India’s Manufacturing Growth and Challenges it Faced

Source: The post India’s Manufacturing Growth and Challenges it Faced has been created, based on the article “Building on the revival of the manufacturing sector” published in “The Hindu” on 7th December 2024

UPSC Syllabus Topic: GS Paper3- Economy-growth, development and employment and changes in industrial policy and their effects on industrial growth.

Context: The article discusses India’s efforts to become a global manufacturing hub through the Production Linked Incentive (PLI) scheme. It highlights the sector’s growth, challenges like high input prices, the need for regional balance, and focus on MSMEs and women’s participation to boost inclusive development.
For detailed information on India Struggling to become a Global Manufacturing Hub read this article here

What is the Impact of the PLI Scheme on India’s Manufacturing Sector?

1. The Production Linked Incentive (PLI) scheme has transformed India’s manufacturing landscape.
2. It has driven growth in mobile manufacturing, electronics, pharmaceuticals, automobiles, and textiles.
3. Manufacturing output grew by 21.5%, and Gross Value Added (GVA) grew by 7.3% in 2022-23 (ASI data).
4. Sectors like basic metals, chemicals, motor vehicles, and food products contributed 58% of manufacturing output, with a growth of 24.5%.
5. The PLI scheme has enhanced production, exports, and job creation.

What challenges does India face in manufacturing?

1. Input Costs: Input prices surged by 24.4% in 2022-23, causing a gap between output growth (21.5%) and GVA growth (7.3%).
2. Import Dependency: High import costs of raw materials impact competitiveness.
3. Regional Imbalance: Over 54% of manufacturing GVA and 55% of employment are concentrated in states like Maharashtra, Gujarat, Tamil Nadu, Karnataka, and Uttar Pradesh, limiting equitable growth across other regions.
4. MSME Challenges: MSMEs contribute 45% to manufacturing GDP but face barriers due to high investment thresholds in PLI schemes. This limits their ability to scale up and integrate into value chains.
5. Low Female Participation: Manufacturing output could rise by 9% with increased women’s participation. Lack of supportive infrastructure, such as childcare facilities, hinders this potential.

What is India’s manufacturing vision for 2047?

1. India aims to raise manufacturing’s share in GVA from 17% to 25% by 2030-31 and 27% by 2047-48.
2. Sustained efforts in domestic manufacturing and value addition are critical.
3. Policies improving ease of doing business will help achieve this vision.

Conclusion: India’s manufacturing sector is growing steadily with strong policy support. Expanding PLI, addressing challenges, and fostering inclusivity can make India a global manufacturing powerhouse.

Question for practice:

Examine the impact of the PLI scheme on India’s manufacturing sector and the challenges hindering its growth.