India’s manufacturing sector is gaining global traction, says S&P Global

New Delhi: India’s manufacturing sector is emerging as an increasingly attractive destination for global investors, with the country making notable progress in enhancing its competitiveness and making its manufacturing sector more attractive to global investors, S&P Global said on Monday.

It also highlighted in its latest research report, titled ‘India Forward: Transformative Perspectives’, that India is ramping up its push for alternative energy to build a cleaner, self-reliant transport future in which biofuels will play a central role. This push offers a triple win for the country through strengthening energy security, lowering greenhouse gas emissions, and enhancing rural incomes, the report said.

India is well-positioned to capitalise on shifting global trade dynamics and cooperation trends, with its economy set to become the world’s third-largest by FY31, S&P Global added.

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Over the past three decades, India has grown significantly in scale and international influence, the reported noted. Its core sectors—manufacturing, agriculture and services—have grown in step with demographic shifts and structural changes, and will see demand grow as the economy advances, it said.

Meanwhile, an analysis of S&P Global Market Intelligence’s Strategic Opportunity Index shows India has made notable gains in competitiveness, especially in attracting global investment to its manufacturing sector.

"Energy will be a key thread that will enable the performance and viability of all sectors in India," the report said. "Cross-cutting themes will span security and reliability, in the larger framework of a more market-oriented and globally integrated economy," it added.

Manufacturing growth hit 10-month high in April

The latest report from S&P Global comes after India’s manufacturing sector expanded at its fastest pace in 10 months in April, driven by strong demand and a sharp rise in output.

The HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 58.2 in April from 58.1 in March and 56.3 in February. The index was at 57.7 in January and 56.4 in December. A reading above 50 indicates an expansion, and below 50 a contraction.

The survey said growth momentum in the Indian manufacturing industry improved in April, with output increasing at the fastest pace since June 2024 on the back of a strong expansion in order books.

"An analysis of S&P Global Market Intelligence’s SOI over time indicates that India has made notable progress in enhancing its competitiveness and making its manufacturing sector more attractive to investors," the report said.

Where India lags

However, India continues to lag in the resource availability momentum score, registering 69.4 out of 100. This score measures the cost and availability of two key inputs: labour and finance.

"This is primarily due to the relatively low score of the labour component (50 out of 100), as the availability of labour with the required skills for value-added manufacturing remains a significant challenge that hinders India’s competitiveness," the report said.

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"The targeted skill development initiatives (e.g., for semiconductors and solar photovoltaic cell manufacturing) underway may take some time to translate into an improvement in the score," it added.

Rising oil exploration on the horizon

The S&P Global report said the Oilfields (Regulation and Development) Amendment Bill, 2024 and other anticipated regulatory changes come at an opportune time for India amid increasing global uncertainty, with the government and national oil companies looking to ensure growth while improving revenue prospects.

Meanwhile, with exploration activity dwindling around the world, many producers are looking at India, which presents an investment opportunity as a major growth market.

"The global narrative in energy markets is shifting closer to what India has always pursued – an ‘all-of-the-above’ approach. The government and its state-owned national oil companies alike are looking to plug mismatches in supply and revenue," the report said.

"S&P Global Commodity Insights notes that India has a consistent decline in liquids production, while its gas markets are expected to grow significantly," it added.

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The report pointed out that the diversifying India’s energy regulatory environment will also be important, especially as it seeks to draw investors in areas such as renewable and nuclear energy.

"Looking forward, how India prepares for potential supply-chain disruption will be an indicator to watch. The largely benign global oil price environment rewards India’s import strategy, but energy security now goes beyond physical supply security," it added.