India Industrial Sector: The Oasis of Economic Growth

The comprehensive report by Cushman & Wakefield explores the drivers for manufacturing growth in India, major markets, along with the opportunities and challenges facing the sector and its related real estate.

Important Findings:

Despite the current economic slowdown and a downsizing of India's expected GDP from 9% to approximately 7.1% as per the latest report by Central Statistical Organisation, India still remains one of the fastest growing economies in the world, ranking only second to China. The pace of this growth has largely revolved around India's service exports, backed by a robust and ever-increasing domestic consumption. Strong long term fundamentals like dynamic industrial environment, positive trend in outsourced manufacturing, increasing domestic demand and growth in exports have led the Indian economy to gain greater foothold in the world market over the past decade. Distinct advantages such as lower costs of production and superior output quality makes India a viable destination for outsourcing of manufacturing for several multi-national corporations (MNCs) across the world.

The manufacturing sector in India has witnessed a healthy average growth of approximately 9% in the last four years, with a record growth of 12.3% in 2006-07, primarily attributed to the global cost competitiveness – competitive capital and operative costs – that India has been able to provide vis-à-vis other locations. Further, the expanding domestic market together with the scaling up of operations by Indian companies, emergence of new industry segments and amendments in the regulatory framework such as incentives and subsidies, single-window clearances, investor friendly policies by several state governments, etc., have provided a further boost to the manufacturing scenario in India.An increased and sustained focus on the manufacturing sector is inevitable as well as advisable to achieve the projected average growth of 9% growth during the 11th Five Year Plan (2007-2012).

India has always enjoyed certain core advantages in the manufacturing sector, like rich mineral resources (iron ore, coal etc.), developed processing base, natural sea ports (Kandla, Kochi, Visakhapatnam, Paradeep, etc.) and abundant supply of cost-effective labour. Owing to these natural advantages, the manufacturing sector in India has spread across primary, secondary and tertiary processing segments.While the traditional manufacturing strongholds in India which have been steel, cement, heavy engineering, textiles, etc., the emerging industrial and related sectors include agro-based/food processing industries, pharmaceuticals, automobiles, logistics and warehousing, among others which are also gaining grounds in India.

Like the manufacturing industry on the whole, the Indian industrial real estate market has also delivered a strong performance in recent years, with average rental growth reaching around 25-30% in key markets. Supply shortages, however, in prime centres such as Mumbai and Delhi –

NCR have forced much of the manufacturing and logistics facilities to relocate to industrial parks in emerging tier-II and III locations. Read complete report at Cushman & Wakefield