Government Aims to Strengthen Domestic Manufacturing
The Indian government is formulating a fresh New Manufacturing Policy to strengthen domestic production and increase its global market share. Officials believe that existing schemes, such as the Production-Linked Incentive (PLI) program, have not entirely achieved their objectives. The new policy, set for early implementation, will consider emerging challenges like global trade tensions and persistent protectionist measures.
A major focus of the policy will be linking incentives to job creation and capital expenditure commitments. According to official sources, the primary goal is to position India as a leading global manufacturing hub while integrating the country into international supply chains. Additionally, the policy seeks to enhance India’s participation in global trade, particularly in merchandise exports.
Addressing Manufacturing Sector Challenges
Over the past decade, India has introduced several initiatives to boost manufacturing, including the Make-in-India campaign, reductions in corporate tax rates, and a temporary concessional tax window for new manufacturing policy units. Despite these efforts, the sector’s share in GDP has remained stagnant, hovering around 16%. The recently announced Budget for FY26 introduced a National Manufacturing Mission, raised credit guarantee coverage from Rs 5 crore to Rs 10 crore, and doubled investment and turnover criteria for defining MSMEs.
The necessity of revising domestic manufacturing policies to align with international trends has been highlighted by a parliamentary panel. While industries such as automobiles and smartphones have seen notable progress, broader manufacturing growth has been sluggish, with factories employing just 15% of the Indian workforce. To address these concerns, experts argue that broad-based manufacturing expansion is essential for creating large-scale employment opportunities.
Identifying Future Growth Sectors
The limitations of the PLI scheme are evident, as only 5% of the Rs 2 lakh crore budget allocated for 14 sectors has been utilized, despite some schemes nearing the halfway mark of their implementation period. Recognizing the need for targeted support, the government recently announced a Rs 22,919 crore incentive package for non-semiconductor electronic components, including displays, cameras, printed circuit boards, and lithium-ion cells.
To guide the new industrial policy, NITI Aayog has conducted a comprehensive study identifying 12 key sectors poised for future growth. This research evaluates manufacturing trends, industrial capabilities, infrastructure needs, and market potential. Additionally, it assesses critical sectoral requirements such as logistics, power supply, regulatory frameworks, taxation, trade agreements, and ease of doing business.
With this renewed policy push, the government aims to overcome existing roadblocks and drive India’s new manufacturing policy sector towards sustained global competitiveness.
