturing and export. It shelters 26 planned industrial estates and has a warehouse capacity of 19,646 metric tons per annum (MTPA). It shares borders with Uttar Pradesh and Haryana, creating the National Capital Region, which is one of India’s largest ESDM and automobile manufacturing hubs. From industry associations and events to policymakers and ready industrial infrastructure, Delhi is suitable for the Make in India hub for the world.  
• Karnataka is the manufacturing powerhouse in south India and is the largest exporter among states in India that’s home to 400 of 500 Fortune companies. The state is India’s second-highest producer of special purpose and heavy electrical machinery and the largest software exporter. It’s capital Bengaluru is not just about the IT and R&D industry, but is also a nucleus for the textile, aerospace and biotechnology sectors. Headquarters of the nation’s most prominent PSUs (Public Sector Undertakings), Hindustan Aeronautics Limited (HAL), CSIR National Aerospace Laboratories (NAL), Indian Space Research Organisation (ISRO) and Bharat Earth Movers Limited (BEML). With single-window clearance, robust infrastructure and logistics, a thriving R&D ecosystem and a skilled talent pool, the state has established itself as an undisputed service and manufacturing leader.  
• Chennai is home to three of India’s  major ports, making it the most prominent industrial, manufacturing and import/export hub. Acclaimed for its software and IT-enabled service industry, Tamil Nadu also has a thriving and fast-growing automotive, engineering, textiles and merchandise manufacturing industry. Chennai, with Tirupati and Nellore-Chittoor, is commonly known as the nation’s tri-city industrial growth corridor. The state has the highest number of operational SEZs and factories in India, ideal for setting up high-capacity production units across sectors. With an estimated GSDP of ₹28 lakh crore in 2023-24 and merchandise exports of $35.17 billion in FY’22, it has to be the ultimate manufacturing destination. Global investors make a beeline for the state because of its dedicated industrial policy, expansive SEZs, quality education institutions and competitive ease-of-doing-business. 
• Gujarat will be the flagbearer of India’s manufacturing sector, poised to become a $1 trillion industry by 2025-26. The manufacturing sector in 2022-23 contributed 45% to the state economy. Easy availability of labor, competitive land pricing, supportive policies, excellent last-mile connectivity and the presence of major ports, roadways, railways and airports make it the one-stop destination for all manufacturing requirements.  Its commercial capital, Ahmedabad, is known for its textiles, chemicals, food processing, automobiles and automotive parts and pharmaceutical manufacturing. The state is home to India’s only International Financial Services Center (IFSC), which is on its way to becoming a center of global finance in the years to come. The state GSDP at current prices (for 2024-25) is projected to reach ₹27.9 lakh crore. If you are considering setting up a manufacturing unit in India, all roads lead to Gujarat.  

Benefits of manufacturing in India 

India offers not one but many compelling advantages to those seeking to establish manufacturing units nationwide.  

The fifth largest economy in the world — according to the International Monetary Fund— India is also set to become the fifth largest consumer market by 2025. Besides a built-in market for companies manufacturing in India as a substantial advantage, the nation also has one of the largest young professionals (aged between 18 and 35) population globally. The country also boasts a coastline extending to more than 7,516.6 km with 200+ ports. The overall port capacity is estimated to grow to more than 3,300 MTPA by 2025.

Moreover, India’s endorsement of global intellectual property (IP) treaties, like the WIPO Copyright Treaty, Vienna Agreement and Nice Agreement on Goods & Services, aligns India advantageously with international standards. Furthermore, an amendment in 2015 to the Arbitration & Conciliation Act ensures faster dispute resolution and contract enforcement. Recent reforms have also ensured tax reductions on corporate tax and increase in FDI in manufacturing, reduction in the compliance burden and boosting the domestic manufacturing sector through public procurement orders.  

From ease of doing business to a captive market, India has all the ingredients for your recipe for success.  

Advantages of FDI in India’s manufacturing sector 

Policy reforms and developments in infrastructure, along with the nation’s skilled workforce and natural resources, make India an advantageous option for enhancing FDI in manufacturing. It is equally beneficial for the nation as FDI offers various benefits, including, but not limited to: 

• Rise in employment and acquired skill: FDI can create jobs for skilled and unskilled workers, providing opportunities for upskilling and employment growth 
• Infrastructural development: In no other sector is infrastructure both a prerequisite and a celebrated advantage, like manufacturing. FDIs enable the transformation of underdeveloped cities and areas into industrial hubs, boosting and sustaining microcosms of the social and industrial economies of the area in which they are located 
• Stability of exchange rates: A steady inflow of FDIs is crucial for maintaining comfortable foreign exchange reserves for the Reserve Bank of India. This translates directly to stable foreign exchange rates for India 
• Increase in exports: An increase in manufacturing through FDIs also translates to a rise in exports. Many manufactured goods have global markets and are exported to those markets from the nation of production, thus increasing the manufacturing nation’s exports and the revenue therefore merited  

