Manufacturing has crawled compared with the ambition. Bank of America's team led by Rahul Bajoria notes that over the past 15 years, output in dollar terms rose at an average pace of 4.3% a year. Their Monday note argues India needs to roughly double that speed for the next decade and a half, assuming the overall economy grows near 7% a year, to get manufacturing to about 25% of GDP.
If India sustains that faster cadence, Bank of America estimates factory output could reach almost $2.3 trillion by 2040, up from roughly $500 billion today. That would more than double India's slice of global manufacturing to 6.3%. For now, the sector's share of domestic output has "broadly stagnated" around 17%, the bank says.
India took a different route than many rich economies: unlike many advanced economies, India saw services drive expansion first, with manufacturing jobs scaling up later. That left a big chunk of the population still working in agriculture. Scaling up manufacturing is seen as key to moving people into better paying roles and to advancing the government's 'Viksit Bharat' objective of becoming a developed economy by 2047. Recent data help the narrative: GDP grew 7.8% in the quarter through June from a year earlier, and manufacturing rose 9.2% in that stretch, a result Prime Minister Narendra Modi hailed as a "herculean feat."
New plants are not built on optimism alone. Bank of America flags heavy red tape and expensive power. India has 92.6 million micro enterprises, yet there are roughly 40,000 medium-size firms, an imbalance that weighs on productivity and quality job creation.
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Smaller manufacturers can face up to 1,400 compliance requirements each year. Power is pricier too: industrial users typically pay 10% to 25% above the cost of supply, while in Vietnam comparable users pay about 10% less than cost. To change the equation, India has rolled out incentives topping $26 billion over the past decade to court global producers and deepen local supply chains, helping draw names like Apple and Samsung and boosting iPhone production and exports.
