India's manufacturing exports may touch $1 trillion by FY28: Bain

India is expected to scale up its manufacturing exports to $1 trillion by fiscal year 2027-28.

This comes amid favourable trends in manufacturing and growth in priority sectors, said Bain & Company, in a report titled, ‘The Trillion-Dollar Manufacturing Exports Opportunity for India.’

The six sectors driving export growth will be chemicals, auto, electronics, pharmaceuticals, textiles and industrial machinery.

The electronics sector is expected to see the highest compound annual growth rate (CAGR) of 35-40 per cent till FY28. This would be followed by chemicals at 19-23 per cent and industrial machinery at 18-20 per cent. Automotive is another key sector and is expected to grow at 15–18 per cent CAGR.

The report comes in the backdrop of India’s manufacturing exports seeing tremendous growth over the last two years.

Manufacturing exports saw a CAGR of more than 15 per cent to touch $418 billion in fiscal year 2021-22.

“The positive developments in the manufacturing sector, driven by production capacity expansion, government policy support, heightened M&A (mergers and acquisitions) activity, and PE/VC-led investment, are creating a robust pipeline for the country’s sustained economic growth in the years to come,” said Deepak Jain, partner, Bain and Company and co-author of the report.

“Despite possible recessionary and inflationary pressure, fundamentals for the manufacturing sector remain strong. The mega trends will continue to play out during the course of this decade. This will accelerate India’s manufacturing-led exports,” Jain said.

The report further said that India is on the cusp of structural shifts in the manufacturing sector. This has been enabled by a post-pandemic global focus on supply chain diversification.

Also, policy initiatives like the revamped foreign trade strategy and rollout of production-linked incentive (PLI) schemes are giving a further boost to manufacturing.

The manufacturing sector is also witnessing an increased inflow of capex and rising M&A activity. This is leading to a surge in manufacturing output and higher contribution to exports.

“PE/VC-led investments are also having a cascading effect, giving a boost to manufacturing-led exports. Last year, 18 per cent of the total PE/VC investments were seen in the manufacturing sector. Majority of them were in pharmaceuticals and chemicals,” it said.