India's Manufacturing Sector Poised for Global Leap as Structural Growth Gains Momentum: Report

New Delhi: India is steadily transitioning from being a low-cost manufacturing destination to building globally competitive industrial capabilities, with favourable economic conditions and policy support expected to drive the next phase of growth, according to a report released on Monday.

The report by Carnelian Asset Management and Advisors said India's manufacturing sector is entering a new era of expansion, backed by a combination of currency depreciation, wider global market access and record public investment in infrastructure.

Describing the current phase as "Manufacturing 2.0", the report noted that multiple growth drivers are working together to strengthen India's position in global manufacturing. It added that the firm's manufacturing-focused investment fund has delivered a compound annual growth rate (CAGR) of more than 32 per cent since its launch in 2020.

The report identified electronics manufacturing services, defence exports, pharmaceutical and contract development and manufacturing organisation (CDMO) exports, auto components, and textiles and apparel as some of the sectors with the strongest long-term growth potential.

Among the major factors supporting the manufacturing sector is the depreciation of the rupee in real effective exchange rate (REER) terms. According to the report, India's REER declined by around 16 per cent between December 2024 and April 2026, marking the sharpest sustained fall since the early 1990s. Historically, such periods of depreciation have been followed by stronger export performance.

The report also highlighted India's expanding trade network, which now provides preferential access to global markets accounting for nearly $9 trillion in imports, significantly improving export opportunities for Indian manufacturers.

Another key growth catalyst is the government's continued focus on infrastructure spending. Public capital expenditure in the Union Budget 2026-27 has been increased to Rs 12.2 lakh crore, nearly four times the level recorded a decade ago, providing a major boost to industrial development.

The report observed that some of the most significant wealth creation opportunities often emerge during periods of structural transformation, before the broader market fully recognises their potential.

India's electronics manufacturing sector was cited as a notable success story. Mobile phone production has surpassed approximately $56 billion, while iPhone exports have crossed nearly $17 billion. The report also noted that Apple now assembles more than 20 per cent of its global iPhone production in India.

It concluded that supportive government policies, global supply chain diversification, rising domestic demand, improved infrastructure and growing competitiveness are together creating a strong manufacturing upcycle. While acknowledging that execution challenges remain, the report said India appears well-positioned for a multi-year industrial expansion with significant investment potential.

With inputs from IANS