Why Indian shipbuilding could be the strategic force-multiplier our economy needs

The Indian Economic Survey 2022-23 has identified India’s shipbuilding industry as a significantly important strategic asset. As per the survey, the Indian Shipbuilding industry plays a crucial role in the development of heavy engineering industries and adds to the national defence and energy security of the country.

Taking into consideration the direct as well as indirect linkages of the shipbuilding industry with other leading industries, the latest Economic Survey suggests that shipbuilding has the potential to significantly contribute to the national GDP while increasing the contribution of the industry in collaboration with various sectors. Furthermore, the Shipbuilding industry’s huge dependence on the Indian economy’s infrastructure and services sectors make it a potential booster for the ‘Aatmanirbhar Bharat’ campaign, the survey said.

Shipbuilding: One of the highest employment multipliers

The Indian Economic Survey 2022-23 states that if a conservative Marginal Consumption to GDP Ratio (MCGR) of 0.45 for the shipbuilding sector is taken based on international shipbuilding statistics, the investment multiplier would be somewhere around 1.82. “For example, an injection of approx. ₹1.5 lakh crore in naval shipbuilding projects would accrue a circulation of ₹2.73 lakh crore in the shipbuilding sector due to the multiplier effect,” the survey noted.

Image: Twitter/@IN_R11Vikrant (An indigenous ALH Dhruv landing on INS Vikrant)

Therefore, the shipbuilding industry has been cited as one of the highest employment multipliers among manufacturing activities and holds the potential of generating mass employment in coastal, remote and rural areas. As per the survey, the indigenously-developed aircraft carrier INS Vikrant, which was commissioned into the Indian Navy in September 2022, engaged approximately 500 MSMEs, 12,000 employees from ancillary industries, and 2,000 shipyard employees. This can be considered as an indicator of the scope provided by the shipbuilding industries in employment generation.

Notably, a study undertaken by the Indian Navy on the development of seven P-17A frigates revealed that around 3/4th of the cost of the project was invested back into the Indian economy, the survey said. Furthermore, as per the latest survey, “indigenisation initiatives implemented by the Indian Navy have resulted in a significant infusion of economic activity by creating employment opportunities for Micro, Medium and Small Enterprises (MSME) and other industries.”

Apart from benefiting the ancillary industries and generating massive employment opportunities, the economic survey states that an indigenous shipbuilding industry can also reduce forex outgo and freight bills. This will reduce the current account deficit. “Thus, we see that the strong forward and backward linkages of the shipbuilding sector play an important part in the creation of a self-reliant India,” the survey noted.