The next phase of India’s manufacturing boom: Capability, not just capacity

Trajectories across sectors point to a substantial but uneven manufacturing expansion in the value it creates. 

Manufacturing is where India’s industrial policy has placed its largest bets. By March 2026, production linked incentive schemes across 14 sectors had attracted over Rs 2.40 lakh crore in investment and generated Rs 22.66 lakh crore in production. Manufacturing GVA grew 9.3% in 2024-25 and 10.7% in 2025-26, but its share of the economy at current prices barely changed, edging from 14.7% in 2022-23 to 14.8% in 2025-26.

The Annual Survey of Industries (ASI), with its latest 2024-25 round released last month, reported broad based growth: fixed capital up 10.5%, workers 7.3%, output 7.8% and gross value added (GVA) 9.6%. ASI shows more than whether manufacturing is growing it tracks capital, inputs, and output at the same factories. It shows how much value each rupee of capital generates, and how much output is produced in-house rather than purchased as inputs.

Read across 2014-15, 2019-20 and 2024-25, the answer is mixed. The sector has grown, and many industries now get more from their capital. But manufacturing as a whole is not adding more value to what it produces than it was a decade ago. Closing that gap means shifting from building capacity to building capability.

You Might Be Interested In

The first part of that picture is the value generated by the sector’s expanding capital base. GVA per rupee of fixed capital relates the value factories add after deducting purchased inputs to the book value of their land, buildings, plant and machinery. On this measure, the past decade has seen a U-shaped trajectorya decline followed by a recovery: each rupee of fixed capital generated about 47 paise of GVA in 2014-15, 41 paise in 2019-20 and 53 paise in 2024-25.

The initial decline was driven largely by petroleum refining, where GVA per rupee of fixed capital fell from about 64 paise to under 10 paise. At the same time, refining’s share of the factory sector’s fixed capital increased from about 9.5% to nearly 14%, giving its deterioration greater weight in the overall figure. Excluding refining, GVA per rupee of fixed capital remained broadly stable at 45-46 paise. The aggregate decline therefore did not reflect a widespread weakening across industries. Similarly, in the recovery period post 2019-20, excluding refining, GVA per rupee of fixed capital rose from about 46 paise in 2019-20 to 58 paise in 2024-25.