Indian corporates have enough cash; do they have will to invest in manufacturing?

By N.S. Venkataraman* 

The Chairman of the State Bank of India recently stated that the corporate sector in India is holding significant cash balances. Internal estimates of the bank put this at Rs. 13.5 trillion, suggesting that corporates have enough internal resources to fund capital expenditure and project investments. With investors showing enthusiasm for subscribing to public issues, there appears to be no shortage of funds for new manufacturing ventures.

While this observation is timely, the reality is that investment in manufacturing is not happening at the scale required. This should be a matter of deep concern for Prime Minister Modi and his government, as the Prime Minister has consistently stressed the importance of Atmanirbhar Bharat and the need to strengthen India’s manufacturing base.

Interestingly, former U.S. President Donald Trump, through measures such as the imposition of a 50% tariff on Indian exports and restrictions on H1B visas, has inadvertently done India a service. His policies forced Indians to rethink their dependence on foreign opportunities and recognize the urgency of becoming self-reliant. For decades, millions of Indians have aspired to migrate to the U.S. for jobs, permanent residency, and eventual citizenship, attracted by the country’s prosperity. Yet, the rise of protests and hostility toward migrants in the U.S., Canada, and parts of Europe has made many realize that alien soil can never be more secure or dignified than one’s own. This realization, even if belated, underlines the necessity of building strength at home.

India’s only meaningful response to this “shock treatment” is to rekindle national pride and strengthen the domestic manufacturing base. A robust industrial sector would reduce import dependence and enhance export competitiveness. Despite India’s rapid economic growth, which has made it the world’s fourth-largest economy, this growth has been powered primarily by services rather than manufacturing. While services are valuable, they are more vulnerable to global pressures, unlike manufacturing, which has the potential to provide stability, job creation, and consumption-led growth. A strong manufacturing ecosystem inevitably expands the domestic consumer base in tandem with GDP growth.

Currently, India’s dependence on imports is unacceptably high in several areas, including pharmaceuticals (active pharmaceutical ingredients), bulk chemicals, fertilizers, renewable energy inputs, and, most critically, crude oil and natural gas. Imports in these sectors continue to grow annually at 6–7%. Yet, a careful product-by-product review suggests that many of these imports could be substituted with domestic production if appropriate strategies were adopted with determination.

Technology remains the major constraint. India’s dependence on imported technology is substantial, underscoring the urgent need to strengthen the research and development ecosystem. Indian engineers and scientists can make significant contributions if the right environment is created. Reducing imports must be accompanied by an equally strong push to boost exports. For that, India needs strong global trading houses—an area where the country is still lacking.

The Government of India has been reasonably proactive, but Indian corporates, despite their strong cash reserves, have so far shown little inclination to rise to this challenge. The absence of significant corporate efforts to respond to Prime Minister Modi’s call for investment in manufacturing and R&D is striking.

It is imperative that India’s corporate leaders come together to set broad strategies, adopt time-bound targets for building manufacturing capacity, strengthen R&D, and pursue global competitiveness through exports. This requires greater cooperation among corporate houses, even in areas where they compete, to share investments, technologies, and market access. Such collaboration is common globally, where competitors often join forces in select areas to achieve mutual benefit and speedier results.

Indian corporates today have the financial resources. What they need to demonstrate is the will. Unless they rise to the occasion, India risks continuing as a services-dominated economy vulnerable to external shocks, rather than building the manufacturing backbone that can secure long-term self-reliance and prosperity.

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*Trustee, Nandini Voice For The Deprived, Chennai