Why in the News?

Union Budget 2026 reinforces the existing manufacturing strategy, especially through Production Linked Incentive schemes and customs duty rationalisation. However, analysts note that manufacturing growth has not translated into large scale job creation.

Core Issue: Growth Without Jobs

1. Stagnant Share in GDP

• Manufacturing share remains 14 to 17 percent for decades.
• Successful industrialisers in East Asia reached 25 to 30 percent before stabilising.
• Indicates incomplete structural transformation.

2. Jobs Growth Disconnect

• Organised manufacturing employs about 1.96 crore workers.
• Only about 57 lakh jobs added in the last decade.
• Total manufacturing employment around 5.44 crore, with two thirds in informal units.

Note: Organised factories are productive but create few jobs. Unorganised units absorb labour but remain low productivity and low wage.

3. Capital Intensive Expansion

• Firms rely on automation and capital deepening.
• Output rises faster than employment.
• Job elasticity of growth remains low.

4. Skills Mismatch

• Firms struggle to find job ready workers.
• Weak firm level training and apprenticeship ecosystem.
• Skill programmes poorly linked to industry demand.

5. MSME Constraints

• MSMEs contribute 35 percent of manufacturing output and about half of exports.
• Credit expansion improves liquidity but not productivity.
• Weak technology adoption, poor supply chain integration, limited scaling.

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