India’s GDP Structure : Despite being a developing economy, India has bypassed the manufacturing-led growth model , directly jumping from agriculture to services.
Manufacturing’s Contribution :
~15-17% of India’s GDP (lower than the global average).
Employs ~12% of workforce.
Offers potential to absorb surplus labor from agriculture.
Challenges Facing Indian Manufacturing
Structural Bottlenecks
Land acquisition : Costly and complex process.
Labour laws : Rigid laws restrict hiring flexibility; compliance is complex.
Infrastructure : Inadequate logistics, power supply, port connectivity.
Logistics cost : High (~14% of GDP vs 8-10% in developed countries).
Policy & Regulatory Issues
Frequent policy changes discourage investors.
Taxation : Despite GST, compliance and implementation issues persist.
Environmental clearances delay projects.
Financial & Technological Issues
Access to credit for MSMEs is tough.
Technological obsolescence : Low R&D spending (India ~0.7% of GDP vs China ~2%).
Sector-wise Insights
Textiles & Apparel : Labour-intensive; faces competition from Bangladesh, Vietnam.
Electronics Manufacturing : Major imports from China; PLI scheme launched to promote domestic manufacturing.
Automobile Industry : One of India's success stories; globally competitive in 2-wheelers and 4-wheelers.
Pharmaceuticals : India is a global supplier of generics; vulnerable due to dependence on Chinese APIs.
Key Government Initiatives
Make in India
Launched: 2014
Aim: Raise manufacturing to 25% of GDP and create 100 million jobs.
Focus sectors: 25 sectors including autos, textiles, electronics, etc.
Outcomes : Mixed success — improved FDI but limited boost to manufacturing share in GDP.
PLI Scheme (Production Linked Incentive)
Sectors: Pharma, Electronics, Telecom, Textiles, etc.
