In News:

• India’s manufacturing sector has entered a phase of accelerated growth, driven by policy reforms, robust industrial performance, and rising global investor confidence.
• Recent data for July 2025 shows the Index of Industrial Production (IIP) growing 3.5% year-on-year, led by a 5.4% surge in manufacturing output.
• Simultaneously, the HSBC Manufacturing PMI reached 59.3, its highest in 16 months, signalling sustained expansion in factory activity and optimism among producers.

Current Performance Snapshot

Engines of Growth

1. Electronics: Digital Factory Revolution

India’s electronics sector has witnessed exponential growth:

• Production rose from ?1.9 lakh crore (2014–15) to ?11.3 lakh crore (2024–25) — a 6x jump.
• Mobile phone manufacturing expanded from 2 units to over 300, while exports skyrocketed 127 times (?1,500 crore → ?2 lakh crore).
• Import dependence fell from 75% to 0.02%, reflecting strong domestic capacity.
• FDI inflow of US$ 4 billion since FY2020–21, largely under the PLI Scheme, has made India the world’s second-largest mobile manufacturer.

2. Pharmaceuticals: The Global Health Anchor

India ranks 3rd globally by volume and 14th by value in pharma production, supplying 50% of the world’s vaccines and 40% of U.S. generics.

• Projected to reach US$ 130 billion by 2030 and US$ 450 billion by 2047.
• Backed by PLI (?15,000 crore) and SPI (?500 crore) schemes for high-value drug manufacturing, quality enhancement, and R&D modernisation — consolidating India’s status as the “Pharmacy of the World.”

3. Automobiles: Driving Industrial Scale

The automotive sector contributes 7.1% to GDP and 49% of manufacturing GDP.

• In FY25, production exceeded 3.10 crore units, making India the 4th-largest automobile producer globally.
• GST 2.0’s tax reduction on vehicles and components is expected to boost consumer demand and accelerate production.

4. Textiles: Weaving Inclusive Growth

The textile and apparel industry contributes2.3% to GDP, 13% to industrial production, and 12% to exports, employing 45 million people.

• With a growth target of US$ 350 billion by 2030, the sector benefits from PM MITRA Parks (?4,445 crore), aimed at attracting ?70,000 crore investment and creating 20 lakh jobs.
• The recently inaugurated Dhar PM MITRA Park (Madhya Pradesh) is projected to generate 3 lakh jobs across 1,300 acres.

Investment, Employment, and Skills

• FDI Surge: Total inflows (2014–25) reached US$ 748.78 billion, up 143% from the previous decade.
• Top FDI sources: Singapore (30%), Mauritius (17%), U.S. (11%).
• Employment Creation: 17 crore jobs added over the last decade.
  • Worker Population Ratio (WPR): 52.2% overall; Female WPR: 32%.
  • Manufacturing’s job share: Up from 6% (2004–14) to 15% (2014–24).
• Skill Development Push: The Skill India 4.0 framework (?8,800 crore outlay) integrates major schemes (PMKVY 4.0, Apprenticeship, Jan ShikshanSansthan) to create an industry-aligned workforce equipped for Industry 4.0 technologies.

Policy Catalysts Powering the Surge

1. GST 2.0: Rationalisation for Growth

Launched in September 2025 under the banner “GST Bachat Utsav”, the reform simplifies tax slabs and lowers rates on 375+ items.

Impact on Manufacturing:

• Reduced Input Costs: 5% GST on packaging, textiles, and logistics lowers production expenses.
• MSME Boost: Faster refunds and simplified compliance enhance liquidity.
• Auto Sector Support: Lower taxes on small vehicles and parts drive consumption.
• Logistics Efficiency: Reduced GST on trucks and delivery vans enhances competitiveness.

2. National Manufacturing Mission (NMM)

The NMM provides a strategic, cross-ministerial roadmap integrating sustainability with industrial expansion. It promotes green manufacturing in solar PV, EV batteries, and hydrogen — aligning with India’s Net Zero 2070 goal.

3. Production Linked Incentive (PLI) Scheme

Covering 14 sectors with an outlay of ?1.97 lakh crore, the PLI scheme has:

• Boosted exports (e.g., smartphones > ?1 lakh crore in FY26 first half).
• Shifted pharma from trade deficit to surplus.
• Generated large-scale investments and jobs in electronics, autos, and medical devices.

4. National Logistics Policy (NLP)

Aims to reduce logistics cost (~13–14% of GDP) to single digits, improving LPI ranking to top 25 by 2030.
The PM GatiShakti Plan and Comprehensive Logistics Action Plan (CLAP) strengthen multi-modal connectivity and digital coordination.

5. Startup India & Industrial Corridors

• Over 1.91 lakh startups and 17.69 lakh direct jobs (as of 2025).
• 12 new industrial corridor projects worth ?28,602 crore approved to create smart, sustainable manufacturing cities.

Challenges Ahead

• Infrastructure Costs: Logistics remains costlier than global average, affecting export competitiveness.
• Skill Mismatch: Need for advanced training in automation, robotics, and AI.
• Regulatory Friction: Land and compliance issues constrain MSMEs.
• Global Headwinds: Trade protectionism and geopolitical volatility may disrupt export growth.
• Sustainability Imperative: Transition to low-carbon manufacturing critical to meet Net Zero goals.

Way Forward

• Plug-and-Play Manufacturing Parks: Accelerate park development with ready utilities for MSMEs.
• Skill India 4.0: Modernize ITIs, establish Centres of Excellence in robotics, AI, and green manufacturing.
• Tariff Rationalization: Lower duties on industrial raw materials to strengthen global competitiveness.
• Strengthen MSME Ecosystem: Provide concessional finance, technology upgradation, and global market access.
• Global Integration: Conclude FTAs (UK, EU) and join supply-chain alliances to diversify markets.
• Energy Diplomacy: Secure long-term access to crude oil, gas, and critical minerals.