Manufacturing Mission: Need of Right Policy Intervention

Syllabus: GS3/Indian Economy

Context

• Recently, the Union government moved to establish an inter-ministerial panel for drafting a National Manufacturing Mission, aiming to strengthen India’s manufacturing sector.

Manufacturing Sector in India

• It encompasses industries engaged in the production, processing, and assembly of goods, contributing significantly to the country’s economic growth and employment.
• It includes textiles, electronics, automobiles, pharmaceuticals, chemicals, and renewable energy components.
• It currently contributes about 17% to India’s GDP, and aims to increase to 23% over the next two decades by focusing on sunrise sectors such as semiconductors, renewable energy components, medical devices, and batteries.
  • India’s GDP growth is projected at 6.7% in FY26, surpassing global growth rates.

Issues and Concerns

• Structural Issues in Manufacturing: MSMEs in India struggle with formalization, limited access to credit, and regulatory hurdles, affecting their growth.
  • Despite these efforts like National Manufacturing Policy (2011) and Make in India (2014), manufacturing’s contribution to GDP has remained at 15-17%.
• Productivity and Competitiveness: India’s manufacturing exports lag behind Asian peers like Vietnam due to low productivity and inconsistent product standards.
  • Technology adoption remains slow, limiting India’s ability to integrate into global supply chains.
• Policy and Infrastructure Bottlenecks: High logistics costs and inadequate infrastructure hinder industrial expansion.
  • State-level industrial policies are not fully aligned with national priorities, leading to uneven growth across regions.
• Labour and Skill Development: Skill gaps in the workforce affect productivity, with a need for better vocational training.
  • Labour-intensive industries like apparel, footwear, and furniture require targeted policy support to absorb surplus labour.
• Clean-Tech and Sustainability Challenges: While India aims to scale up clean-tech manufacturing, challenges remain in solar PV cells, EV batteries, and wind-energy components.
  • Carbon emissions from manufacturing pose environmental concerns, requiring better sustainability measures.

Related Initiatives & Steps

• Production Linked Incentive (PLI) Scheme: It has been instrumental in transforming India’s manufacturing landscape, covering about 14 key sectors such as electronics, automobiles, pharmaceuticals, and textiles.
  • It has led to ₹1.5 lakh crore in investments and ₹13 lakh crore in production value.
• Make in India 2.0: It is focusing on 27 sectors to position India as a global manufacturing hub.
  • It has helped India become the second-largest mobile phone manufacturer globally.
• National Manufacturing Mission: It was announced as part of the Union Budget 2025-26 to strengthen India’s manufacturing sector, covering small, medium and large industries, emphasizing:
  • Ease and cost of doing business
  • Future-ready workforce development
  • Revitalization of MSMEs
  • Access to cutting-edge technology
  • Production of globally competitive quality products.
• Infrastructure and Logistics Development: The government has invested in industrial corridors, smart cities, and logistics improvements to enhance manufacturing efficiency.
  • The National Infrastructure Pipeline (NIP) and National Monetization Pipeline (NMP) aim to modernize industrial infrastructure.
• FDI and Trade Policy Reforms: Over the last decade, total FDI inflows amounted to $709.84 billion, accounting for 68.69% of the overall FDI inflow in the past 24 years.
  • Policy measures such as GST implementation, corporate tax reductions, and streamlined regulatory processes have improved the business environment.
• Focus on Clean-Tech Manufacturing: India is scaling up clean-tech manufacturing, focusing on solar PV cells, EV batteries, wind-energy components, and hydrogen technology.
  • These efforts align with India’s climate goals and aim to reduce import dependence.

Learning from Others: Global Best Practices

• China’s Dual Circulation Strategy: It emphasizes self-reliance in critical tech and a strong domestic supply chain base.
• Germany’s Mittelstand Policy: It supports SMEs through innovation subsidies and export assistance.
• Vietnam’s SEZ Model: It offers tax incentives, simplified compliance, and strategic port access.

Way Forward

• Strengthening MSMEs for Inclusive Growth:
  • Access to Credit: Expanding the Credit Guarantee Scheme and introducing customized MSME credit cards with higher limits.
  • Simplified Compliance: Reducing regulatory burdens through single-window clearance and digitized approvals.
  • Technology Adoption: Subsidizing automation and digital tools to enhance MSME productivity.
• Boosting High-Value Industries:
  • PLI Expansion: Extending PLI benefits to sunrise sectors like semiconductors, aerospace, and clean-tech manufacturing.
  • Global Supply Chain Integration: Strengthening export incentives and trade agreements to enhance India’s competitiveness.
  • Advanced R&D Support: Increasing funding for innovation hubs and industry-academia collaborations.
• Workforce Development and Skilling:
  • Vocational Training Expansion: Aligning skill development programs with industry needs.
  • Apprenticeship Incentives: Encouraging industry-led training for MSME workers.
  • AI & Automation Upskilling: Preparing the workforce for next-gen manufacturing technologies.
• Sustainable and Clean-Tech Manufacturing:
  • Green Manufacturing Incentives: Supporting solar PV, EV batteries, and hydrogen technology.
  • Circular Economy Policies: Encouraging recycling and waste reduction in production.
  • Carbon Neutrality Targets: Implementing low-emission industrial standards.

Source: BS