India, with its colossal population exceeding 1.3 billion encapsulates a reservoir of potential waiting to be unleashed on the global stage. But the nation grapples with formidable challenges impeding its stride towards sustainable and inclusive development. The trajectory of India’s economic growth tells a tale of unevenness, characterized by stubborn inequalities and a sprawling informal sector. To surmount these barriers and carve a path towards a more prosperous future, it is crucial that India embrace deep industrialization. The global economic landscape has undergone a significant transformation due to the COVID-19 pandemic, resulting in a shift away from globalization. Nations around the world are now turning towards policies aimed at deep industrialization and greater state-led economic interventions. Deep Industrialization stands as a profound metamorphosis, a shift from a foundation of low productivity, and antiquated technology to a realm of heightened productivity and technological sophistication. This transformative journey entails the cultivation of a diversified manufacturing sector, the assimilation of cutting-edge technologies, and the nurturing of a skilled workforce. However, India’s path towards deep industrialization has not been without its share of challenges. From a dearth of infrastructure and skilled labor to regulatory bottlenecks, financial constraints, and an innovation deficit, the path is fraught with challenges demanding a concerted effort from the government, private sector, and civil society alike.
India’s industrialization unfolds against a backdrop of stagnation, with manufacturing’s contribution to GDP languishing at a mere 16%. The landscape is dotted with hurdles, ranging from inadequate telecom facilities beyond urban hubs to loss-making State Electricity Boards and soaring logistics costs. India’s transportation infrastructure faces strain, marked by overloaded rail networks and numerous issues affecting road transport. These obstacles hinder the smooth flow of goods and adversely affect the manufacturing sector. The MSME sector encounters challenges in obtaining credit in contrast to medium and large-scale industries. This imbalance requires rectification to foster the growth of the MSME sector, which plays a pivotal role in India’s economic advancement. Moreover, the undervaluation of vocational skills and artisanal knowledge has stifled organic innovation, perpetuating a reliance on archaic economic structures. Despite these tribulations, recent data offers a glimmer of hope, with industrial production showing a growth of 10.3% year-on-year in August 2023. The advent of initiatives like the Production Linked Incentive (PLI) scheme, tax incentives, and a national infrastructure program underscores the government’s commitment to revitalizing the manufacturing sector and bolstering logistics. India’s strategic focus on nurturing niche manufacturing sectors, harnessing digital capital for physical infrastructure, and enhancing export competitiveness has gained momentum in its growth trajectory.
India’s industrial evolution is marked by distinct epochs. From the colonial era’s dominance in industries like textiles, coal mining, plantation industries, shipbuilding, and iron and steel to the post-independence era’s experiments with import substitution and subsequent liberalization, India has been through a tumultuous path. The contemporary milieu paints a picture of manufacturing struggling to compete with its East Asian counterparts, commanding a modest 14-16% of GDP while the services sector reigns supreme. Recent endeavors such as Make-in-India and an evolving industrial policy underscore a renewed vigor to revitalize manufacturing and foster job creation, aligning with the nation’s vision for inclusive and sustainable economic transformation.
India faces significant challenges in industrialization, exacerbated by its reliance on foreign imports for critical sectors such as transport equipment, machinery, iron and steel, chemicals, and fertilizers. This dependency underscores the urgent need for import substitution strategies to bolster domestic manufacturing capabilities. However, the industrial landscape is marred by an uneven consumption-led growth and a historical lack of effective industrial policy reforms. Moreover, India grapples with post-pandemic economic distortions and a services-led growth model that fails to absorb labor effectively. The draft New Industrial Policy ’23, if effectively implemented, could pave the way for a more competitive manufacturing sector aligned with local aspirations and expertise. As India navigates these complexities, rethinking economic growth strategies, prioritizing labor-intensive sectors, and implementing inclusive industrial policies emerge as imperatives for deep industrialization and sustainable development.
