India’s Industrial Slowdown
Context:
Recently, India saw a drastic downfall in its industrial growth. It went down to 4% in the FY25.
Relevance:
GS-03 (Growth and Development, Industries)
Dimensions of the Article:
- What Drives Industrial Growth in India?
- What’s Holding Back Industrial Growth?
- Way forward
What Drives Industrial Growth in India?
- A rise in domestic investment for capital-intensive sectors like electronics and auto components has boosted investor confidence in India’s manufacturing capabilities.
- ₹37 lakh crore domestic investment in FY24.
- FDI inflows are strong in the automobile, electronics, and pharma sectors.
- Technology and innovation in AI and automation have helped India improve its productivity, signalling tech-driven growth.
- Industry 4.0 (AI, automation, IoT) is improving productivity.
- Electronics manufacturing grew at a 17.5% CAGR (FY15–24).
- HSBC Manufacturing PMI touched 59.1 in March 2024 (a 16-year high).
- Policy pushes and Reforms have helped India to accelerate its industrial sector in sectors like pharmaceuticals, electronics, etc.
- It has boosted investor confidence.
- FDI in manufacturing hit ₹14.45 lakh crore (US$165 billion), a 69% rise in a decade.
- Aim: Raise manufacturing share in GDP to 25% by 2025.
- India’s rising middle class and their demand have given a kick-start to sectors like electronics, pharma, and auto.
- Consumer durables have increased from 3.6% (FY24) to 8% (FY25).
- Exports of non-petroleum goods also improved YoY.
- Infrastructure Growth
- Smart cities, highways, and PM Gati Shakti are aiding core sectors.
- Steel production rose 3.3% in Apr–Nov FY25; cement demand is surging.
- Geostrategic Export Leverage
- Mobile phone exports grew 92%, hitting $5 billion by Aug FY24.
- Gati Shakti and the Logistics Policy aim to cut supply chain costs.
- Green Manufacturing
- ₹20,000 crore allocated in Budget 2025-26 for solar and nuclear power.
- EV sector boosted via PM E-DRIVE initiative.
What’s Holding Back Industrial Growth?
- Global Shocks and Trade Conflicts
- The IMF slashed India’s growth forecast to 6.2% for FY26.
- Reciprocal US tariffs could cost India ~$14 billion in exports.
- Rural Demand Weakness
- Rural food inflation: 8.65% vs. 7.9% urban (Dec. 2024).
- Reduced rural consumption = slower FMCG and agro-industry growth.
- High Logistics Costs
- India’s logistics cost: 14–18% of GDP vs. 8–10% in developed nations.
- Poor last-mile connectivity and storage increase costs.
- Regulatory Burden
- MSMEs face difficulties in compliance, finance, and permits.
- Excessive regulation hinders innovation and formalisation.
- Skill Gap
- 29 million skilled worker shortage in industrial sectors.
- Despite PMKVY, the training does not match industry needs.
- Sustainability vs Growth Dilemma
- 55% of electricity still comes from coal.
- Green tech adoption is slow due to high initial costs.
- Global Competition
- India’s global manufacturing share: only 2.8%.
- Faces stiff competition from China and Vietnam.
- Still exports low-value raw materials, like iron ore, instead of finished goods.
- Startup Focus Misaligned
- Many startups focus on low-impact sectors (e.g., food delivery).
- Need more in semiconductors, AI, 3D printing, and robotics.
Way Forward:
- Encourage MSMEs to adopt Industry 4.0 tools via tax rebates and digital upskilling. This will reduce operational inefficiencies and make them globally competitive.
- Tailor skill programs for sunrise sectors—AI, robotics, EVs, etc.—and build training partnerships with industry and academia. Align vocational education with market-ready skill sets.
- Encourage green manufacturing through targeted PLI schemes for clean tech, EV subsidies, and carbon credit markets. Integrate sustainability into industrial policy itself.
Also know:
“Energy Statistics India 2025.”
- Recently, the National Statistics Office (NSO) published its Energy Statistics India 2025 report.
- The report provides data on coal, petroleum, natural gas, and other renewables that includes their reserves, capacity, production, consumption, and import/export.
- Energy Account and SEEA Framework:
- A new chapter was introduced on energy accounts using the System of Environmental Economic Accounting (SEEA), 2012 framework.
- Includes asset accounts and physical supply and use tables for FY 2022-23 and 2023-24.
- Renewable Energy Potential and Growth:
- India’s renewable energy potential stands at 21,09,655 MW as of 31-Mar-2024.
- Wind Power dominates (55%) with 11,63,856 MW, followed by Solar Energy (7,48,990 MW) and Large Hydro (1,33,410 MW).
- States with highest potential: Rajasthan (20.3%), Maharashtra (11.8%), Gujarat (10.5%), Karnataka (9.8%).
- Growth in Renewable Energy Capacity and Generation:
- Installed capacity for renewable energy increased from 81,593 MW in 2015 to 1,98,213 MW in 2024 (CAGR of 10.36%).
- Gross electricity generation from renewables grew from 2,05,608 GWh (2014-15) to 3,70,320 GWh (2023-24) (CAGR of 6.76%).
- Energy Efficiency and Consumption Trends:
- Per capita energy consumption increased from 14,682 MJ/person (2014-15) to 18,410 MJ/person (2023-24) (CAGR of 2.55%).
- Transmission and distribution losses reduced from 23% (2014-15) to 17% (2023-24).
- Industry sector remains the largest energy consumer, growing from 2,42,418 KToE (2014-15) to 3,11,822 KToE (2023-24).
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