India’s vision of building a USD 5 trillion economy by catapulting the manufacturing sector into a rapid-growth spiral has been pushed further to 2030. This gives us just enough time to acknowledge the challenges in the way and undertake a more strategic approach to attract sufficient investor interest and capital.
In FY 2020-21, India’s Foreign Direct Investment (FDI) inflow increased by 10 per cent (year-on-year) to touch the highest-ever level of $81.72 billion. The upward trend is a lifesaver for the country’s manufacturing sector, which has been plagued by pandemic-induced and other challenges since the last few quarters.
Today, global investors are betting on India, particularly hubs in North and South India that already have a strong manufacturing muscle. The growing presence of industrial parks in Bengaluru region is a fine example of the Karnataka government’s vision and the local industrial board’s execution prowess. As I see it, the current state industry policy is designed to help the region emerge as a global leader in advanced manufacturing, R&D, and innovation as well as to create an ecosystem for inclusive, balanced, and sustainable development.
Here’s a look at some of the key factors contributing to Bengaluru’s growth as India’s leading manufacturing hub with state-of-the-art private parks:
Delivering on Industry 4.0
For India to emerge as a global manufacturing hub for high-value products, its manufacturing companies need to become an integral part of global supply chains. This is possible only when our manufacturing companies and hubs offer infrastructure solutions that deliver on Industry 4.0 requirements – intelligent operations, integrated supply chain, seamless IoT connectivity and end-to-end visibility, and predictive modelling to improve the value chain.
As India’s start-up capital and a global IT city, Bengaluru already has the talent and technology required to deliver on Industry 4.0 features. The wheels are turning, but the key question for those at the helm of our manufacturing ecosystem is whether we can get them to speed up to meet the country’s ambitions.
Focussing on value-led manufacturing capabilities
To emerge as a world-class manufacturing leader, we need to offer more than the ‘cost-effective factory’ tag. India’s manufacturing capabilities have often been questioned in the context of their innovation quotient. Moreover, in the light of the 2030 Agenda for Sustainable Development, in particular its Sustainable Development Goal 9 (SDG9) on industry, infrastructure and innovation, there’s an urgent need for the manufacturing industry to improve its sustainability and inclusiveness quotient.
As India’s innovation capital, I believe Bengaluru has the potential to help change the ground reality as well as long-held perceptions. The ‘Silicon Valley of India’ isn’t just a start-up hub; it is also a strong magnet for value-conscious manufacturers.
Currently home to 2000+ MSMEs and produces 60 per cent of India’s machine tools, the IT capital has 400+ MNCs running their global R&D centres from the city. And that’s an encouraging sign for manufacturers and policy leaders keen to change the status quo!
Leveraging the logistics advantage
There’s no denying that India’s high logistics costs impacts our competitiveness. The lack of a multimodal transport system, fragmented storage infrastructure, multiple stakeholders in the value chain, poor quality of road and port infrastructure, and absence of technological intervention are the key culprits.
For India to emerge as a world-class manufacturing hub, we need to bring down our average logistics cost by more than 40 per cent. It currently stands at 14 per cent of the GDP, as compared to the global average of approximately 8 per cent. If left unchecked, this gap is expected to increase to USD 500 billion by 2030.
While we score on certain traditional resources associated with the sector, the need of the hour is to pivot swiftly by leveraging our logistics advantage. And in this endeavour, Bengaluru holds exceptional potential to lead and inspire the country. Home to two industrial corridors – the Bengaluru-Mumbai Economic Corridor and the Chennai-Bengaluru Industrial Corridor, there are now plans to build a Bengaluru-Chennai Expressway. Such logistics infrastructure finds high resonance among Grade A park developers as well as investors.
The Hoskote-Narasapura cluster towards the east of Bengaluru, for instance, has witnessed several land acquisitions for Greenfield warehousing and manufacturing developments due to its proximity to Mumbai and Chennai. It is a sought-after destination for Japanese, European and Korean companies in the auto, electronics, FMCG and FMCD sectors.
IndoSpace has three parks spread across 86 acres of land near Bengaluru, which will also provide plug-and-play facilities for rapid scaling requirements of its clients from various sectors including manufacturing. Our newly launched Narasapura Park, located close to NH48, will soon have easy connectivity to the Chennai port, while the other IndoSpace parks, located at Bommasandra and Nelamangala, also offer similar strategic advantages.
Right now, India’s manufacturing sector is at a critical juncture. The world is looking at us to deliver on new values driven by technology and innovation that will shape the global approach to manufacturing.
The way I see it, policy interventions and industry frameworks will work best when we acknowledge the role of private park developers in transforming key markets such as Bengaluru that have all the requisites to fuel India’s rapid growth in the manufacturing sector. While the groundwork for pan-India manufacturing excellence must be encouraged and built at the best possible pace, it’s prudent to adopt a more strategic approach – prioritize and plan – to lead the transformation of India’s economy by 2030.
The Karnataka Industrial Areas Development Board (KAIDB) is laying special focus on the development of Electronics, Electric Vehicles, Machine Tools, Aerospace & Defence sectors in the state.
Government of Karnataka has signed 34 MoUs for investments worth Rs.2,424 crores in early 2021. A significant percentage of these investments will go towards acquiring land parcels in and around Bengaluru by private park developers; this includes Haralur, which is expected to develop as an aerospace and defense manufacturing cluster.
An EV sector-specific cluster is also expected to come up in Ramanagara, with several OEMs already expressing interest in the 400 acres+ area which is within a 50-kms radius from Bengaluru.
Authored by Rajesh Jaggi Vice Chairman, Real Estate – The Everstone Group