The Manufacturing Sector: Growth Story of India

In the post-liberalization world, Indian economy was swayed by growth in the services sector whereas the growth of manufacturing & agriculture sectors largely remained muted

INDIA GROSS VALUE ADDED – CURRENT US$ TN

3.50

9%

10%

9% 7%

7%

6%

5% 6%

3.50

1991 - 2014 LIBERALIZATION

2014 - TILL DATE

1991 – 2014

2014 - 2021

3.0

3.00

GDP (CAGR*)

Service Sector (CAGR)

Manufacturing Sector (CAGR)

Agriculture Sector (CAGR)

2.50

2.50

*CAGR - Compound Annual Growth Rate

2.00

2.00

1.50

1.50

1.0

1.00

During the liberalization era post 1991, growth of the service sector took-off in a big way. During the 14 years from 1991-2014, the services sector grew at 10% CAGR as against manufacturing and agriculture sector growing at 7-8% during the same period. Policies and incentives were largely geared towards the growth of information technology, banking, and other services sector, with limited focus on a targeted growth for the manufacturing sector. Consequently, the services sector continued to grow at a higher pace compared to all other sectors and the overall economy even during the 2014-2021 period, when government began focusing on growth of the manufacturing sector for semi-skilled job creation. The manufacturing and agriculture sector growth has been a laggard relative to the overall economic growth since the post liberalization era. Slower growth of the manufacturing sector can be attributed to various factors – inadequate infrastructure, limited investments in R&D, archaic labor laws, labor productivity issues etc. Similarly, the agriculture sector has been plagued by problems such as inadequate R&D on productivity, fragmented land holdings, lack of modernization etc.

0.50

0.50

- 0.00

2000

2003

2006 2009

1991

1994 1997

2012

2015

2018 2021

GDP (current US$ Trn)

Manufacturing, value added (current US$ Trn)

Services, value added (current US$ Trn)

Agriculture*, value added (current US$ Trn)

*Agriculture sector includes agriculture, forestry and fishing

*Source - World Bank Database-2021

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Cushman & Wakefield

The Manufacturing Sector Growth Story of India

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