[Answered] Examine how transitioning from growth to productivity-led manufacturing can realize Viksit Bharat. Evaluate the structural reforms necessary to sustain this momentum.

Introduction

Economic Survey 2025-26 emphasises that sustaining India’s 6.5% GDP growth requires a shift. However, transitioning from a fast-growing major economy to a Viksit Bharat (Developed India) by 2047 requires a fundamental shift: moving from a factor-accumulation model (simply adding capital and labor) to a Total Factor Productivity (TFP) driven growth model.

Why Productivity-Led Manufacturing is Crucial for Viksit Bharat

Escaping the Middle-Income Trap

1. Sustained prosperity depends on productivity, not merely expanding labour and capital inputs. Consumption-led growth faces diminishing returns over time. Example: Latin American stagnation.
2. Productivity raises per-capita income sustainably without excessive inflation. Example: East Asian economies.
3. TFP-driven economies achieve higher innovation and competitiveness. Example: South Korea transition.

Manufacturing as the Engine of Structural Transformation

1. Manufacturing bridges low-productivity agriculture and high-value modern sectors. Agriculture employs ~43% workforce but contributes far lower GDP share. Example: Disguised unemployment.
2. Manufacturing creates strong forward-backward linkages across sectors. Example: Auto-component clusters.
3. Large-scale industrialisation absorbs semi-skilled labour effectively. Example: Electronics manufacturing hubs.

Employment Generation with Productivity Gains

1. Manufacturing uniquely combines job creation with rising efficiency. Labour-intensive sectors can absorb India’s demographic surge. Example: Textiles and footwear.
2. Industry 4.0 promotes worker upskilling and technological diffusion. Example: Smart factories.
3. Formal manufacturing increases wage security and social protection. Example: EPFO-linked jobs.

Global Competitiveness and Export Resilience

1. Productivity lowers unit costs and integrates India into global value chains. China+1 strategy creates opportunities for India’s export manufacturing. Example: Apple supply chains.
2. PLI schemes support scale economies in sunrise sectors. Example: Semiconductor mission.
3. High-productivity exports strengthen external stability. Example: Engineering goods exports.

Innovation and Technological Sovereignty

1. Productive manufacturing ecosystems stimulate domestic innovation capacity. NITI Aayog highlights deep-tech manufacturing as strategic priority. Example: AI-enabled manufacturing.
2. Industrial R&D enhances defence and semiconductor resilience. Example: Atmanirbhar Bharat.
3. Manufacturing depth improves domestic value addition. Example: EV battery ecosystem.

Structural Constraints Hindering Productivity Growth

1. Fragmented Industrial Structure: India’s manufacturing sector is dominated by small, low-productivity firms. Absence of mid-sized firms weakens scale competitiveness. Informality restricts access to credit and technology adoption. Example: Missing middle problem.
2. Dwarf Firm Problem: Inefficient firms continue surviving despite low productivity. Capital remains trapped in unviable enterprises. Weak insolvency and bank-led evergreening slow creative destruction. Example: NPA restructuring.
3. High Logistics and Compliance Costs: Efficiency gaps reduce industrial competitiveness globally. India’s logistics cost remains around 13% of GDP. Excessive regulatory approvals discourage scaling up. Example: Compliance burden.
4. Skill and Labour Market Mismatch: Education expansion has not ensured industrial employability. Limited vocational training reduces labour productivity. Manufacturing faces shortage of job-ready technicians. Example: Apprenticeship deficit.

Structural Reforms Necessary to Sustain Momentum

Labour and Human Capital Reforms

1. Productivity growth requires a flexible and skilled workforce. Operationalise four Labour Codes uniformly across states. Example: Formalisation reforms.
2. Integrate NEP 2020 with vocational and apprenticeship ecosystems. Example: Dual-skilling models.
3. Expand AI, robotics, and semiconductor training institutions. Example: Skill India Digital.

Financial and MSME Reforms

1. Shift from collateral-based to cash-flow-based lending. Example: GST-linked credit.
2. Encourage equity financing to prevent zombification. Example: Startup ecosystem.
3. Cluster-based MSME modernization should be accelerated. Example: Tiruppur textile cluster.

Infrastructure and Logistics Reforms

1. Infrastructure must transition from creation to utilisation efficiency. PM Gati Shakti should integrate multimodal logistics seamlessly. Example: Freight corridors.
2. Develop plug-and-play industrial cities and export hubs. Example: Dholera smart city.
3. Reliable energy-water-digital infrastructure is essential. Example: Green hydrogen hubs.

Governance and Regulatory Reforms

1. Ease of doing business must evolve into ease of operating business. Reduce compliance burden through trust-based governance. Example: Faceless clearances.
2. Strengthen Insolvency and Bankruptcy Code implementation.
3. Stable taxation and contract enforcement improve investor confidence. Example: Arbitration reforms.

Innovation and R&D Push

1. Innovation-led productivity is essential for developed economy status. India’s GERD remains below 0.7% of GDP. Example: OECD comparison.
2. Budget 2026-27 expanded semiconductor and AI allocations. Example: IndiaAI Mission.
3. University-industry research partnerships should deepen. Example: IIT-industry collaboration.

Conclusion

Securing macroeconomic stability and 6.5% growth is a commendable foundation, but it is not a guarantee of developed-nation status. To achieve a true Viksit Bharat by 2047, India must activate its internal growth engines via uncompromising, structural micro-reforms.