Scale, innovation and global value chain integration vital for next manufacturing phase: Economic Survey

manufacturing

• Survey urges tech-driven, innovation-led manufacturing for India's growth
• Manufacturing share in GDP targeted to double to 25 percent by 2035
• PLI schemes and infrastructure upgrades seen as key to boosting jobs and exports

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The next phase of India’s industrial growth will depend less on protection and more on scale, technology adoption, innovation and deeper integration into global value chains, the Economic Survey 2025-26, tabled in Parliament on January  29, has said.

The survey pegs manufacturing as central to India’s long-term growth ambitions, as global supply chains undergo structural realignments. Competitiveness is increasingly determined not by low-cost labour alone but by technological capability, reliability and strategic relevance within global production networks, it said.

For India to emerge as a high-productivity manufacturing hub, the survey emphasised the need for stable, innovation-friendly policies and sustained reforms across ease of doing business, R&D and innovation, skilling, infrastructure and logistics, and MSME scaling.

A key recommendation is to move toward mission-driven manufacturing policy through the National Manufacturing Mission. The survey positioned the mission as the long-term blueprint to expand manufacturing capacity, accelerate technology adoption and deepen MSME integration into domestic and global supply chains.

The long-term vision is ambitious, targeting a doubling of manufacturing’s share in GDP to 25 percent by 2035, generating around 143 million jobs and pushing merchandise exports toward $1.2 trillion.

The survey also recommended continuing targeted incentive-based industrial policy in strategic sectors through schemes such as the Production Linked Incentive (PLI) programme.

PLI schemes, now spanning 14 sectors with an outlay of Rs 1.97 lakh crore, have already helped attract more than Rs 2 lakh crore in investments, generate incremental production of over Rs 18.7 lakh crore and support employment generation of more than 12.6 lakh, it said.

The policy signal is that targeted, scale-linked incentives can help anchor global supply chains in India when combined with domestic capability building.

Beyond incentives, the survey favoured innovation-led manufacturing. It stressed the need for India to transition from a technology adopter to a global innovator, supported by initiatives such as the Anusandhan National Research Foundation and research and innovation funding mechanisms aimed at crowding in private R&D investment and accelerating capability development in strategic sectors.

The survey also linked manufacturing competitiveness directly to infrastructure and logistics efficiency. Initiatives such as PM GatiShakti and the National Industrial Corridor Development Programme are critical to reducing logistics costs, improving supply chain reliability and enabling large-scale industrial growth. Infrastructure is positioned not just as a growth enabler but as a core determinant of manufacturing competitiveness.

Another recommendation is to accelerate MSME integration into larger value chains. Long-term manufacturing growth and job creation will depend on the ability of smaller firms to scale, adopt technology and participate in global supply networks rather than remain fragmented and domestically focused, it said.