Systemic Surgery for Small Firms

India's manufacturing sector appears to be on the cusp of a revival.

- Tulsi Jayakumar

According to this week's print of the Index of Industrial Production, manufacturing grew by a promising 3.9 percent in June. Fifteen of the 23 industry groups under the second level of industrial classification posted positive annual growth in June 2025.

The Production-Linked Incentive (PLI) scheme has been credited for much of this revival. In July, Minister of State for Commerce and Industry Jitin Prasada informed the Lok Sabha that PLI schemes, with an outlay of ₹1.97 lakh crore across 14 sectors, had attracted ₹1.76 lakh crore in investments by March. These resulted in production increases exceeding ₹16.5 lakh crore and generated over 12 lakh jobs.

Electronics—especially mobile phone manufacturing—and pharmaceuticals have emerged as consistent success stories. The PLI scheme helped India move from being a net importer of bulk drugs (₹1,930 crore in 2021-22) to a net exporter (₹2,280 crore in 2024-25).

This targeted strategy, aimed at fostering global champions and reducing import dependence, has undeniably positioned India as a serious manufacturing contender. Yet, a critical question lingers: in helping industrial giants, are we overlooking the micro, small, and medium enterprises (MSME)—the silent-but-vital engine of inclusive growth?

PLIs are designed to attract large-scale investments in high-tech industries with thresholds largely suited to established players. While their growth is vital for competitiveness and innovation, the benefits don't always reach the broader MSME ecosystem. This risks creating a dual economy—gleaming high-tech manufacturing hubs alongside a struggling MSME sector, much like the skyscrapers and slums of Mumbai.