Manufacturing mission: The sector needs the right policy intervention

The Union government’s recent move to set up an interministerial panel to draft a National Manufacturing Mission signals a renewed push to revive the manufacturing sector in the country. With an aim to further the “Make in India” initiative, the mission is expected to focus on five pillars — improving the ease and cost of doing business; preparing a future-ready workforce; revitalising the micro, small, and medium enterprises (MSMEs); ensuring access to cutting-edge technology; and producing globally competitive quality products. The decision is both timely and necessary. Successive plans, including the National Manufacturing Policy of 2011 and the Make in India in 2014, have sought to boost domestic production. Yet, manufacturing as a share of gross domestic product has stubbornly hovered at 15-17 per cent, much short of the long-envisaged target of 25 per cent.

 

One of the core challenges lies in the structural composition of Indian manufacturing. While the production-linked incentive scheme has primarily focused on large, capital-intensive sectors, such as automobiles, electronics, and pharmaceuticals, MSMEs continue to remain on the margins. They tend to struggle with limited access to credit, technological barriers, and a regulatory environment that is far from being enabling. By emphasising MSMEs, the mission seeks to correct this imbalance. Labour-intensive industries such as apparel, footwear, toys, and furniture offer immense potential to absorb surplus labour from agriculture and reduce underemployment. However, these sectors need targeted policy support, from simplified compliance to affordable credit and better logistics. The renewed focus on these sectors in this year’s Budget will hopefully help to scale up productive employment in low-skill manufacturing. Equally important is the push towards clean-tech manufacturing. With the global energy transition gathering pace, India has an opportunity to scale up production in photovoltaic cells, electric vehicles, grid-scale batteries, and wind-energy components. Not only does this align with the country’s climate goals, but it can also anchor high-value manufacturing and reduce import dependence in critical sectors.

 

Technology and quality upgrades are particularly vital for improving India’s global competitiveness. The country has underperformed in manufacturing exports compared to Asian peers such as Vietnam. Domestic output in manufacturing is not just constrained by low productivity but also inconsistencies in product standards and the lack of scale. Global supply chains demand reliable, tech-enabled production ecosystems that India must strive to build, especially through cluster-based development and the skilling of the workforce. At the same time, states should work towards aligning their industrial policies with national priorities. So far, both high-value manufacturing and MSMEs remain geographically concentrated in a few states like Tamil Nadu, Maharashtra, Gujarat, and Uttar Pradesh. The manufacturing sector needs structural reforms, along with improvement in physical infrastructure and logistics, a reliable trade policy with low tariffs on inputs, a skilled workforce, and investor-friendly regulations. Most of the issues affecting manufacturing are well known but have not been adequately addressed over the years. It remains to be seen if the new mission can push the policy in the right direction.