Manufacturing’s Declining Share in India’s Economy, 2013-2024
Why in the news
An analysis of the decade to 2023-24 found India moving towards services at manufacturing’s expense, suggesting it skipped the classic industrialisation stage and went from agrarian to service-led growth.
Key data: 2013-14 versus 2023-24
| Indicator | 2013-14 | 2023-24 |
|---|---|---|
| Manufacturing share in GVA | 16.5% | 14.3% |
| Share in gross capital formation | 17.3% | 15.7% |
| Value added to gross output ratio | 21.6% | 20.6% |
| Manufactured goods in final consumption | 57.2% | 48.8% |
| Durable goods consumption | 2.8% | 3.2% |
| Construction share of investment | 4.8% | 8.1% |
| Trade, hotels, transport, communication | 15.3% | 22.2% |
| Railways capital formation | 1.3% | 2.7% |
| Private non-financial corporations’ share | 36.6% | 32.4% |
Why it matters
- Services need less capital than manufacturing, which normally drives higher capital formation.
- This affects long-term sustainable growth.
Challenges
- Supply side: freer trade makes imports easy; mobile phone output is mostly assembly despite PLI schemes; imports dominate several sectors.
- Demand side: spending shifted to health, transport and education; non-durable demand fell; weak demand leaves capacity idle and discourages private investment.
Government efforts
- Make in India, Production-Linked Incentive (PLI) schemes, corporate tax cuts and GST rationalisation.
- Even so, the demand tilt towards services continues.
Way forward
- Supply-side steps alone cannot fix weak demand.
- Firms must innovate, offer cost-effective goods and adapt to consumers with higher incomes and service-oriented lifestyles.
Exam angle
- Manufacturing share of GDP target: 25%.
- Schemes: Make in India and PLI.
- GVA share: 16.5% to 14.3%.