INDUSTRIAL           

• Manufacturing Industries in general
• Agrochemicals
• Specialty Chemicals
• Petrochemicals & Refineries
• Other Process Industries
• Electronics & Semi-conductors
• Other Manufacturing Industries

Global Industry Scenario: Internationally, transformation is happening across the industrial sectors – rapid globalisation, major product innovations with technological advancements, rising demands, emergence of newer markets. The shift in the economic power from the predominant markets in the developed countries (North America and Western Europe) to emerging markets (BRIC and Asian countries), is shaking the high technology manufacturing sectors, and new players from emerging markets are posing serious competition. Some industries like automobile are poised for new technological breakthrough with advancement in high performing materials and alternative fuels. Certain industries like chemicals face volatility in the material prices, environmental and regulatory controls. The old industries like pulp, paper and packaging are also seeing changes – with rising demand, increasing brand awareness, and innovation in packaging material and concepts; and are reinventing with new technologies, operational excellence, and branding. Metal sector suffers from low demand and high global competition. Companies are redefining market strategies and realigning to regulatory standards. Competition, new demand patterns, and financial issues are prompting restructuring and merger and acquisition (M&A), resulting in more agile, nimble, and responsive corporates.

Indian Scenario: India’s manufacturing sector, which is one of the biggest employment generators, is vital for its economic progress. India’s natural resources, strong manufacturing base, technically educated/skilled manpower, and strong domestic demand, are its key strengths. Post-independence, India has made rapid strides in industrialisation; and has been attractive as a manufacturing center to foreign companies, who have or are established new manufacturing base in India for serving the vast and growing domestic demand, or for using the Indian Manufacturing facilities as sourcing hub for their global requirement. But, Indian manufacturing has suffered in recent years; and some segments like basic industries, metals, and capital goods have under-performed, with global slowdown, currency volatilities, infrastructure constraints, and restrictive regulation. The share of manufacturing in India’s GDP has fallen to ~15%.

The long term prospects of Indian manufacturing remain robust. With the Indian govt.’s new “Make in India” vision and various initiatives, the Indian manufacturing sector is set for a transformation, and a faster growth rate is expected over next 5 years. Some export sectors like textiles, pharma, gem & jewelry, chemicals, and hi-tech products which have been growing, are likely to give a fillip to the Indian manufacturing; and the exports growth would be a key demand-driver. Strong growth in the economies of Middle East & Africa, the top manufacturing export destination, is an encouraging trend. The Rural India could provide next wave of growth for Indian manufacturing, as the rural consumption and wages are growing faster than the urban. India’s manufacturing sector, with its inherent advantages can certainly bounce back and do much better in coming years. According to a study, India’s manufacturing industry could touch US$ 1 trillion by 2025 on the back of the rising domestic demand, and the penchant of MNCs for establishing low-cost plants in India, which could create up to 90 million domestic jobs, and the sector producing ~ 25–30% of India’s GDP. (Read full Industry Research Report on the Industrial sector in India)

KLS&A Advantage: The industrial sector need agile, transformational and technologically savvy leaders with multicultural sensitivity, who can drive innovation and cost competitiveness, devise and implement strategies to rapidly respond to market forces and regulatory issues, conquer new markets, and achieve breakthrough performance, while managing volatilities. Our team of experienced search consultants with strong manufacturing domain knowledge understands the fast evolving pattern of globalisation; and has been helping our well-known industrial clients succeed by spotting, inspiring, and recruiting able leaders and human talent. Our promoters having worked in the leadership roles with industrial conglomerates intimately know about the diverse manufacturing industries. We are pleased to offer our team’s proven expertise in hiring senior talent that is best-in-class, fits in your culture, and can help you realise your business goals, whether you are a PE-backed component supplier or the large OEM.

(References: Various media reports, press items, and research reports including from McKinsey, CII-BCG, IBEF, and EM, etc.)

[Disclaimer: This general note which has very broad, indicative, and unverified information of the industry sector has been compiled through secondary research from multiple sources; and is not meant to be relied by anyone for any purpose. KLS&A is not responsible for any errors or shortcomings in the same.]

