Indian manufacturing, despite its vast potential, still lags behind its international peers. The sector’s contribution is approximately 14 per cent to the country’s Gross Value Added (GVA), a modest number, considering the government’s ambitious plan to develop manufacturing into a $1 trillion economy. While Vietnam has successfully moved up the manufacturing value chain and gained strong export momentum, India remains confined to basic manufacturing with limited global competitiveness. The regulatory environment becomes a hurdle between businesses and investors due to being overlaid with cross-cutting regulations, inconsistent enforcement, and conflicting laws. Import duties on intermediate goods and raw materials inflate input costs, making goods from India costlier globally.
While India produces a large number of engineers and graduates, regional imbalances persist. Just five or six States, such as Gujarat, Maharashtra, Tamil Nadu, account for 90 per cent of all activity, whether in domestic investment, manufacturing, or foreign investment. Moreover, social barriers and housing shortages restrict labour mobility, particularly affecting women’s participation in the workforce. This limits the pool of skilled labour available to industries. Initiatives such as the Goods and Services Tax (GST) reform, Production Linked Incentive (PLI) schemes, and digital infrastructure development are yet to bring about a significant change.
The government has established a panel on redrafting the National Manufacturing Mission (NMM). The panel addresses five key areas: enhancing the ease and cost of doing business, preparing a future workforce, empowering MSMEs, developing a spur for advanced technology, and ensuring product quality.
Establish new taskforce
A key recommendation for the government is to establish a multi-stakeholder taskforce, a separate body comprising representatives from government, regulators, corporations, industry associations, and academia. This taskforce will ensure ground-level implementation of policies, evaluate their effectiveness, and recommend changes when necessary. To catalyse change, the government should pilot manufacturing-specific regulatory sandboxes in select States to test compliance simplification, fast-track approvals, and labour flexibility.
Skill development has been an area of focus, with setting up of programmes such as five National Centres of Excellence for Skilling, 50,000 Atal Tinkering Labs, and exclusive AI training centres. Yet, the gap remains between theoretical and on-the-job skills needed for modern manufacturing industries. To counter this, there should be greater interaction between academia and industry for curriculum alignment with demands from emerging technologies — primarily from robotics, AI, automation, and CNC machining.
A cultural shift in manufacturing entrepreneurship is also essential. The panel should promote risk-taking, value creation, and global orientation. Mechanisms such as industrial VC funds, innovation clusters, and incubation hubs can nurture high-potential ventures. Encouraging the professionalisation of family-run firms can also help scale businesses up the value chain.
A fresh perspective is needed on redefining medium enterprises in India. Rather than the current ₹20-100 crore turnover limit for medium enterprises, India should consider ₹5,000-50,000 crore as a benchmark. Support systems must accompany this reclassification, including concessional finance, export support, and market access for scaling firms. In parallel, MSME-focused corridors with plug-and-play infrastructure and shared logistics facilities can accelerate formalisation and competitiveness.
Technology and innovation need to be at the heart of India’s manufacturing strategy. Currently, the country spends just 0.7 per cent of its GDP on research and development, far behind the levels of China (2.4 per cent) and Korea (4.9 per cent). The government has announced a ₹1 lakh crore R&D fund that needs to be channelised for cutting-edge technology areas like quantum computing, space technology, next-gen materials, and bio-manufacturing through collaborative R&D with academia and industries. A dedicated industrial-tech venture capital fund can also spur the adoption of advanced technologies. To foster scale, a fast-track programme should help medium-sized firms become large enterprises, offering tailored support in finance, exports, and global market access.
The writer is President, IMC Chamber of Commerce and Industry