Decline in Manufacturing Sector Despite ‘Make in India’ Push

Despite Prime Minister Narendra Modi’s ‘Self-reliant India’ slogan and the ambitious ‘Make in India’ campaign designed to boost domestic manufacturing, data reveals that India’s manufacturing sector is in decline. Despite efforts to reduce dependency on foreign products, particularly Chinese goods, the sector has struggled to deliver the expected results.

Key Numbers Highlighting the Decline:

• Industrial sector’s share in GDP in 2000: 29.9%
• Highest share recorded in 2008: 32.3%
• Decline by 2019: 27.5%
• Bangladesh’s industrial GDP share in 2000: 25.3%
• Increase in Bangladesh’s share by 2019: 31.2%

India’s industrial production sector, once a significant part of its economy, now finds itself at its lowest share of the GDP in two decades. This stands in stark contrast to Bangladesh, which has made significant strides in its manufacturing sector over the same period.

Manufacturing Sector: Troubling Trends

According to the Asian Development Bank (ADB) and the International Monetary Fund (IMF), India’s industrial production sector has failed to keep pace with global developments. From a peak of 32.3% of GDP in 2008, the share fell to 27.5% by 2019. These numbers paint a bleak picture for a country that was once expected to become a manufacturing hub.

The stagnation of India’s manufacturing sector is particularly concerning when compared to the progress made by neighboring Bangladesh. Bangladesh has managed to increase the industrial sector’s contribution to its GDP from 25.3% in 2000 to 31.2% by 2019, indicating a stronger, more consistent focus on manufacturing growth.

Factors Contributing to the Decline

The downward trend in India’s manufacturing sector is not a recent phenomenon. The growth rate of the sector has been gradually declining over the past decade, with manufacturing growing by 4.8% in 2013, which further decreased to 3.9% by 2019.

The period between 2016 and 2019 was particularly challenging for India’s manufacturing sector, seeing a reduction of 190 basis points in its share of the economy. Many economic experts attribute this drop to significant policy shifts like demonetization and the introduction of Goods and Services Tax (GST). These policies, although implemented with good intentions, disproportionately affected India’s unorganized and small-scale manufacturing sectors.

Bangladesh Outpaces India in Growth

In the fiscal year 2019-20, Bangladesh recorded an impressive growth of 5.24%, outpacing India’s 4.2%. This marks a significant achievement for Bangladesh, which has been steadily strengthening its manufacturing base while India struggles with policy and infrastructure challenges.

The Road Ahead

For India to regain its momentum in manufacturing, experts believe that policy reforms, investments in infrastructure, and targeted support for small and medium enterprises are essential. As neighboring countries continue to grow their industrial sectors, India needs to address the existing roadblocks to ensure its ‘Make in India’ campaign fulfills its potential.