INDUSTRIAL SECTOR IN INDIA         

Industry Overview

India’s manufacturing sector is vital for its economic progress; and is one of the biggest employment generators. India is not only rich in natural resources; it has strong manufacturing base, skilled manpower, and technical capabilities. India has made rapid strides in industrialisation since independence. Today, the country is attractive as a manufacturing center to foreign companies – several MNCs have established or are setting up new manufacturing base in India, either for serving the vast and growing domestic demand, or for using the Indian Manufacturing facilities as sourcing hub for their global requirement.

Performance & Challenges

Manufacturing has suffered in India during recent times. Some manufacturing segments like the basic industries, metals, capital goods have performed poorly in recent years. Indian manufacturing sector is at its lowest in last decade with ~ 15% share of manufacturing in overall GDP. Slowdown in domestic demand having the biggest impact on the sector in the past 12 months. Infrastructure constraints; restrictive regulation being other major challenges. Indian manufacturing is beset by increasing volatility and turbulence over the past 2 decades. The context of manufacturing has changed. Export dynamics are very different now than two decades ago – Continuing global slowdown and dollar strengthening being the top 2 unfavourable global trends for the Indian manufacturing. .

Growth Prospects

However, despite the general slowdown in the manufacturing sector, some export sectors like textiles, gem and jewelry, chemicals, and hi-tech products have been growing and are likely to give a fillip to the Indian manufacturing sector – e.g., total exports of chemicals grew at a CAGR of 16.2% from US$3.5 Bn in FY03 to USD15.5 Bn in FY13. Exports of Hi-tech products (including electronics and pharma) have grown at a CAGR of 26% during 2007–11, and jumped from ~US$8 Bn to US$21 Bn. According to a study by McKinsey & Co., India’s manufacturing industry could touch US$ 1 trillion by 2025, on the back of the rising demand in the country and the penchant for establishing low-cost plants in India by multinational companies (MNCs, which could create up to 90 million domestic jobs by that time; and the sector producing about 25–30 per cent of India’s gross domestic product (GDP).

Government Initiatives

The Indian government is conscious of the importance of this sector to the country’s industrial development and jobs creation, and has been taking a number of steps to further enhance the manufacturing industry, e.g., announcement to create five National Investment and Manufacturing Zones (NIMZs) outside the DMIC region; cabinet’s decision to liberalise FDI in defence from 26% to 49%, and also commitment of big investments in railways, which will help spur the manufacturing growth. The National Manufacturing Policy is targeting to enhance the sector’s share in GDP to 25% and create 100 million jobs by 2022. Similarly, the National Policy on Electronics to boost India’s electronics systems and design will also give impetus to the manufacturing industry. India’s new Science, Technology and Innovation policy announced by the government, aims to increase the number of R&D personnel in India by at least 66% of the present strength in 5 years.

Way forward

Despite slowdown, long term prospects of Indian manufacturing remain robust, with faster rate of growth expected over next 5 years. The exports growth would act as a key demand-driver, especially in industries like textiles, pharmaceuticals, and electronics. Adoption of digital technology and data analytics to improve customer focus are the most favourable global trends for Indian manufacturing; and strong growth in the economies of Middle East & Africa, the top manufacturing export destination, are encouraging trends. Also  the growing Rural India will provide next wave of growth for Indian manufacturing, considering that the rural consumption is growing faster than urban consumption (19% rural growth vs. 17% urban growth during 2009-12); and rural wages have been growing at a healthy rate (growth of 14% over the past 5 years). India’s manufacturing sector, with its inherent advantages of low cost labour, and educated and skilled engineering talent can certainly bounce back and do much better in coming years.

For winning in this new milieu, it is very important to developing structural capabilities through talent management – attract the best talent to manufacturing companies and develop their skills deal with the complexities of manufacturing sector. Talent Management is going to be the key success factor for future growth of manufacturing.

(References: Various media reports, press items, and research reports including from McKinsey, CII-BCG, IBEF, and EM, etc.)

[Disclaimer: This general note which has very broad, indicative, and unverified information of the industry sector has been compiled through secondary research from multiple sources; and is not meant to be relied by anyone for any purpose. KLS&A is not responsible for any errors or shortcomings in the same.]