Syllabus: GS-III & V: Industry, Infrastructure, Investment Models.

Why in the News?

Recently, the Federation of Indian Chambers of Commerce & Industry (FICCI) released its quarterly survey (July-September 2025-26) showing strong optimism in India’s manufacturing sector. With 87% of respondents reporting steady or rising production, and 83% expecting increased new orders after recent GST rate cuts, the sector is drawing attention as a driver of economic growth. However, production costs remain an area of concern, mainly due to the rising prices of raw materials, energy, and labour, making a balanced assessment essential.

Current Status of India’s Manufacturing Sector

• Contribution to GDP: Around 17% of India’s Gross Value Added (GVA) comes from manufacturing.
• Employment: The sector employs nearly 12% of India’s total workforce, around 60 million people.
• Key Industries: Automotive, capital goods, pharmaceuticals, textiles, chemicals, and electronics dominate the landscape.
• Capacity Utilization: As per the latest FICCI survey, average utilization stands at ~75%, reflecting steady momentum.
• Investment Outlook: Over 50% of surveyed manufacturers plan capacity expansion in the next six months.
  

Assam’s Context

In the North-East region, Assam is emerging as an industrial hub, with focus sectors such as petrochemicals, natural gas, cement, food processing, and tea-based industries.

• The Assam Industrial Policy 2023 aims to attract ₹10,000 crore investment by 2028.
• The Numaligarh Refinery Expansion Project (₹28,000 crore) and Assam Gas Cracker Project are key anchors of regional manufacturing growth.
  

Major Drivers of Manufacturing Growth in India

1. Robust Domestic Demand:
   
   • Growing middle-class consumption, urbanization, and rising rural purchasing power are fueling demand for automobiles, consumer durables, and FMCG products.
     
2. Digital Transformation & Industry 4.0:
   
   • Rapid adoption of AI, IoT, robotics, and smart factories has increased productivity and supply-chain efficiency.
     
3. Policy Reforms and Infrastructure Push:
   
   • GST simplification, Gati Shakti National Master Plan, and National Logistics Policy (2022) have reduced transaction costs.
     
4. Global Supply Chain Realignment:
   
   • Geopolitical tensions and the China+1 strategy have positioned India as a preferred alternative manufacturing base.
     

Significance of the Manufacturing Sector

1. Economic Growth Engine:
   
   • Critical for achieving India’s $5 trillion economy goal and sustaining long-term GDP growth.
     
2. Employment Generation:
   
   • Labour-intensive industries such as textiles, leather, and food processing provide large-scale employment.
     
3. Export Diversification:
   
   • Manufacturing-led exports can reduce dependence on primary commodities and boost foreign exchange earnings.
     
4. Regional Development:
   
   • Industrial corridors (like the Delhi–Mumbai and East Coast Corridors) promote balanced regional growth.
     
5. Technological Upgradation:
   
   • Encourages R&D, innovation, and skill development, fostering self-reliance in critical sectors such as defense and semiconductors.
     

Challenges Faced by the Manufacturing Sector

1. High Input and Logistics Costs:
   
   • As per FICCI, 50% of firms reported rising production costs due to expensive raw materials (metals, chemicals, energy).
     
2. Skilled Workforce Gap:
   
   • Around 20% of industries face difficulty in sourcing skilled labour, especially in MSME and high-tech sectors.
     
3. Regulatory Complexity:
   
   • Lengthy approval processes and compliance burdens hinder ease of doing business.
     
4. Infrastructure Bottlenecks:
   
   • Inadequate logistics, fragmented power supply, and high inland transport costs affect competitiveness.
     
5. Global Uncertainties:
   
   • Trade restrictions, tariff wars, and supply chain disruptions affect export orders.
     
6. Low R&D Spending:
   
   • India spends less than 1% of GDP on research and innovation, limiting technological self-reliance.
     

Steps Taken to Boost Manufacturing in India

1. Atmanirbhar Bharat Abhiyan:

• Focus on import substitution, domestic production of critical goods, and MSME empowerment.

2. PLI Schemes:

• Electronics, telecom, and pharmaceuticals are witnessing strong FDI inflows under PLI.
• Over ₹1.6 lakh crore investment commitments received till 2025.
  

3. Ease of Doing Business Reforms:

• India’s ranking improved from 142 (2014) to 63 (2020) on the World Bank index.
• Single-window clearances and labour law rationalisation implemented.
  

4. Infrastructure Push:

• PM Gati Shakti, Industrial Corridors, and Dedicated Freight Corridors reduce logistical costs.
  

5. Skill Development:

• Skill India Mission and PM Kaushal Vikas Yojana (PMKVY) provide vocational training.
  

6. Digital Manufacturing & Green Transition:

• Promotion of smart manufacturing, renewable energy adoption, and Net Zero by 2070 targets.

7. Others:

• Make in India (2014): Promoting domestic manufacturing and FDI inflows.
• National Manufacturing Policy (NMP): Targets 25% share of manufacturing in GDP and creation of 100 million jobs.

Assam-Specific Initiatives:

• Assam Industrial Policy 2023 offers capital subsidies and land incentives.
• Bamboo & Tea-based clusters under the North East Industrial Development Scheme (NEIDS).
• Mega Food Park at Tihu (Nalbari) promotes agro-processing.
  

Way Forward

1. Strengthen MSMEs:
   • Facilitate technology access, credit flow, and market linkages for small manufacturers.
     
2. Boost R&D and Innovation:
   • Create manufacturing-focused R&D parks and incentivise academia-industry collaboration.
     
3. Promote Green Manufacturing:
   • Encourage energy-efficient technologies and circular economy practices.
     
4. Develop Regional Industrial Hubs:
   • Replicate the success of Tamil Nadu, Gujarat, and Maharashtra in other states including Assam and Odisha.
     
5. Leverage Free Trade Agreements (FTAs):
   • Expand market access for Indian products under new trade pacts (UAE, Australia, UK).
     
6. Build Human Capital:
   • Expand skill programs aligned with emerging sectors — semiconductors, EVs, and electronics.
     

Conclusion

India’s manufacturing sector stands at a strategic inflection point. With favourable policy support, domestic demand, and global realignments, it has the potential to become a key pillar of sustainable and inclusive economic growth.
For states like Assam, integration into national manufacturing networks through industrial corridors and policy support can drive regional equity and employment generation.

However, achieving the target of 25% GDP share from manufacturing by 2030 requires a calibrated approach — blending innovation, skill development, and sustainability with ease of doing business.

UPSC Mains Question

“Discuss the role of India’s manufacturing sector in achieving sustainable economic growth. What steps have been taken to strengthen domestic manufacturing, and what more needs to be done to address its structural challenges?”

MCQ

Q. With reference to India’s manufacturing sector, consider the following statements:

1. The Production Linked Incentive (PLI) scheme aims to boost domestic manufacturing across 14 sectors.
   
2. India’s manufacturing sector currently contributes around 25% of GDP.
   
3. Assam Industrial Policy 2023 provides incentives for tea-based and bamboo industries under NEIDS.
   

Which of the above statements are correct?

(a) 1 and 3 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3

Answer: (a) 

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