Context:

• Amid growing geopolitical uncertainties and the reconfiguration of global production networks, India’s manufacturing sector has regained momentum.
• As supply chains diversify away from single-country dependence and industrial policy regains global prominence, India’s manufacturing revival provides a strong base for the next phase of industrialisation.
• The Economic Survey underscores that sustaining this momentum hinges on improving competitiveness and deeper integration into Global Value Chains (GVCs).

Manufacturing Revival - From Capacity Creation to Capability Building:

• India’s manufacturing policy has progressively focused on:
  • Lowering entry barriers through targeted incentives
  • Infrastructure investments
  • Ease of Doing Business (EoDB) reforms
• These measures have boosted investor confidence and capacity creation.
• However, the next challenge is to shift from mere capacity expansion to capability building, supported by stronger industrial ecosystems.

Strategic Industrialisation and Technology Leadership:

• Countries commanding critical technologies, complex manufacturing processes, and trusted production capabilities enjoy greater global bargaining power.
• India’s next phase of industrialisation must:
  • Prioritise strategic and technology-intensive sectors
  • Scale up traditional manufacturing
  • Allow higher experimentation and tolerance for firm-level failures
• This approach is essential to move up the value chain and ensure strategic indispensability.

Moving up the Value Chain - Sectoral Success Stories:

• India’s manufacturing profile is increasingly technology- and export-oriented. For example,
  • Electronics manufacturing: Production expanded almost 6 times, and exports grew nearly 8 times over the last 11 years.
  • Pharmaceuticals: India’s pharma production is among the world’s largest by volume. India supplies over 50% of global vaccine demand, and it is the major producer of generic medicines.
• To replicate such success across sectors, India needs:
  • Higher private sector participation
  • Stronger R&D-led innovation
  • Deeper industry–academia linkages
  • Faster technology absorption
  • Robust skilling ecosystems

Spatial Reorganisation - Rethinking Industrial Clusters:

• As capabilities deepen, spatial concentration of industry gains importance.
• As existing clusters are often small and fragmented, limiting productivity gains, focus must shift from creating clusters to building large, integrated industrial ecosystems.
• Tier-2 and Tier-3 cities are emerging as anchors due to:
  • Affordable land and real estate
  • Lower wage and operating costs
  • Large labour pools
  • Improved infrastructure and liveability

Infrastructure and Logistics - The Competitiveness Backbone:

• India has made notable progress. For example,
  • Logistics costs declined to around 7.97% of GDP (FY 2023–24) — close to global benchmarks.
  • Improved port efficiency, with several ports in the Top 100 of the World Bank’s Container Port Performance Index 2024.
• Key initiatives: PM Gati Shakti, National Logistics Policy, and Accelerated highway construction.
• Suggestions: Rebalance freight movement by increasing share of railways and coastal shipping. Promote multimodal logistics integration to unlock further efficiency gains.

Quality Control Orders (QCOs) - Raising Standards, Not Costs:

• QCOs can strengthen competitiveness in strategic and safety-critical sectors.
• By aligning with international standards, they encourage capability upgradation, and global market credibility.
• Success depends on phased implementation, adequate testing infrastructure, and continuous industry consultation.

MSMEs - Backbone of Manufacturing Growth:

• MSMEs contribute significantly to employment, output, and exports.
• Recent gains are greater formalisation, improved access to finance, and stronger supply-chain integration.
• Key challenges are persistent credit gaps, and limited technology adoption.
• Solutions include deeper MSME integration into strategic value chains, strengthening skilling, technology access, and quality infrastructure.

Governance and EoDB - The Factory-Floor Reality:

• While regulatory reforms have improved formal EoDB metrics, firms value speed, predictability, and consistency.
• Persistent bottlenecks include land acquisition delays, utilities and regulatory approvals, and weak dispute resolution mechanisms.
• With manufacturing becoming spatially concentrated, state and local governments play a decisive role through stable regulatory regimes, effective single-window systems, and time-bound approvals.

Challenges and Way Forward:

• Fragmented industrial clusters and scale constraints. Deepen GVC integration; build large, integrated industrial ecosystems in Tier-2/3 cities.
• Limited R&D intensity and weak innovation ecosystems. Prioritise technology-intensive and strategic sectors.
• MSME credit and technology gaps. Strengthen MSME participation in strategic value chains by filling credit and tech gaps.
• Overdependence on road transport for freight. Promote multimodal logistics and freight rebalancing.
• Regulatory delays and implementation inconsistencies. Ensure predictable, time-bound regulatory governance.

Conclusion:

• India’s next manufacturing leap will be defined not just by the scale of production, but by technological depth, strategic relevance, and global competitiveness.
• The proposed National Manufacturing Mission offers a platform to align reforms, infrastructure, skilling, and innovation under a coherent industrial strategy.
• Ultimately, India’s success will rest on building globally competitive firms embedded in strategically indispensable sectors—positioning manufacturing as a durable engine of growth and resilience.