UPSC DAW Mains Answer Writing 20th September 2025
Question
India's target of a 25% contribution from the manufacturing sector by 2025 has been hindered by sluggish growth. Comment
Model Answer
Introduction:
The manufacturing sector is emerging as a critical pillar of India’s economic growth and GDP contribution. It currently generates 16–17% of India’s GDP, but the ambitious vision to elevate the manufacturing sector's contribution from 15% to 25% by 2025 has not been realised.
Reasons for sluggish growth of the manufacturing sector:
1. Weak infrastructure and logistic bottlenecks:
High logistics costs make Indian-manufactured goods less competitive on the global stage. Poorly maintained roads and inadequate handling facilities increase the risk of cargo damage during transit.
Example: Logistics costs in the Indian supply chain amount to almost USD 400 billion, or 14% of GDP, compared to 8–10% of GDP in the US and Europe, and 9% in China.
2. Labour market challenges:
Shortage of skilled workers, a perception of manufacturing as a low-status career, high workforce attrition, and delays in implementing labour codes continue to dominate the manufacturing sector.
Example: Due to labour shortages, 28% of organisations witness production delays on the frontline at least once every two weeks.
3. Dependence on imports for raw materials:
Indian manufacturers are dependent on imported raw materials, and any hike in their prices, influenced by global trends or higher import duties, directly adds to production costs, affecting profitability.
Example: According to a report of the Ministry of Mines (2023), India imports 10 critical minerals from other nations, which affects the manufacturing of EVs and defence products.
4. Fragmented MSME sector:
Lack of access to credit facilities, technology development, and export markets limits their growth in the manufacturing sector.
5. Bureaucratic hurdles:
According to Moody's Investors Service, "India's higher bureaucracy in decision-making will reduce its attractiveness as a destination for foreign direct investment, especially when competing with other developing economies in the region, such as Indonesia and Vietnam."
Measures to improve manufacturing sector growth:
1. Enhance infrastructure and reduce logistic costs:
Increase investments in multimodal transit corridors, develop port connectivity, and build dedicated freight corridors.
Example: The Ministry of Railways has taken up the construction of two Dedicated Freight Corridors — the Eastern Dedicated Freight Corridor from Ludhiana to Son Nagar, and the Western Dedicated Freight Corridor from Jawaharlal Nehru Port Terminal to Dadri.
2. Simplify regulatory frameworks:
Implementation of labour laws, simplifying land acquisition processes, environmental clearances, providing rebates, and incentives will accelerate the growth of the manufacturing sector.
3. Focus on skill development:
Upskilling and reskilling should be carried out based on the demands of the manufacturing sector.
4. Strengthen the MSME sector:
Encouraging diversification and innovation within the manufacturing sector can create more business opportunities. Integrating MSMEs into global value chains, strengthening robust local supply chains, and providing collateral-free loans will enhance their progress in manufacturing sector growth.
Example: In the Union Budget 2025–26, the credit guarantee cover for micro and small enterprises has been increased from ₹5 crore to ₹10 crore.
5. Boost technology adoption and Industry 4.0:
Upgradation to Industry 4.0 will boost productivity and efficiency through emerging technologies such as automation, AI, and IoT.
Conclusion:
By 2047, in the Amrit Kaal of independence, the goal is not just participation but leadership in the global manufacturing sector. By addressing critical challenges such as infrastructure gaps, policy inconsistencies, and technological lags, the sector can align with global standards.