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At the root of India’s manufacturing challenge

  • Published
    2nd Jun, 2023


The majority of the 1991 economic changes were directed towards manufacturing, however despite the large reduction in tariffs and the end of the "licence-permit Raj" manufacturing's share of the economy did not rise.

Unimpressive record:

  • Focus on Manufacturing: After the economic reforms of 1991, India’s focus on manufacturing sector came back after 2014 with the initiatives like make In India and Production linked incentive scheme.
  • Poor growth: The first advance estimates of the national income for 2022-23 show manufacturing growth to be 1.3% for the year, less than that for agriculture.
  • Government efforts: Government has brought many steps to improve the ease of doing business like reduction in corporate tax rates, increase in capital expenditure by 18.5%.

The Price of food:

  • Demand: Food makes up a sizable portion of the budget for a significant portion of Indian households, limiting the expansion of the demand for goods manufactured.
  • Exports: Amongst the large economies, the share of food is the largest in India and its GDP per capita is the lowest. Thus, the option for exports must be explored to sidestep the demand issue.
  • Successful exporters: As seen in the cases of East Asian economies, skilled workforce and infrastructure is required for any economy to become a successful exporter.

Educational outcomes in India:

  • Poor primary education: India lags most other successful manufacturing economies in terms of educational quality.
  • Poor vocational education: The Planning Commission had shown that only about 5% of Indian youth have had any kind of technical training in spite of South Korea has over 85%.
  • Overhauling: Economic reforms of 1991 overlooked the need for an entire ecosystem, including schooling, training and infrastructure for manufacturing to flourish.
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