“Industrial growth rate has lagged-behind in the overall growth of Gross-Domestic-Product (GDP) in the post-reform period.” Give reasons. How far the recent changes in Industrial-Policy are capable of increasing the industrial growth rate ?
Approach · directive: “give reasons / how far”
What it asks · Give reasons why industry has grown more slowly than the economy after 1991, and judge how far recent industrial policy changes can lift it.
It asks 2 things — answer each
- Give reasons why industrial growth lagged behind overall GDP growth in the post-reform period
- Assess how far the recent changes in industrial policy can raise the industrial growth rate
Open with · Since 1991 services have driven India's growth while manufacturing has stayed near a sixth of output; the Economic Survey 2025-26 still finds its real share steady at around 17-18 per cent, unlike East Asia's manufacturing-led take-off.
Cover
- Reasons: infrastructure gaps in power, transport and logistics raise costs and delay projects.
- Reasons: rigid labour laws, land acquisition difficulty and long clearances discourage large, labour-intensive plants.
- Reasons: import competition after tariff cuts, weak R&D and technology, and high cost of credit and stressed bank balance sheets.
- Reasons: the small-scale sector, fragmented and informal, struggles to scale up; global slowdown after 2008 hit exports and demand.
- Recent changes: Make in India (2014), FDI opening in defence and railways, easier licensing, ease-of-doing-business reforms, Start-up India and skill development.
- Recent changes: GST (2017) for a common national market, the Insolvency and Bankruptcy Code (2016), industrial corridors and the National Manufacturing Policy target.
- Assessment: these lower costs and uncertainty, but results depend on land, labour and power reform, credit revival and export competitiveness; impact will take time.
Close with · Industry will lead growth only when a stable tax and regulatory regime is matched by State-level land, labour and power reform and cheaper logistics; that is the route from Make in India to an Atmanirbhar Bharat that manufactures for the world.
Add value (verified)
- Economic Survey 2025-26, Chapter 1: in real (constant) price terms manufacturing's share of GVA has remained steady at around 17-18 per cent.Economic Survey 2025-26, Chapter 1: State of the Economy ↗“In real (constant) price terms, manufacturing’s share has remained steady at around 17-18 per cent (Chart I.16).”
- Economic Survey 2017-18, Chapter 8: India leapt 30 ranks from its previous rank of 130 in the World Bank's Doing Business Report 2018.Economic Survey 2017-18, Chapter 8: Industry and Infrastructure ↗“India has leapt 30 ranks over its previous rank of 130 in the World Bank’s latest Doing Business Report 2018.”
- National Manufacturing Policy notified on 4 November 2011 with the objective of raising manufacturing's share of GDP to 25% and creating 100 million jobs over a decade or so.PIB: Implementation of National Manufacturing Policy (Ministry of Commerce and Industry) ↗“National Manufacturing Policy (NMP) through a Press Note dated 4th November, 2011 with the objective of enhancing the share of manufacturing in GDP to 25% and creating 100 million jobs over a decade or so.”
- PLI schemes for 14 key sectors announced with an outlay of Rs 1.97 lakh crore to enhance manufacturing capabilities and exports.PIB: Production Linked Incentive Schemes for 14 key sectors (2023) ↗“Production Linked Incentive (PLI) Schemes for 14 key sectors have been announced with an outlay of Rs. 1.97 lakh crore (over US$26 billion) to enhance India's Manufacturing capabilities and Exports.”
Question: UPSC's CS (Main) 2017, GS Paper III — paper ↗. Approach: Minimalist IAS, checked 3 Oct 2026 (how we verify) — UPSC publishes no model answers. ·
Model answer· 375words · Minimalist IAS
Since 1991 services have driven India's growth while manufacturing has stayed near a sixth of output: the Economic Survey 2025-26 still finds its real share steady at around 17-18 per cent of GVA. Industry grew, but never fast enough to lead, unlike East Asia's manufacturing-led take-off.
Why industrial growth lagged behind GDP growth
- Infrastructure deficit: unreliable power, congested ports and costly logistics raised costs; software and finance could sidestep these, factories could not.
- Factor-market rigidity: labour laws kept firms small or capital-intensive; land acquisition was slow and contested; multiple clearances stretched gestation.
- Premature competition: tariff cuts exposed firms to imports before they reached scale, while R&D stayed thin.
- Credit and balance sheets: high real interest rates and, after 2011, the twin stress of bad bank loans and over-leveraged corporates choked investment.
- Missing middle: an informal small-scale sector could not scale up, and the 2008 global slowdown hit exports and private investment.
How far recent industrial-policy changes can raise the growth rate
- Make in India (2014): FDI opened in defence, railways and insurance; online clearances and self-certification; India leapt 30 ranks from 130 in the World Bank's Doing Business 2018 (Economic Survey 2017-18).
- National Manufacturing Policy (2011): sought a 25 per cent manufacturing share of GDP and 100 million jobs within a decade; the real GVA share still sits at 17-18 per cent, short of that goal, so paper policy built few factories.
- One market, easy exit: GST (July 2017) ended cascading taxes and border friction; the Insolvency and Bankruptcy Code (2016) allows timely resolution of stressed assets.
- Since then: Production Linked Incentive schemes for 14 sectors, outlay Rs 1.97 lakh crore, reward scale and exports.
| Constraint | Policy response | Gap that remains |
|---|---|---|
| Transaction costs | GST, online clearances | Land, labour, power with States |
| Stressed credit | IBC 2016 | Bank credit to industry slow |
| Scale, technology | NMP, Make in India, PLI | Skills, logistics, exports |
- Verdict: the reforms remove real constraints and are necessary, not sufficient; without factor-market reform, cheaper logistics and skills their effect shows only over years.
Industry will lead growth only when a stable tax and regulatory regime is matched by State-level land, labour and power reform and cheaper logistics; that is the route from Make in India to an Atmanirbhar Bharat that manufactures for the world.
Prepared by Minimalist IAS to the answer standard of Shivam Singh (mentor, 7 years) · facts checked against official sources (how we verify) · updated 3 Oct 2026. UPSC publishes no model answers: compare your structure and coverage with this, then write your own.
