Manufacturing sector expansion hits two-year high in FY24, most firms added in 13 years

Formal manufacturing sector grew at the fastest pace in two years in FY24

India’s formal manufacturing sector expanded at its fastest pace in nearly two years in FY24, with the number of factories added rising to a 13-year high, according to data released by the government on August 27. The sector’s gross value added (GVA) grew 11.9 percent in 2023–24—the strongest since 2021–22—as the broader economy maintained growth above 8 percent.

A key driver of this growth was the rise in the number of factories. India added 6,727 formal sector manufacturing firms in FY24, marking a 2.7 percent increase—the sharpest since FY12. The surge reflects renewed investment activity after two subdued years. Fixed capital formation in the sector grew 12.2 percent, the highest in seven years, signalling capacity expansion by firms.

The strongest growth came from basic metals, motor vehicles, chemicals, pharmaceuticals, and food processing.

Employment trends also improved. The number of workers rose 6.2 percent in FY24, while total persons engaged in manufacturing grew 5.9 percent. Wages to workers climbed 12 percent, reflecting both higher headcount and better pay. This marks the third consecutive year of healthy gains in employment metrics, reinforcing post-pandemic formalisation.

Food and textiles remained the largest employers, together accounting for nearly a fifth of total formal manufacturing jobs.

The top five states—Maharashtra, Gujarat, Tamil Nadu, Karnataka, and Uttar Pradesh—accounted for 55 percent of manufacturing GVA and less than half the formal sector workforce, underscoring regional concentration.

On the production side, the value of output rose 5.8 percent, supported by a 5.2 percent increase in products and by-products. While this was below the double-digit growth of the previous two years, it came amid moderation in input costs. Fuel consumption declined 1.3 percent after two years of sharp increases, while material consumption growth eased to 3.4 percent from 24.2 percent in FY23.

Profitability improved modestly. Net income rose 10.7 percent, reversing a sharp slowdown in FY23, while profits grew nearly 10 percent. However, interest payments surged 22.5 percent, reflecting rising borrowing costs, even though outstanding loans increased only 2.8 percent.