The Indian manufacturing sector has witnessed significant growth in recent years, propelled by technological advancements, government initiatives, and increasing domestic and global demand. As the sector teeters on the edge of rapid expansion, it faces numerous talent challenges that must be addressed. These include retaining talent and bridging the growing skills gap, crucial steps for ensuring a resilient and prosperous future.

Growth story 

Comprising 17% of the nation’s GDP and employing over 27.3 million workers, the manufacturing sector holds substantial importance in the Indian economy. The Indian government aims to boost this sector further, targeting 25% of the economy’s output from manufacturing by 2025 through various programs and policies, as per the India Brand Equity Foundation. 

In fact, the UN World Economic Situation and Prospects (WESP) 2024 report also indicates that the GDP in South Asia is expected to rise by 5.2% in the same year, primarily propelled by India's strong expansion, solidifying its position as the world's fastest-growing large economy.

With initiatives such as Make in India 2.0, Production Linked Incentive, National Manufacturing Policy, the manufacturing sector has seen a surge in investments, infrastructure development, and the adoption of modern manufacturing practices. This growth has bolstered the country's industrial output and contributed to job creation, skill development, and economic expansion. As India continues to emerge as a manufacturing hub, fueled by innovation and efficiency, the sector holds immense potential for further expansion and diversification, promising a bright future for the nation's industrial landscape.

Even as the future looks promising, having the right talent to drive this projected growth is turning out to be quite challenging. 

Talent challenges 

• India’s manufacturing sector is facing several talent challenges that could potentially hinder its growth and competitiveness. One of the primary challenges is the skill gap in the workforce. According to a McKinsey & Co report, India could face a potential skill gap of 85-90 million by the year 2030. Many manufacturing jobs require specific technical skills often lacking in the available talent pool. Additionally, there is a shortage of qualified candidates for specialised roles, such as engineering and machine operation. 

• Many young professionals entering this sector may have unrealistic expectations about the nature of work, salary levels, and job prospects. Additionally, there may be a disconnect between the skills possessed by job seekers and those required by employers. According to latest data, the manufacturing sector has seen a 1% increase in organisations being seen as great places to work by employers, with 86% of employees confirming this in 2024. However, satisfaction levels still lag behind those of 2022, indicating the ongoing need for sustained efforts in fostering a top-notch workplace culture. Larger organisations particularly need to focus on continuous improvement, as the current improvement is mainly driven by mid-sized companies.

• Another challenge is the retention of skilled workers. High turnover rates are common in the manufacturing sector due to factors such as limited career advancement opportunities, poor working conditions, and low wages. This turnover can disrupt production schedules and increase recruitment costs for companies. In fact, according to the World Economic Forum’s The Future of Jobs report, employers foresee a significant turnover of 23% of jobs in the labor market over the next five years.

• Furthermore, the rapid advancement of technology in the manufacturing industry requires workers to upskill or reskill to remain relevant. Over the next five years, 23% of worldwide jobs are projected to undergo changes due to industry transformation, driven in part by advancements in artificial intelligence and other technologies. Therefore, there needs to be more investment in training and development programs by many manufacturing firms, leading to a shortage of workers with the necessary technical competencies.

• Lastly, the perception of manufacturing jobs as low-status or ‘undesirable’ careers among the younger generation exacerbates the talent shortage in the sector.

Solutions 

To address these challenges, HR leaders must work towards finding disruption-proof solutions that can deliver sustainable success: 

Leveraging technology: Adopting HR technology solutions such as applicant tracking systems, learning management systems, and employee self-service portals to streamline HR processes, improve efficiency, and enhance the employee experience. Organisations can leverage Keka's comprehensive HR solutions and create a workplace that allows employees to thrive. 

Developing talent pipelines: Implementing robust talent acquisition strategies, including campus recruitment programs, apprenticeships, and partnerships with educational institutions, to build a continuous pipeline of skilled workers. This is especially important as the manufacturing sector in India continues to deal with an especially high attrition rate. Manufacturing organisations can leverage Keka's Recruitment and Applicant Tracking System to streamline their recruitment processes, from job posting to candidate selection. By leveraging features such as job board integrations, candidate screening, and interview scheduling, manufacturing firms can attract and hire skilled professionals, reducing time-to-fill vacancies, combating the high churn rate of the sector more efficiently.

Investing in training and development: Investing in training and development is crucial in the manufacturing sector, where diverse industries demand specialised skill sets. With the ongoing digital transformation, there exists a considerable gap between the skills possessed by employees and those required by employers. Offering continuous training and development opportunities to current employees becomes imperative to enhance their skills and enable adaptation to evolving job roles and technologies within the manufacturing landscape.

Implementing employee engagement initiatives: Creating a positive work culture and environment through employee engagement initiatives, recognition programs, and regular feedback mechanisms to improve employee satisfaction and retention. By focusing on employee safety and prioritising compliance with labor laws, and industry standards, leaders must work toward creating a safe and legally compliant work environment that protects the well-being of employees. 

Collaborating with industry associations: Engaging with industry associations and networks to share best practices, benchmark performance, and collaborate on talent development initiatives to address common challenges faced by the manufacturing sector.

By adopting a holistic approach that combines talent acquisition, development, engagement, technology adoption, diversity, compliance, and collaboration, HR leaders in the manufacturing sector can effectively address talent challenges and drive sustainable growth for their organisations.

Key takeaways

1. The Indian manufacturing sector is experiencing significant growth driven by technological advancements, government initiatives, and increasing demand.

2. India is forecasted to expand at a rate of 6.2% in 2024, with the manufacturing and services sectors playing a crucial role in this growth.

3. Despite the promising future, the manufacturing sector faces talent challenges, including skill gaps, unrealistic job expectations, high turnover rates, and the need for upskilling.

4. HR leaders must adopt technology solutions, develop talent pipelines, invest in training and development, implement employee engagement initiatives, and collaborate with industry associations to address these challenges effectively and drive sustainable growth.