Odisha’s gross state value added (GSVA) at 2011-12 prices has exhibited an impressive growth of 8.6 per cent compared to 6.8 per cent in FY23. The growth in GSVA is significantly supported by 8.8 pc growth in the manufacturing sector. However, the share of the manufacturing sector constitutes 27 pc of Odisha’s GSVA. If we take the last ten years’ data from FY2015 to FY2024, the decadal average share of manufacturing in GSVA at 2011-12 prices is around 24 pc. Illustratively, in high per capita income states like Gujarat, the share of the manufacturing sector in Gujrat’s GSVA has been around 36 pc during the last decade.
Odisha requires a structural change where manufacturing sector share will rise to 30 pc of GSVA at constant prices in the coming decade. The sector includes MSME manufacturing and large manufacturing units. The sector has forward and backward linkages in agriculture and services. A higher share of the manufacturing sector in Odisha’s economy will spill over mainly to the agriculture sector, raising its productivity and propelling the services sector.
There will be ten tangible benefits to the Odisha economy if the share of the manufacturing sector in GSVA increases. While overcrowded workforce will move to the manufacturing sector, productivity in the agricultural sector will improve. Besides, more gainful employment will be created with enhancing skill. Micro, small, and medium enterprises (MSMEs) are the backbone of manufacturing and supporting these enterprises through access to finance, technology, and markets, will lead to inclusive growth and employment generation.
The entrepreneur culture will grow as the manufacturing drive will attract youth for their involvement in shaping the nation’s future. Similarly, existing manufacturing units in the informal sector will be attracted to the formal sector to avail themselves of the government’s incentives.
The export potential will be improved and it will also bring in technological advancement. Besides, it will augment the GST supplier’s base in Odisha. Lastly, higher buoyancy in SGST will be possible through higher value addition of manufacturing sectors in turn, more state own tax revenue will be realised.
The advantage of production-linked incentives to boost domestic manufacturing should be taken to accelerate economic growth and make manufacturing competitive. The Make in India Initiative, launched in 2014, aims to transform India into a global manufacturing hub. It encourages domestic and international companies to produce goods in India, focusing on electronics, automotive, defence, and textiles.
Integrating digital technologies in manufacturing, known as Industry 4.0, is revolutionising the sector. Industry 4.0 — also called the Fourth Industrial Revolution or 4IR — is the next phase in the digitisation of the manufacturing sector. Manufacturing will increasingly adopt the Internet of Things (IoT), Artificial Intelligence (AI), robotics and big data to enhance productivity, improve quality, and reduce costs.
The manufacturing growth will be supported by greater credit off-take alongside a favourable policy framework. The expansion of manufacturing sectors is used to gauge the economic strength of the economy. However, sustainability and green manufacturing, with growing concerns over climate change, manufacturing will gradually shift towards more sustainable practices. Green manufacturing emphasises reducing waste, conserving energy, and using environmentally friendly materials and processes.
India’s commitment to becoming a global manufacturing hub is underscored by its focus on technology-driven transformation, supply chain resilience and sustainability, making it a key player in the global manufacturing landscape over the coming years. Boosting of manufacturing sectors in Odisha will contribute to the envisaged global manufacturing hub.
The structural change in Odisha’s economy towards the manufacturing sector will align with Viksit Bharat@2047. The Utkarsh Odisha – Make in Odisha Conclave will enhance the manufacturing base. In this direction, Odisha is creating an ecosystem to attract investments in manufacturing sectors such as textiles, apparel, and technical textiles; through a manufacturing hub, Odisha will position itself as one of India’s industrial powerhouses.
(Professor in Finance, Chair Professor of Centre of Excellence in Fiscal Policy & Taxation, XIM University. Views expressed are personal)