The manufacturing industry is like the lifeblood of any economy. We cannot expect an economy to grow or have a healthy GDP without the manufacturing sector. It is because of this sector that people are able to fulfill their needs and desires and also live a healthy lifestyle.
Manufacturing, as we all know, is the production of products and services for human or industrial consumption. It is a vital part of the secondary industry that turns raw and unusable materials into finished and usable products.
Any economy’s growth and wellbeing is determined by its GDP, i.e. Gross Domestic Product. Now the GDP is the rate at which a country is growing and one of the main indicators of a healthy economy is the abundant and smooth production of goods and services.
It measures the monetary value of these products and services and then determines if a country is doing well or not. If the manufacturing sector is strained or if there is lack of smooth trade flows between manufacturing channels, it negatively affects a country’s GDP.
Some Important Updates on the Manufacturing Sector:
It is said that the Indian manufacturing sector will reach $1 trillion by the year 2025. The COVID-19 pandemic caused a sharp decline in the FDI inflows in the country. An estimate made by the United Nations Conference on Trade (UNCTAD) stated that the pandemic could cause a steep decline in the FDI inflows by 5% - 15% due to disruption in manufacturing sector activities and factories shutting down.
These FDI investment shortages are most likely to be felt in sectors like energy, automotive, and airline. Also, the companies in the industries like automobile, chemical, airline, and electronics are facing the threat of shortages in raw materials.
However, PM Narendra Modi’s ‘Make in India’ initiative has received a lot of attention lately thanks to international borders being sealed due to the pandemic. There are lot of promotions of home-grown brands being done in order to encourage the buyers to buy more home-made products and services.
But on the other hand, the electronics industry has received a huge blow due to the pandemic as most of the electronic products come from China. China accounts for nearly 85% of the components produced to make smartphones and 75% of television sets use Chinese components. Hence when the manufacturing plants in China were shut down due to the pandemic, it severely affected the Indian electronics industry.
And since China is facing shortage of raw materials supply, it has decided to increase its component prices by nearly 2% to 3%.
Many European companies like Daimler and Volkswagen had announced that they were temporarily shut down due to the COVID-19 pandemic to keep the workers safe.
Some companies are also shifting base to countries less affected by the COVID-19 pandemic. For example South Korean electronics giant Samsung announced to shift some portion of its production plants to Vietnam as South Korea saw a huge increase in the number of COVID positive cases.
Hence, the global manufacturing sector has suffered huge losses and will take some time to recover during the post-lockdown phase.