How building infrastructure, financing MSMEs and digitization can help make India a manufacturing superpower

India holds a three percent share in the global manufacturing value chain while having the second largest population. From manufacturing pharmaceuticals, health products, chips, electronics and white label products, India must achieve self-reliance.

The COVID-19 pandemic has shown that achieving independence is not a matter of choice but a necessity. With the global supply chain changing rapidly, there is an opportunity.

The first steps in making India a manufacturing superpower have been taken with Quad’s Supply Chain Resilience Initiative (SCRI). The SCRI shows the growing number of requests for India’s participation in an alternative global supply chain.

A three-pronged approach based on a foundation, a driver and a multiplier can achieve this: building infrastructure, financing MSME providers and digital transformation.

Also read: The goal is to build a manufacturing center in India for the world: ACMA

Building an infrastructure to connect India’s highways to the global supply chain

With 14%, India has one of the highest logistics costs relative to GDP. Likewise, India’s electricity cost as a percentage of GDP is also among the highest in the world.

This has limited the competitiveness of Indian products in the past. For India to be a global manufacturing superpower, building infrastructure is the foundation. It will serve two purposes.

First of all: As the infrastructure sector is labor intensive, it creates a pattern of national economic growth that will be insulated from disruptions in the global supply chain and economic cycles. This is the key to realizing the vision of autonomy.

By connecting future Indian cities with better domestic trade opportunities, it will allow business continuity. Infrastructure building initiatives such as the 100 Smart Cities mission and the PLI program covering 13 sub-sectors will enable Indian industry to expand its footprint in Tier 2 and Tier 3 cities.

This will lighten the demographic burden of metropolitan cities, reduce the costs of real estate and raw materials and allow job creation.

Second, the creation of infrastructure will allow small and large Indian manufacturers to connect with EXIM business opportunities. Robust infrastructure for EXIM trade such as airports, ports, inland container depots and logistics parks will enable Indian manufacturing to take advantage of the untapped potential of MSME suppliers through greater use of local capacity. Building infrastructure alone can contribute 4.5% of India’s GDP growth rate each year.

Enabling frictionless finance to strengthen MSMEs

MSMEs are the engines of economic growth in India. MSMEs in India contribute 30 percent of India’s GDP, 33 percent of manufactured production and 48 percent of exports.

Through the COVID19 pandemic, the vulnerabilities of supply chain finance have come to the fore. The unavailability of on-demand credit is a major challenge for MSMEs.

One of the main barriers to the availability of on-demand credit for MSMEs is the use of offline credit disbursement methods that rely on unreported and under-reported metrics such as sales, profitability and turnover. business.

Lack of visibility on relevant metrics distorts the assessment of MSME creditworthiness and slows the release of working capital.

Agile cash flow is the fuel Indian MSMEs need. Shifting from offline credit disbursement to digital disbursement can strengthen MSMEs’ balance sheets.

Digital supply chain finance platforms leverage dynamic metrics such as cash flow to secure credit approvals through more accurate underwriting and enable rapid on-demand credit injection into MSME balance sheets.

The shift from offline cash credit disbursement to digital supply chain finance can add 3% to India’s GDP every year.

Also read: India overtakes the United States to become the second most sought-after manufacturing destination

Accelerate innovation through automation and digital transformation

The third catalyst for this approach is the digital transformation of the entire supply chain ecosystem. Automation reduces marginal costs of supply chain processes, reduces the time to complete repetitive tasks, and frees up time to focus on strategic tasks.

Automation creates an error protection system from the ground up by leveraging clean data. Using clean data is integral to reducing manual errors that escalate at every step of the downstream supply chain.

Clean data is essential to enable ZED (zero effect zero defect) quality control processes, bespoke manufacturing and agile project management.

By increasing visibility into the worst, most likely and best scenarios, the adoption of data and digital can enable early warning and rapid response systems for each of these scenarios.

In doing so, digital transformation can accelerate innovation. Our digital workforce has made us the global back office.

The digital transformation of manufacturing supply chain processes, such as sourcing, distribution and logistics tracking, can make us the global factory.

Buoyancy in the Indo-Pacific is the opportunity for India to create a community of shared destiny

Geopolitical risks, volatilities of the South China Sea maritime trade route, and economic risks in a way. Indian manufacturing can deliver what the global supply chain demands.

However, Thailand, Vietnam and other countries that have the advantage of participating in the miracle of growth in East Asia are strong competitors.

For India to meet this challenge, we must build a unique model of competitive advantage in manufacturing. Infrastructure is the foundation of this model. MSMEs are the engines and cash flow the fuel of this model.

Finally, digital transformation is the multiplier that will bring them together to operate transparently for us and our partners around the world. The time has come to make India a manufacturing superpower and to create a “community of shared destiny”.

(The author is CEO, Moglix.)

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About Clara Barnard

Clara Barnard

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