PLI and Make in India Create Sectoral Success Stories, but Manufacturing’s Share of GDP Remains Broadly Stable; Structural Reforms Key to Achieving 25% Target

New Delhi: India has pursued an ambitious manufacturing-led growth agenda for over three decades, introducing landmark interventions including liberalisation, Special Economic Zones, Make in India and the Production-Linked Incentive (PLI) scheme. Yet, despite sustained policy support, manufacturing’s contribution to GDP has remained broadly stable, highlighting the structural challenges in transforming India into a global manufacturing powerhouse.

Manufacturing accounted for around 15–16% of GDP before the 1991 reforms and rose to roughly 18% by the mid-1990s. Since then, its share has remained within a relatively narrow range, at around 17–18% today, depending on the GDP series used. India’s National Manufacturing Mission has now set an ambitious target of raising manufacturing’s contribution to 25% of GDP by 2035.

Commenting on India’s manufacturing trajectory, Mr. Athar Imam Raza, Economist, Infomerics Ratings, said, “India’s manufacturing journey reflects meaningful progress alongside persistent structural challenges. While the sector has expanded significantly in absolute terms, its share of the economy has moved only gradually. PLI has demonstrated that targeted interventions can create globally competitive capabilities, particularly in electronics and pharmaceuticals. The next phase must build on these gains by broadening the manufacturing base, strengthening export competitiveness, easing land and logistics constraints, and ensuring that industrial growth generates significantly greater employment.”

The employment challenge remains significant. Manufacturing accounted for around 9% of India’s workforce in 1972-73 and only around 12% five decades later. This is particularly important as India adds an estimated 8–10 million people to its workforce annually. Meanwhile, jobs directly linked to exports declined from 9.5% of the workforce in 2012 to 6.5% in 2020, suggesting that manufacturing growth has been relatively more capital-intensive.

At the same time, India faces growing competition from emerging manufacturing hubs. In apparel, leather, textiles and footwear, India’s share of global exports rose to 4.5% in 2013 before easing to around 3.5%, while Bangladesh and Vietnam increased their shares to 5.1% and 5.9%, respectively.

The PLI scheme nevertheless provides evidence of what targeted policy can achieve. By March 2026, it had catalysed around ₹2.4 lakh crore in investment, generated over ₹15 lakh crore in cumulative exports and supported approximately 14 lakh direct and indirect jobs. Electronics and pharmaceuticals have emerged as notable success stories.

Going forward, deeper tariff reforms, easier land acquisition, improved logistics, stronger export competitiveness and incentives linked to job creation will be critical. India’s manufacturing journey has delivered tangible sectoral gains, but achieving the 25% target will require converting these successes into a broader, more employment-intensive industrial transformation.