India's Manufacturing is Broken

SYNOPSIS

Despite ambitious initiatives like Make in India and PLI, India's manufacturing sector remains stuck, with labour-intensive industries losing ground instead of creating jobs. This blog explores why focusing on the domestic market has limited competitiveness, how export-led growth transformed countries like Bangladesh, and why aligning policy, industry, and states around a few strategic sectors could finally unlock India's manufacturing potential.

Can India become the world’s factory without building for the world? Its manufacturing challenge is testing whether scale, exports, and coordination can drive the next growth phase.

The problem isn't effort. Its direction. India keeps building factories for itself, not for the world.

That sounds fine until the numbers show up. Manufacturing's share in GDP has stagnated, and labour intensive sectors such as apparel, leather and food processing have struggled to expand.

Over the past decade, manufacturing grew at roughly 3.3 percent a year on average, less than half the pace of the broader economy. Last year, apparel output fell 5.3 percent and leather fell 4.1 percent. These are exactly the sectors meant to absorb workers leaving farms, and they are shrinking instead.

There is a myth India needs to drop. People say the country is too big a market to bother

exporting. But population is not a market. Per capita income sits near 3,000 dollars, and that

number hides huge inequality. A large share of people still live on a few dollars a day. That is a thin market, not a large one. Without scale, there is no competitiveness. Without

competitiveness, growth does not follow.

Bangladesh proves the point better than any report could. It entered the garment trade decades after India did. Today it exports more ready made garments than India, and many of those factories are run by Indian entrepreneurs who built abroad instead of at home. The skill and capital were never missing. The environment was.

PLI tells a similar story. It started with export focus, then spread across fourteen sectors and lost that sharpness. Mobile phones is the one segment that found real scale, helped by a major global investor and domestic suppliers building around it.

Agriculture still holds over 40 percent of India's workforce. Services cannot absorb that surplus alone, especially with AI reshaping even skilled service jobs. Manufacturing remains the only realistic landing spot for that transition.

None of this needs a new scheme. It needs alignment. A few sectors chosen with intent, targets that are tracked, policy designed state by state, and every stakeholder held to the same number. Tamil Nadu didn't become an export hub by accident.

India isn't short on ambition. It is short on coordination.

Jaini Shah