Manufacturing in India: Progress Towards Becoming a Developed Economy by 2047
Current Status of Manufacturing
The share of manufacturing in India's Gross Value Added (GVA) was 14% in 2023-24. Historical data shows the share rose to around 18% by 1980-81, remained stable until 2010-11, and has since declined.
- At constant 2011-12 prices, the share increased from 9% in 1955-56 to 18% by 2020-21, but dropped to 17% in 2023-24.
Employment in Manufacturing
Based on the KLEMS database, manufacturing employment rose from 10.4% in 1980-81 to 11.8% in 2011-12, but declined to 10.6% by 2022-23.
- In contrast, the services sector's share in employment increased from 20% in 1990-91 to 33.8% in 2022-23.
Comparative Analysis with Other Nations
India's manufacturing share of GDP was 13% in 2023, lower than Bangladesh, Sri Lanka, and Pakistan. It significantly trails behind Southeast and East Asia, where China had a 26% share.
- The export of manufactured products dropped from 18% in 2012-13 to below 7% in 2022-23.
Challenges in the Manufacturing Sector
India's manufacturing sector is not advancing at the required pace, with increased import dependence for manufacturing inputs, including critical ingredients for pharmaceuticals.
Strategies for Accelerating Manufacturing Growth
To boost manufacturing, measures should focus on reducing government oversight, expanding the entrepreneurial base, and fostering innovation. Key strategies include:
- Encouraging more focused investments and participation in the global economy.
- Implementing policies that support innovation in products and processes.
Industrial Policy and Government Role
India's industrial policy historically involved government intervention through industrial licensing, abolished in 1991. However, initiatives like the production-linked incentive scheme indicate continued government influence.
- This scheme provides subsidies for production in selected sectors, potentially distorting competition.
Encouraging Entrepreneurship and Innovation
Emphasizing entrepreneurship, particularly first-generation enterprises, can strengthen manufacturing. A supportive financial system is crucial for startups.
- Family-owned conglomerates currently dominate, often lacking focus on technological advancements.
Global Market Participation
To become a major player globally, Indian companies need to innovate more and enhance product offerings.
- Examples from other countries show focused firms like Samsung and Huawei lead in global markets.
Conclusion
For India to achieve its development goals, a shift is necessary towards more entrepreneurial corporations that aim for global competitiveness, ensuring diverse employment and higher growth in production and exports.