Chandrajit Banerjee: Manufacturing competitiveness can yield growth, jobs and resilience

Mint

16-07-2025

India stands at a pivotal moment in its economic trajectory. With the global manufacturing landscape undergoing a strategic realignment, India is uniquely positioned to emerge as a key player in global supply chains. This transformation can anchor long-term economic growth, generate large-scale employment and strengthen industrial resilience—critical pillars for achieving the vision of Viksit Bharat. Manufacturing success is also a strategic and national security imperative, as a string of recent domestic and global events have demonstrated.
India's strong fundamentals—a growing middle class, rising consumption, a rich resource base and a youthful workforce—create a solid foundation. Yet, despite this promise, manufacturing contributes only about 17% to gross value added (GVA) and employs just over 11% of the country's workforce. These figures underscore the urgency of scaling and strengthening India's manufacturing base.
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To harness the sector's potential, we need to adopt a comprehensive strategy focused on competitiveness, innovation and sustainability. I would suggest a five-pillar strategy to strengthen India's manufacturing competitiveness.
My first suggestion is to empower the National Manufacturing Mission: This government initiative can be a game-changer. To unlock its full potential, the Mission should be operationalized as a cross-ministerial, action-oriented platform with clear objectives: to increase the share of manufacturing in GDP to 25%, expand merchandise exports to $1 trillion by 2030 and create jobs at scale. A three-tier governance model—providing strategic oversight, implementation support and outcome monitoring—can ensure its effectiveness.
The Mission should prioritize high-value and labour-intensive sectors, adopt cluster-based development and introduce a dedicated sub-mission for advanced manufacturing. This sub-mission would accelerate the adoption of technologies such as AI, IoT, robotics, additive manufacturing and nanotechnology, while promoting R&D, cross-sector integration and global collaboration.
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Second, bridge the 'missing middle' with capital support: One of the persistent structural issues in Indian manufacturing is the 'missing middle'—a gap between large enterprises and micro firms. Mid-sized firms often lack access to growth capital, which stifles innovation and scalability. To address this, the government could launch a capital support scheme offering interest-free loans, and up to 50% of the equity capital for projects in the ₹50- ₹1,000 crore investment range. Loans could be repayable over five years after a moratorium of ten years.
Further, two fund-of-funds should be established—one focused on providing equity capital to small and medium enterprises and another on overseas technology acquisitions—drawing from the successful model used for startups. These funds would catalyse private investment and enable technology upgradation for globally competitive manufacturing.
Third, accelerate the construction of large-scale industrial infrastructure that's world-class: For this, it is essential to have a robust national framework for land acquisition that streamlines acquisition processes, ensures fair compensation, enables compliance with environmental norms and facilitates coordination among all stakeholders.
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In tandem, India must build its next generation of smart industrial cities along major industrial corridors. Drawing on successful models such as Sri City in Andhra Pradesh and AURIC in Maharashtra, the government should partner with the private sector to develop 10 new cities equipped with modern infrastructure, logistics and digital utilities.
For faster development of the 12 smart cities already approved, an empowered group of ministers should be constituted with representation from central and state governments. A forward-looking national policy for private industrial parks—offering 'plug and play' infrastructure—can help scale up the effort to build large world-class parks that would attract both domestic and international manufacturers.
Fourth, lower logistics and power costs: High logistical costs severely impact export competitiveness. The Eastern and Western Dedicated Freight Corridors (DFCs) are welcome steps, but momentum must be sustained by fast-tracking the proposed East Coast, East-West and North-South DFCs. A world-class multimodal logistics network will improve turnaround times, reduce costs and attract global investors.
Similarly, rationalizing industrial power tariffs is crucial. Current high tariffs, driven by cross-subsidization and often arbitrary surcharges, hinder cost-efficiency. The Confederation of Indian Industry (CII) recommends implementing direct benefit transfers for subsidy-deserving consumers, with state governments funding these subsidies directly instead of doing it through distribution companies. Transparent tariff structures and reduced open-access charges will further improve reliability and investor confidence.
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Fifth, accelerate smart manufacturing and digital readiness: As the world moves towards Industry 5.0, India must build its capacity for smart manufacturing. CII proposes the creation of a National Digital Maturity Framework to guide businesses through the digital transformation journey—from foundational adoption to advanced integration.
In parallel, establishing Centres of Excellence for Skill Development in smart manufacturing across key industrial regions will help build a digitally skilled and future-ready workforce. These centres can bridge the talent gap in AI, robotics, automation and data analytics—critical for high-productivity, innovation-led growth.
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To conclude, India's inherent strengths—its demographic dividend, strong domestic demand and globally competitive sectors like pharmaceuticals, auto components and renewables—provide a compelling case for a manufacturing-led economic strategy. A bold and cohesive policy framework focused on technology adoption, capital access, industrial infrastructure and digital readiness will help realize India's manufacturing potential. Reaching $7.5 trillion in manufacturing output by 2047 is ambitious but achievable—and it can serve as a cornerstone for a $30 trillion economy by India's centenary.
We must unlock this opportunity not just to transform India's economic landscape, but also to secure its rightful place in the global manufacturing value chain.
The author is director general, Confederation of Indian Industry (CII).