Advantages for foreign investors manufacturing in India 

• Market size and skilled labor: India is a top choice for foreign investors looking to invest in the manufacturing sector due to its vast market size of over 1.4 billion people and a skilled workforce that can communicate fluently in English. Additionally, India’s strategic geographical location, along with its easy access to maritime transport and international trade through various ports, makes it an attractive investment option for foreign investors  
• Supply chain integrity: India’s geography also provides an essential feature for investments in manufacturing: the resilience and integrity of supply chains. India is the second largest producer and the sixth highest exporter of textiles, including apparel, home products and other technical products. Home to the fifth highest reserves of iron ores in the world, India is also the second largest producer of crude steel, with 118 metric tons in FY’23 (till January). Meanwhile, crude oil production stood at 24.8 million metric tons in FY 2023-2425. With 23 oil refineries currently in operation, India plans to expand its crude oil production capabilities through interventions. The country has everything —from textiles to oil & gas to pharmaceuticals—for companies to set up industries across the value and supply chain.  
• Tax benefits: In the Union Budget 2024-25, India has announced a concessional corporate tax of 15% for certain new domestic manufacturing companies. In recent amendments to the FDI policy, the Government of India has allowed 100% FDI for foreign investors to manufacture satellites. Moreover, under Maritime Amrit Kaal Vision 2047, the government plans to offer benefits like tax holidays, reductions in port charges and more for foreign investors to promote FDI inflow.
• Special Economic Zones: Tax incentives, customs exemptions and license fee reductions are also offered to foreign investments in the SEZs. The compliance burden on investments in the SEZs is also being reduced by amending the IFSCA Act to avoid dual regulation under the SEZ Act.

Growth opportunities in manufacturing in India 

India’s manufacturing sector is growing and expanding. It has been a well-established player in automobile, pharmaceuticals, textile and electronics manufacturing.  

Between April 2000 and December 2023, manufacturing in industries like automobiles, chemicals and pharmaceuticals attracted FDI inflows of $35.6 billion, $22 billion and $222.3 billion, respectively. The Production Linked Incentive (PLI) schemes have attracted over ₹1.03 lakh crore of investments till November 2023 and recorded exports surpassing ₹3.2 lakh crore, with large-scale electronics manufacturing, pharmaceuticals, food processing and telecom & networking products dominating the mix.

Initiatives by the Ministry of Heavy Industries & Public Enterprises, such as SAMARTH Udyog Bharat 4.0 or SAMARTH Advanced Manufacturing and Rapid Transformation Hubs, are expected to increase the manufacturing sector’s competitiveness in the capital goods market. 

India is turning a new leaf in its manufacturing story with avenues arising in emerging industries such as electric vehicle manufacturing, semiconductors, space technology, agritech and waste management. Some emerging trends in this sector include Industry4.0, AI integration, IoT-driven processes and 3D technology.  

There’s a revolution in manufacturing, a ripe opportunity for investors to ride the growth wave. 

Make in India to Made in India 

India’s robust domestic demands and thriving export prospects have positioned the nation as one of the most promising manufacturing hubs in the world. One of the chief architects of India’s success and future as a manufacturing magnate is the Make in India initiative, launched in 2014. Make in India —in conjunction with the Atmanirbhar Bharat Abhiyan and the PLI scheme —has helped cement India’s position as a global manufacturing hub.  

While Atmanirbhar Bharat Abhiyan promotes self-reliance, the PLI scheme, with an outlay of ₹1.97 lakh crore, aims to boost domestic production across 14 sectors. 

Prime Minister Narendra Modi’s clarion call for Make in India is making the country a hub for manufacturing, design and innovation across 27 sectors, including defence, electronics manufacturing and textiles.  

For instance, the Tata Group is setting up the nation’s first fab unit in Dholera, Gujarat, with an investment of ~$11 billion.

iPhone maker Apple Inc.’s India output has hit the $14-billion mark — a remarkable success story of Make in India for the world. Luxury automobile manufacturer Mercedes Benz is lining up ₹200 crore investment to launch 12 products in 2024. In the defence sector, Make in India has made a profound impact, with exports increasing by ~32% in FY 2023-24 (over the last fiscal), breaching the ₹21,000-crore mark.

While quite a few cities have emerged as growth corridors and manufacturing hubs for automobiles, petrochemicals, pharmaceuticals and more, the central government is actively fostering an entrepreneurial and production-oriented spirit across the nation.  

Reforms in taxation, future-focused government policies, foreign investment inflows and a conscious and concentrated focus on sustainable industries and technologies ensure that India’s manufacturing sector will stay true to its upward trajectory and perhaps surpass its projected growth of more than 8%. 

Reforms and initiatives that encourage foreign investments and handhold indigenous manufacturers to ensure that while the nation moves forward toward prosperity on the global stage, we stay true to our roots.