‘Make in India’ of 12 years shows patchy performance

Why in the News

Twelve years after the Make in India campaign was launched on 25 September 2014, an assessment across 12 metrics covering growth, investment, employment and exports shows the manufacturing sector has not materially raised its share in India’s economic growth, employment or global exports. The campaign’s later incentive schemes have produced some results. Those gains sit in a handful of sectors rather than across manufacturing as a whole. The contested point is whether the shortfall reflects too few incentives or a failure of private investment to broaden beyond the sectors an incentive already reaches.

What is Make in India?

1. Launch and objective: Make in India is a Union government campaign launched on 25 September 2014 to raise the manufacturing sector’s share in India’s economic growth, employment and exports.
2. How performance is judged: Its record is read off 12 metrics spanning growth, investment, employment and exports, rather than off a single headline target.
3. Two statistical series: The output figures exist in an old series and a new series of both the national accounts and the Index of Industrial Production (IIP). A 12 year comparison therefore runs across both.

Has the manufacturing sector actually gained ground in the economy?

1. Growth against the whole economy: Manufacturing grew faster than the overall economy in only half of the 12 years under consideration on the old series.
2. The new series reading: On the new series manufacturing outpaced overall growth in all three years for which data exists, from the 2023 to 2024 financial year through the 2025 to 2026 financial year. That gap is shrinking fast.
3. Industrial production: Within the IIP, manufacturing outpaced the overall index in only three of the 12 years on the old series of that index.
4. The new IIP series: Manufacturing growth matched the overall index in the 2023 to 2024 financial year and was slower in each of the next two years.
5. Share of output, old series: Gross Value Added (GVA) data on the older series shows manufacturing’s share in overall GVA is lower in the 2025 to 2026 financial year than it was when the campaign was launched in 2014.
6. Share of output, new series: The new series shows the sector’s share rising marginally, from 14.6 per cent in the 2022 to 2023 financial year to 15.6 per cent in the 2025 to 2026 financial year.

What do the export numbers actually show?

1. Growth since the launch: Non petroleum goods exports grew 53 per cent to $388.3 billion in the 2025 to 2026 financial year, from $253.5 billion in the year the campaign was launched.
2. The preceding 12 years: The same exports grew more than 400 per cent over the 12 years before the launch, on a much smaller base.
3. Base effect is only part of it: The smaller starting base accounts for only some of the difference between the two periods.
4. Share of world trade: United Nations Conference on Trade and Development (UNCTAD) data shows India’s share in global merchandise exports rose from around 0.8 per cent in 2002 to 1.7 per cent in 2013. It has remained at 1.7 per cent in the 2025 to 2026 financial year.

Is private investment backing the manufacturing push?

1. Private capital formation: Gross fixed capital formation (GFCF) by the private sector, meaning its spending on real asset creation, formed a lower share of gross domestic product (GDP) in the 2023 to 2024 financial year, the latest on the old series, than it did in the 2014 to 2015 financial year.
2. The new series trend: On the new series GFCF as a percentage of GDP has been falling since the 2022 to 2023 financial year.
3. Foreign investment into factories: Foreign direct investment (FDI) into manufacturing grew slower than overall FDI in 7 of the 12 years. Its share in overall FDI rose from nearly 48 per cent in the 2014 to 2015 financial year to 55 per cent in the 2025 to 2026 financial year.
4. Capacity utilisation: Reserve Bank of India (RBI) data on how intensively factories are being used shows the metric rising slowly over recent years. It remains below the 80 per cent mark treated as the level above which companies invest in fresh capacity.
5. Credit without output: Bank credit to industry has grown strongly, led by credit to micro, small and medium enterprises. In the absence of sustained rapid growth in output, this points to borrowing for working capital rather than for new investment.

How concentrated are the incentive gains?

1. Scale of the schemes: The 14 Production Linked Incentive (PLI) schemes, launched across 2020 and 2021, have drawn a cumulative investment of Rs 2.4 lakh crore as of March 2026.
2. Concentration in five sectors: Solar modules, pharmaceutical drugs, automobiles and their components, specialty steel and large scale electronics manufacturing together account for nearly 83 per cent of all investment under the schemes.
3. Everything else in the schemes: The remaining covered sectors share a little over one sixth of the investment between them.

Challenges to Make in India

1. Tariff protection raises input costs: Duties placed on intermediate goods raise the cost of inputs for the assembly the same policy is trying to attract. Eg. The Phased Manufacturing Programme for mobile phones raised duties on imported components such as chargers and printed circuit board assemblies.
   The Fix: Hold intermediate inputs at low duty rates and apply protection only at the final assembly stage.
2. Incentive design favours large incumbents: A subsidy paid on incremental sales above a threshold can only be claimed by firms already operating at scale. Eg. Under the PLI scheme for large scale electronics manufacturing, most approved incentive has flowed to a small group of mobile phone assemblers.
   The Fix: Add a lower turnover tier with simpler claim documentation so first time manufacturers can enter the scheme.
3. Assembly without deepening: Incentives reward final assembly, so domestic value addition stays low where components continue to be imported. Eg. India’s electronics exports have risen alongside rising imports of components and sub assemblies.
   The Fix: Tie each incentive tranche to a rising domestic value addition threshold verified at the component level.
4. Factor market constraints outlast incentives: Land, power reliability and labour regulation decide where a plant is built, and a subsidy changes none of them. Eg. The four labour codes passed in 2019 and 2020 took years to be brought into force.
   The Fix: Publish State level readiness on serviced industrial land, power availability and single window clearance timelines so investors can compare locations.

Conclusion

The instruments changed and the structural shares did not. A campaign judged on manufacturing’s place in output, employment and global exports has moved none of the three, and the one instrument that did pull investment pulled it into a narrow group of sectors. What has not been achieved is broad private capacity creation, and that is the condition the next phase has to meet rather than another incentive line. The marker to watch is whether private capital formation turns up as a share of output, since that is what builds new factories.

Back2Basics: Gross Value Added

1. What it measures: GVA is output minus the value of the intermediate goods and services consumed in producing it. It isolates the value added by each sector, which is why sectoral shares are read off GVA rather than off GDP.
2. Relation to GDP: GDP at market prices equals GVA at basic prices plus product taxes minus product subsidies.
3. Why the series matters: National accounts are periodically rebased on a more recent base year, so the same indicator in an old series and a new series is not directly comparable.

Matching Previous Year Question

“[2025, GS3, 15 marks] Discuss the rationale of the Production Linked Incentive (PLI) scheme. What are its achievements? In what way can the functioning and outcomes of the scheme be improved?”