Manufacturing Sector

Definition & Role

 Manufacturing sector refers to industrial production involving the transformation of

raw materials into finished goods.
 It includes textiles, electronics, automobiles, food processing, pharmaceuticals, etc.
 Part of the secondary sector in national income accounting.

Significance

Aspect Significance Supporting Data Example

GDP Major contributor to India’s ~17% of GDP (2023- Tata Steel, Maruti
Contribution economic output. 24, MoSPI) Suzuki
Employment Provides large-scale direct Employs ~60 million Textile & Apparel
Generation & indirect employment. people (12% of MSMEs in Tamil
workforce) Nadu
Export Growth Boosts foreign exchange ~70% of India’s Pharmaceuticals
earnings. merchandise exports (Sun Pharma), Auto
are manufactured parts
goods
Industrial Base Backbone of India's Expanding industrial Delhi-Mumbai
industrial growth and clusters and SEZs Industrial Corridor
urbanization. (DMIC)
Import Reduces reliance on foreign Key in electronics, iPhone assembly in
Substitution goods → strengthens self- defense, and India (Apple–
reliance. chemicals Foxconn)
Multiplier Effect Drives demand in services, High backward and Automobile industry
logistics, finance, and retail forward linkages driving steel, tires
sectors.
Boosts Promotes R&D, design, and India ranks 40th in Bharat Biotech
Innovation process engineering. Global Innovation (vaccine
Index (2023) manufacturing)
Supports Most MSMEs are ~45% of MSMEs are Lijjat Papad, Khadi
MSMEs manufacturing-oriented → in the manufacturing sector units
promotes grassroots sector
entrepreneurship.
Global Helps India integrate into India is the 5th Bajaj Auto exports
Competitiveness global supply chains. largest manufacturer to 70+ countries
globally (UNIDO,
2023)
Data
Indicator 2023–24 Data Source
GDP Contribution ~17% of GDP (target: 25% by 2025) MoSPI, Economic
Survey 2023–24
Employment 18.5 million workers employed in manufacturing Annual Survey of
industries (7.5% ↑ from FY22) Industries (ASI),
MoSPI
Wages Average emoluments increased by 6.3% in FY23 ASI, MoSPI
Exports Manufacturing exports reached a record high of Economic Survey
USD 447.46 billion in FY23 ~70% of total 2023–24
merchandise exports (6.03% ↑ from FY22)
Industrial Output 5% growth in factory output in January 2025 Rediff News
Growth
PMI (Purchasing Manufacturing PMI at 57.5 in May 2025, Rediff News
Managers’ Index) indicating strong expansion
Indicator Latest Figures
Share in Exports ~70% of total merchandise
exports
IIP Growth (2023-24) 5.9% (Index of Industrial
Production)
India’s Rank in Manufacturing 5th largest globally (UNIDO,
2023)
Target (National Manufacturing Raise GDP share to 25% by 2025
Policy)

Examples
Sector Example Why It’s Important (How to Use in
Answers)
Electronics Apple–Foxconn (Tamil Flagship case for Make in India & PLI
Nadu) scheme success in electronics exports.
Tata Electronics – India’s entry into semiconductor
Semiconductor ATMP packaging/export – crucial for self-reliance.
Automobile Maruti Suzuki Longest-running Indo-Japan joint venture;
massive export and job creator.
Tata Motors – EVs Indigenous electric vehicle manufacturing;
green manufacturing transition.
Pharmaceuticals Sun Pharma, Cipla India as the "pharmacy of the world" –
significant in exports and R&D.
Textiles & Shahi Exports Women-dominated garment unit; export-
Apparel (Karnataka) oriented; employment-intensive.
Khadi & Village Preserves traditional craft + promotes rural
Industries manufacturing & sustainability.
Food Processing Amul Cooperative model; value addition + rural
income + manufacturing in dairy sector.
Heavy Industry BHEL PSU manufacturing for energy and
transport; strategic national capacity builder.
Startups/Tech Bharat Forge – Defense Indigenous defense production → strategic
manufacturing autonomy under Make in India.
Ather Energy (EV Innovation in electric mobility; tech-driven,
Startup) sustainable manufacturing.
Biotech/Health Bharat Biotech (Covaxin) COVID-era manufacturing capacity &
indigenous R&D-based production.
Green JSW Steel – Green Transitioning to low-carbon industrial
Manufacturing hydrogen initiatives output.

