ASSEMBLING A MIRACLE: MADE IN INDIA, DESIGNED SOMEWHERE ELSE

For three decades, India has chased a manufacturing miracle. On paper, it possesses every prerequisite for success: a vast domestic market, a young workforce, improving infrastructure and a government increasingly willing to subsidise industrial investment.

- PROF. VIKAS SINGH

Yet despite successive waves of reform, manufacturing has struggled to gain ground. The sector accounted for roughly 16-17% of GDP two decades ago and remains near that level today. It employs barely one in eight Indian workers, while more than 40% of the workforce remains dependent on agriculture.

Countries typically become rich by moving workers from farms into factories and from factories into higher-value industries; a path followed with extraordinary success by Britain, Germany, Japan, South Korea and China. Manufacturing was not merely another sector of the economy; it was the bridge between poverty and prosperity. Instead, India moved millions of workers towards services before building a deep manufacturing base. The country built globally competitive software firms before it built globally competitive industrial ecosystems. In a twist of historical irony, India’s entrepreneurs only truly flourished when they escaped the physical world altogether; having spent decades suffocating under the “Licence Raj”, they discovered that the bureaucratic red tape was far easier to bypass when it was converted into digital code. That produced growth, but not industrial depth. India’s manufacturing problem is not that it failed to attract factories, but that it failed to create the thousands of firms, skills and supplier networks that make them productive. The result is one of the great puzzles of the modern economy: a country trying to become an industrial power without ever fully industrialising.

The conventional explanations of labour, land, infrastructure and bureaucracy contain some truth and successive governments have spent decades trying to address them. Yet the deeper puzzle remains: manufacturing has failed to become the employment engine policymakers once expected. The conventional diagnoses explain why factories hesitate to come, not why industrial ecosystems fail to emerge after they arrive.