Nantoo Banerjee

The country’s industrial outlook for the current year as well as the next few years will depend on the stability of the new government and how the Bharatiya Janata Party deals with its alliance partners and the opposition, which will have a formidable presence in the newly-elected Parliament. At stake are several large investment projects, including those under foreign direct investment (FDI), worth $30 billion.

A good number of them are linked with production of semiconductors and display fab manufacturing. The last government approved an outlay of Rs76,000 crore (>US$10 billion). The government offered fiscal support of 50 percent of project cost on pari-passu basis for all technology nodes under the Scheme for Setting-up of Semiconductor and Display Fabs in India. It included compound semiconductors, silicon photonics, sensors fab and connected facilities.

 A few projects, including a Tata joint venture with a Taiwanese firm, were announced. And, almost all of them proposed to be set up at Prime Minister Narendra Modi’s home state, Gujarat, probably to ensure their smooth operation.

Things may change now with some of the NDA’s strong vocal allies such as Telugu Desam Party chief Nara Chandrababu Naidu as well as opposition leaders expected to demand a locational balance of semiconductor projects, offering massive employment potential, by spreading them through other state locations as well.

Gujarat is not the epicentre of India’s telecom industry. The southern states of Karnataka, Andhra Pradesh, Telangana and Tamil Nadu and also Maharashtra are. A tug of war between Narendra Modi and other influential political party leaders on the sensitive industrial location issue may only delay the projects.

Large industrial projects generate a large number of quality jobs of generally permanent nature. The last 10 years of the NDA government, seen to be under the thumbs of Prime Minister Narendra Modi and his next-in-command Home Minister Amit Shah, both representing Gujarat, which ranks 9th among India’s large states in population counts in excess of 50 million each.

Uttar Pradesh, Maharashtra, Bihar, West Bengal, Madhya Pradesh, Tamil Nadu and Rajasthan are far ahead of Gujarat in terms of population. Barring Maharashtra, Tamil Nadu and Uttar Pradesh, all the others are almost industrially backward. According to the annual survey of industries, released by the government before the election, Gujarat is placed as India’s top industrialised state, followed by Maharashtra, Tamil Nadu, Karnataka and Uttar Pradesh.

Together, the top five industrialised states accounted for 53 percent manufacturing GVA (gross value added) of the country. Gujarat’s sudden industrial rise is believed to be at the cost of other parts of the country.

 Historically, the pattern of industrial and economic development of the country’s states has been at the mercy of the ruling party and its influential alliances at the Centre. The trend may change now with the BJP, the leading NDA partner, holding only 240 seats in the 543-member Lok Sabha. The opposition parties together combine 250 seats.

For the first time in many years, the ruling political alliance will have to adjust with a strong vocal opposition. And this may impact the government’s decisions and actions on the country’s industrial development. They may also influence the decisions of foreign direct investors on greenfield projects.

It may be noted that during the last financial year (2023-24), foreign equity inflows (FDI) fell by almost 3.50 percent to US$44.42 billion due to lower investments in several key sectors such as telecom, pharma and services. Even the reinvested earnings of foreign companies in India showed a decline.

Some of the top growing industries in India, which are expected to do extremely well in the next five years, are: information technology; semiconductor and electronics manufacturing; e-commerce; pharmaceutical and healthcare sectors; renewable energy and electric vehicles. Their combined revenue growth between now and 2030 is expected to exceed well over US$1 trillion.

Apart from these industries, the sectors such as banking, insurance, FMCG, railways, civil aviation and public transport systems are set to grow well in the coming years. Such growth prospects are bound to bear a big influence on the job market which seemed to have failed to draw much attention during the previous two terms of the NDA government. The country witnessed a nearly jobless economic growth.

 After a gap, the job market is poised for good growth. The employment landscape is showing a big upswing as manufacturing and BFSI (banking, financial services and insurance) are set to hire more in 2024 with an impressive 19 percent hiring intent compared to the previous year.

A report titled ‘Redefining Employment & Employability: Navigating Talent and Jobs Landscape,’ launched by the Digital Recruitment Platform for Talent Acquisition (Taggd), one of India’s best digital recruitment platforms powered by artificial intelligence (AI), projected a three percent increase in the hiring of women from 33 percent in 2023 to 36 percent this year.

About two out of three hires in 2024 will be for hybrid roles. They all sound good as long as the government plays a major driver of growth.

 Suffice it to say that in India the government continues to play a big role in the country’s industrial growth both as a major producer and consumer. Despite a strong effort by the NDA government in the last 10 years to privatise large state-governed industrial undertakings and financial institutions through the disinvestment process, it failed to achieve a noticeable success.

However, in the process, the government succeeded in halting the expansion of public sector enterprises and institutions to benefit a few Gujarat-linked industrial houses. The government’s future disinvestment programmes are likely to face a further setback under possible intervention from the ruling political allies of the BJP-led NDA government as well as a much stronger opposition.

Prime Minister Modi has to substantially alter his administrative style and operational outlook to carry his difficult political allies as well as the opposition along to provide a stable government and a stable industrial and economic growth. The task is not easy for Modi, known for his dictatorial work style. In fact, this appears to be the biggest challenge before the new Modi government to achieve ‘Sabka Saath, Sabka Vikas,’ meaning development of all with collective efforts of all.