Issues & Challenges in India’s Manufacturing Sector

Category Challenges Supporting Data / Examples
Infrastructure - Inadequate industrial Logistics cost in India ≈ 14% of GDP
Gaps infrastructure vs 8–10% in developed countries
- High logistics and electricity
costs
Regulatory - Complex compliance burden India ranked 63rd in Ease of Doing
Hurdles (GST, labor laws) Business (2020), but difficulties
- Land acquisition delays remain in land/labour
Credit - Limited credit access, especially MSMEs still face high collateral
Constraints for MSMEs demands despite MUDRA, CGTMSE
Low Tech - Outdated machinery & India’s R&D spending: <0.7% of
Adoption processes - Poor R&D GDP; lower than China (2.4%)
investments
Skilled Labour - Skill mismatch between industry Only 20% of workforce formally
Shortage needs and workforce skilled (MSDE)
- Inadequate vocational training
Global - Stiff competition from China, Vietnam’s manufacturing exports >
Competition Vietnam, etc. India despite smaller economy
- Poor integration into global
value chains
Digital Divide - Many small manufacturers lag Only 15% of MSMEs fully digitized
in digital adoption and (Digital MSME Survey 2022)
automation
Fragmentation of - Lack of scale & informality → 90%+ MSMEs are informal,
Industry low productivity restricting access to finance & formal
markets
Policy - Frequent policy changes, delays PLI rollout delays in sectors like
Uncertainty in PLI disbursement, shifting textiles, auto components
trade policies
Sustainability - Environmental non-compliance Need for green tech integration in
Concerns - High energy intensity in steel, cement, textiles sectors
traditional industries

Govt Schemes
Scheme/Policy Objective Key Features
Make in India (2014) Boost domestic manufacturing - Target: Raise manufacturing
and increase share in GDP share to 25% of GDP - Focus on
25 sectors
PLI Scheme (2020) Promote scale, efficiency, and - Covers 14 sectors including
exports through incentives electronics, auto, pharma, textiles
- ₹1.97 lakh crore outlay
SAMARTH (Textiles) Skill development in textile - Focus on job creation in
manufacturing garment, knitting, processing, and
handloom sectors
UDYAMI Bharat Enhance MSME - Includes credit support, skill
Scheme (2022) competitiveness and ease of training, technology upgrades
doing business
ZED Certification Promote Zero Effect Zero - Encourages quality production
Scheme Defect manufacturing among with minimal environmental
MSMEs impact
] Startup India / Stand- Encourage manufacturing - Collateral-free loans,
Up India innovation, particularly among mentorship, and market access
SC/ST & women support
National Logistics Improve logistics efficiency & - Aims to reduce logistics cost
Policy (2022) lower costs for manufacturing from 14% to 8% of GDP
sector
Technology Help textile sector modernize - Provides subsidies on capital
Upgradation Fund equipment & adopt new tech investment in machinery
Scheme (TUFS)
Industrial Corridors Infrastructure-driven - 5 major corridors planned to
(DMIC, CBIC) manufacturing clusters facilitate plug-and-play industrial
zones
Sustainable Promote green technology and - Incentives for renewable energy
Manufacturing reduce industrial carbon use, waste reduction
(MoEFCC + DPIIT) footprint
Way Forward
Area Suggested Measures
Infrastructure Push Fast-track industrial corridors, reduce logistics costs.
Ease of Doing Business Simplify compliances, expand single-window systems.
Skill Alignment Match training programs with industry needs (via PMKVY, ITIs).
Boost MSME Improve access to credit, tech support, cluster development.
Manufacturing
Increase R&D Spend Incentivize private R&D, promote innovation hubs.
Green Manufacturing Encourage sustainability, circular economy, and ESG-compliant
production.
Export-Orientation Leverage FTAs and strengthen supply chain competitiveness.

Imp Committees Recomendations

Committee / Report Recommendation How to Use in Answer
National Raise manufacturing share to 25% of Reinforce the long-term
Manufacturing Policy GDP by creating National Investment policy vision for sectoral
(2011) & Manufacturing Zones (NIMZs). growth.
Economic Survey Promote "Assembly in India for the Useful to argue for export-
(2022–23) world" and boost global value chain led and integration-focused
participation. manufacturing.
Arvind Panagariya Reduce regulatory compliance burden, Supports arguments on
Committee on ease land and labor laws. structural reforms.
Industrial Policy
RBI Report on MSMEs Improve credit flow, create distressed Key for MSME-focused
(UK Sinha Committee, asset fund, cluster-based support. manufacturing reforms.
2019)
NITI Aayog Strategy Invest in skills, innovation, and Use for skill-development
@75 Document digitization of MSMEs. and future-ready ecosystem
points.
Injeti Srinivas Simplify company law, reduce penal Important for improving
Committee on Ease of provisions, and digitize inspections. the business environment
Doing Business for manufacturers.
Report of the Task Fast-track approvals and create single- Use to argue for faster
Force on Project window systems for manufacturing infrastructure & industrial
Execution (2021) projects. corridor clearances.
CII Vision Document Focus on Industry 4.0, clean Great for forward-looking,
on Manufacturing manufacturing, and global tech-led suggestions.
(2022) competitiveness.
K.P. Krishnan Consolidate and modernize labour laws Useful for tackling rigid
Committee on Labour into 4 labour codes. labour market issues in
Reforms manufacturing.
Conclusion

India’s aspiration of becoming a $5 trillion economy and a global manufacturing hub hinges on
revitalizing its manufacturing sector through policy stability, technology infusion, and skilled
workforce development.

Reviving manufacturing is not just about GDP numbers — it's about inclusive growth, rural employment,
and creating a sustainable livelihood ecosystem for millions.

With just 17% contribution to GDP and over 60 million employed, manufacturing holds the untapped
potential to bridge the gap between economic ambition and ground reality.

Revitalizing manufacturing aligns with the constitutional goals of distributive justice and socio-
economic upliftment (Directive Principles under Article 43 and 39).