Far Below Expectations
At some 14 per cent of GDP, manufacturing has failed to make headway despite the e•orts of the Modi regime
DURING THE UPA YEARS, the share of manufacturing as a percentage of GDP was around 16 per cent on average despite efforts such as the New Manufacturing Policy. From 2014-22, this figure has hovered around the 14 per cent mark, as per World Bank estimates. In 2023, the contribution from manufacturing, which employs 27.3 million workers, was 17 per cent, according to Union minister for petroleum, housing and urban affairs Hardeep Singh Puri, which the government plans to increase to 25 per cent by 2025, through measures such as the production linked incentive (PLI) scheme.
First announced in 2020 targeting 14 key sectors, the PLI scheme, with an outlay of Rs 1.97 lakh crore, aimed to create manufacturing champions, six million new jobs and added production worth Rs 30 lakh crore over five years. The sectors included mobile manufacturing and specified electronic components, drug intermediaries and active pharma ingredients, medical devices and automobiles and auto components, among others. The Centre claims the incentives have boosted electronics manufacturing, especially mobile handsets, but critics like ex-RBI governor Raghuram Rajan say the scheme has only lavished subsidies on manufacturing firms. Earlier this year, the Centre said the scheme has led to over Rs 1 lakh crore investments till November 2023, with exports surpassing Rs 3.2 lakh crore.
Indian manufacturing faces many challenges, including the maze of regulations, high logistics costs, lack of finance, lack of innovation and skills, to name a few. “Ease of doing business has changed relatively little from a decade ago,” says Naushad Forbes, co-chairperson, Forbes Marshall. The regulations logjam, be it the new Sebi disclosure guidelines for publicly listed firms or the Company Law requirements for private sector firms, can still be intimidating. The PLI scheme has attracted a reasonable amount of investment, but the real test will be how companies fare once the subsidies dry up. ■