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I ndia’s manufacturing sector occupies a pivotal position in Real wages to workers mirrored the
trajectory of rising workers, rising at a CAGR
the country’s long-term growth and development trajectory.
It is central to the structural transformation required for
achieving Atmanirbharta and realising the vision of Viksit of 4.4 per cent over the five-year period
Bharat@2047.

In recent years, policy initiatives such as the from FY18-20 but grew by 10.5 per cent post-Covid (FY22-24).
Production-Linked Incentive (PLI) scheme across 14 strategic Over the five-year horizon, real value added grew at a healthy
sectors, the launch of the National Manufacturing Mission, CAGR of 8.9 per cent.
reforms to enhance the ease of doing business, and
rationalisation under the Goods and Services Tax (GST) have The surge in real output and value added has been
aimed to stimulate domestic production, improve underpinned by strong investment momentum. Real gross
competitiveness, and position India as a global manufacturing fixed capital formation (GFCF) in manufacturing grew by 26.5
hub. While the government’s policy thrust has been per cent on average in the post-Covid period, compared to a
significant, it is necessary to assess the sector’s performance meagre 1.9 per cent in FY18-20. Industry’s real profits also
in recent years to evaluate the effectiveness of these witnessed a striking reversal, rising by 15.7 per cent on
interventions and identify areas where further improvements average during FY22-24, in contrast to a contraction of -7.3 per
are needed. cent in the pre-covid years.

The Annual Survey of Industries (ASI), released annually by The growth impulse has not been confined to output and
the Ministry of Statistics and Programme Implementation capital alone, as employment generation, measured in terms
(MoSPI), offers a detailed account of developments in the of number of workers, has also accelerated. The industrial
formal manufacturing sector. ASI is the principal source for workforce expanded at a CAGR of 4.4 per cent during FY20-24,
statistics on the organized manufacturing sector in India. It with post-covid hiring averaging 7.2 per cent annually, higher
covers the organized manufacturing sector, including than the pre-covid pace of 3.8 per cent. The employment
industries registered under the Factories Act, 1948. elasticity, measuring the responsiveness of job growth to
output, has also improved markedly from 0.26 in pre covid
period to 0.93 in post-covid period. Real wages to workers
Overview of mirrored the trajectory of rising workers, rising at a CAGR of
4.4 per cent over the five-year period.
Manufacturing Sector
However, the number of factories increased only marginally,
This article analyses medium-term trends in output, value registering a subdued CAGR of 1.3 per cent between FY20 and
added, investment, employment, and wages, to examine the FY24. Strong workforce expansion, despite moderate factory
structural shifts underway in Indian manufacturing. growth, suggests that existing factories are expanding their
To filter out short-term fluctuations and the impact of the scale of operation and hiring more labour, rather than new
Covid-19 pandemic, the analysis compares the pre-Covid factories driving employment growth. This is evident in the
three-year period (FY18-20) with the post-Covid period increase in average number of workers per factory, from 52.4
(FY22-24). In addition, compound annual growth rates during FY18-20 to 57.3 in FY22-24, indicating a process of
(CAGR) over the five-year period (FY20–24) has been consolidation, with factories increasing in scale and absorbing
calculated to capture broader trends. The key performance more labour.
metrics have been deflated by the GDP deflator of that
particular year to assess the performance in real terms after
netting out the impact of price effects. Growth in Key Manufacturing Indicators (%)
Pre-Covid Post-Covid 2023-24 CAGR
Avg FY18-20 Avg FY22-24 (FY20-24)
India’s manufacturing sector is on a
clear growth trajectory, with strong Real Output 4.0 14.3 3.1 8.4
post-covid expansion Real Net Value -1.4 10.5 9.0 8.9
Added
Real GFCF 1.9 26.5 15.0 7.6
In aggregate terms, the performance of manufacturing over Real Profits -7.3 15.7 7.1 16.7
the past five years has been robust. The real value of output
expanded at a CAGR of 8.4 per cent between FY20 and FY24. Workers 3.8 7.2 6.2 4.4
Post-covid recovery has been particularly strong, with output Real Wages to 6.1 8.6 9.2 4.4
registering an average annual growth of 14.3 per cent in Workers
FY22-24, compared to only 4.0 per cent during FY18-20. A Factories 1.6 1.3 2.7 1.3
similar turnaround is visible in real value added, which
contracted at -1.4 per cent on average in the pre-covid period Source: Ministry of Commerce

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