India’s manufacturing sector is stepping into a defining phase in 2025. While historically it has underperformed in proportion to the country’s demographic advantage, the current landscape presents a vastly more optimistic scenario. With robust government policies, strong investor interest, and a rising Purchasing Managers’ Index (PMI), India is strategically positioning itself as a resilient and globally integrated manufacturing hub.
Manufacturing Ambitions on a New Trajectory
Through initiatives like the Production-Linked Incentive (PLI) Scheme, which targets 14 sectors, India is not only incentivizing large-scale production but also encouraging innovation and sustainability. Combined with state-level industrial policies and ease of doing business reforms, this approach is steadily driving growth across traditional sectors like automobiles, textiles, and steel, while also attracting FDI in electronics, semiconductors, and green energy equipment.
India aims to raise the manufacturing sector’s contribution to the GDP from 13–14 percent in 2025 to upwards of 20 percent in the coming decade. Although the growth in FY 2023–24 stood at a modest 1.4 percent (compared to 4.7 percent the previous year), this is widely attributed to global trade slowdowns—not domestic inefficiency. On the contrary, India’s market fundamentals remain strong, as evidenced by its high-frequency economic indicators.
PMI Trends Reflecting Strong Market Sentiment
The HSBC India Manufacturing PMI consistently remained above 56 for the past 18 months—well above the 50 mark that signals expansion. This reflects resilience in new orders, production, and employment. July 2025 closed with a PMI of 59.1, mirroring levels seen in March 2024. This strong PMI streak indicates sustained business confidence and economic momentum.
Key PMI Highlights (2025):
- July: 59.1
- June: 58.4
- May: 57.6
- April: 58.2
These levels underscore India’s attractiveness for manufacturers looking to derisk from overreliance on any single geography—a strategy increasingly adopted by global corporations under their China+1 or Plus One diversification plans.
Reviving Traditional Strengths While Embracing Innovation
India’s Index of Industrial Production (IIP) shows broad-based growth. The manufacturing sub-sector, which contributes 77.6 percent to total industrial output, saw 19 out of 23 industry groups post positive year-on-year growth in January 2025. Sectors showing high performance included:
- Electrical equipment: +21.7%
- Coke and refined petroleum products: +8.5%
- Basic metals: +6.3%
These figures reflect the resurgence of traditional heavy industries, supported by infrastructure investments and policy reforms.
Private Sector Role and FDI Inflows
India is becoming a top destination for manufacturing-related FDI, with major global players establishing or expanding their operations. Apple, Samsung, and Tesla suppliers are increasing assembly operations, while electronics contract manufacturers and green-tech firms are exploring India as a long-term production base.
The country is also boosting domestic capabilities through public-private partnerships (PPP) and skill development programs like Skill India, ensuring that its workforce remains competitive and industry-ready.
Government’s Proactive Role
Policy certainty, reduction in corporate tax rates, production incentives, and improvements in logistics (via the Gati Shakti Master Plan) are playing a crucial role in building a globally competitive manufacturing ecosystem. Export promotion councils and sector-specific clusters are also helping MSMEs access international markets more easily.
Looking Ahead: The Path to Resilient Growth
India’s manufacturing roadmap is marked by:
- Strategic diversification into EVs, semiconductors, and solar equipment
- Supply chain localization for critical sectors
- Increased automation and smart manufacturing adoption (Industry 4.0)
- Green manufacturing policies focused on sustainability
Despite global uncertainties, India is building a strong foundation to weather external shocks and capitalize on global shifts. With sustained policy focus, investor confidence, and rising domestic capabilities, the manufacturing sector is poised to become a key driver of India’s economic transformation.
In Conclusion
2025 may be the year where India’s manufacturing sector breaks from its earlier inertia and enters a phase of dynamic, inclusive, and resilient growth. For global and domestic investors, the message is clear: India is not just a market of the future—it’s a market of now.
