India's Industrial Growth Isn't as Satisfactory as It's Made Out to Be

An alternative reading of data points to a manufacturing underperformance that needs to be addressed as a policy priority

- R. Nagaraj

In 2023-24, India's manufacturing sector contributed 17.5% to domestic output (gross value added) at constant prices (i.e., net of inflation), as the National Accounts Statistics (NAS) show. In 2011-12, the sector's share was almost identical. It means that the sector has grown at the same 6% annual rate as domestic output, during this period. During 2004-05 to 2011-12, the average growth rate was 9.5%. Hence, over a longer span, industrial growth has decelerated.

However, the industrial growth numbers raise many questions, both statistical and substantial. When the current NAS series (base year 2011-12) was introduced in 2015, red flags were raised on the veracity of the revised GDP series, as the new growth estimates were at serious variance with the earlier estimates (R. Nagaraj, 'Seeds of Doubts on New GDP Numbers,' Economic and Political Weekly, 28 March 2015). The doubts were most acute for the manufacturing sector.

The primary cause of the reported overestimation was the introduction of the ministry of corporate affairs' MCA21 database of statutory filings of audited financial accounts. It replaced the earlier production accounts-based estimates, which mainly used the Annual Survey of Industries (ASI). The doubts raised by various data users, however, have remained unresolved. Without public access to the MCA database, it was not possible to independently validate the official estimates.