Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard.
Approach · directive: “comment”
What it asks · Explain why a larger manufacturing and MSME base speeds up growth, then assess the Government's present policies: what they offer and where they fall short.
It asks 2 things — answer each
- Establish why faster growth needs a larger share of manufacturing, and of MSMEs in particular, in GDP
- Comment on the Government's present policies for manufacturing and MSMEs: what they offer and where they fall short
Open with · Manufacturing added only 14.3% of GVA in FY23 (Economic Survey 2023-24), far below the 25% the National Manufacturing Policy sought, while MSMEs supplied 30.1% of GDP and 35.4% of manufacturing output; raising both shares is the surest route to mass non-farm jobs.
Cover
- Why it matters: manufacturing's output share (35.2%) is over twice its GVA share, showing deep linkages; MSME products are 45.7% of exports (2023-24).
- Scale push: PLI in 14 sectors with a ₹1.97 lakh crore outlay, Make in India, a concessional tax rate for new units.
- Cost push: PM Gati Shakti and the National Logistics Policy against logistics cost.
- MSME ecosystem: 2020 definition, Udyam (4.91 crore registrations by August 2024), ECLGS, CGTMSE, TReDS, RAMP, ZED, PMEGP.
- Shortfalls: PLI benefits skew to large firms; delayed payments, thin credit, informality and compliance burden keep MSMEs small.
- Way forward: tie PLI to MSME sourcing, enforce timely payment, fund technology and skills through RAMP.
Close with · Manufacturing will lift growth only when its MSME base is formal, technology-ready and plugged into global value chains; that, not incentives to large firms alone, is the path to the 25% share and to SDG 9's inclusive and sustainable industrialisation.
Add value (verified)
- Economic Survey 2023-24 (Ch 10): manufacturing was 14.3% of GVA at current prices in FY23 but 35.2% of output, showing strong backward and forward linkages.Economic Survey 2023-24, Chapter 10: Industry, para 10.2 ↗“The share of manufacturing in total gross value added at current prices was 14.3 per cent in FY23. However, the output share is 35.2 per cent during the same period, indicating that the sector has significant backward and forward”
- Economic Survey 2023-24 (para 10.29): MSMEs produced 35.4% of all-India manufacturing output in FY22; MSME-specified products were 45.7% of exports in 2023-24.Economic Survey 2023-24, Chapter 10: Industry, para 10.29 ↗“the share of MSMEs in all-India manufacturing output during the year FY22 was 35.4 per cent. Data Dissemination Portal of Directorate General of Commercial Intelligence and Statistics (DGCIS) states that the share of export of MSME-specified products in all-India exports in 2023-24 was 45.7 per cent.”
- PIB backgrounder (29 August 2024): MSME GVA was 30.1% of GDP in 2022-23; over 4.91 crore enterprises registered on the Udyam portal.PIB, Ministry of MSME: Celebrating MSMEs on National Small Industry Day 2024 (29 August 2024) ↗“the sector sustained a contribution of 27.3% in 2020-21, rebounding to 29.6% in 2021-22 and reaching 30.1% in 2022-23.”
- PIB (29 August 2024): over 4.91 crore enterprises registered on the Udyam portal.PIB, Ministry of MSME: Celebrating MSMEs on National Small Industry Day 2024, headline ↗“Celebrating MSMEs on National Small Industry Day 2024 Over 4.91 Crore Enterprises Registered, Udyam Portal Transforms MSME Landscape”
- PIB (December 2024): PLI schemes cover 14 sectors with an outlay of ₹1.97 lakh crore.PIB backgrounder on Production Linked Incentive schemes (December 2024) ↗“Production Linked Incentive (PLI) Schemes for 14 key sectors have been announced with an outlay of Rs. 1.97 lakh crore to enhance India's Manufacturing capabilities and Exports.”
Question: UPSC's CS (Main) 2023, GS Paper III — paper ↗. Approach: Minimalist IAS, checked 3 Oct 2026 (how we verify) — UPSC publishes no model answers. ·
Model answer· 223words · Minimalist IAS
Manufacturing added only 14.3% of GVA in FY23 (Economic Survey 2023-24), against the National Manufacturing Policy's 25% goal; MSMEs gave 30.1% of GDP (2022-23). Both must grow.
Why growth needs more manufacturing and MSMEs
- Linkages: manufacturing's output share is 35.2%, over twice its GVA share: factories pull in suppliers, logistics and services.
- Jobs and exports: MSMEs absorb workers leaving farms, make 35.4% of manufacturing output (FY22) and 45.7% of exports (2023-24).
Present policies
- Scale: PLI in 14 sectors (outlay ₹1.97 lakh crore), Make in India and a concessional tax rate for new units (lapsed March 2024).
- Cost: PM Gati Shakti and the National Logistics Policy attack logistics cost.
- MSME ecosystem: the 2020 definition, Udyam registration (4.91 crore enterprises, August 2024), ECLGS and CGTMSE guarantees, TReDS, RAMP, ZED.
| Lever | Aim | Gap |
|---|---|---|
| PLI | Scale in 14 sectors | Skewed to large firms |
| Udyam, TReDS | Formalise, pay on time | Delayed payments persist |
Where they fall short
- Missing middle: PLI favours capital-intensive large units; thin credit, delayed payments, informality and compliance burden keep MSMEs small and outside global value chains.
Way forward
- Link, not just incentivise: tie PLI beneficiaries to MSME sourcing, enforce timely payment, fund technology through RAMP.
Growth needs formal, technology-ready MSMEs inside global value chains, not incentives to large firms alone: the route to the 25% goal and to SDG 9's inclusive and sustainable industrialisation.
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.
