India’s Manufacturing Growth: Insights from the Annual Survey of Industries 2024–25

Context

The Ministry of Statistics and Programme Implementation (MoSPI) has released the detailed findings and unit-level data of the Annual Survey of Industries (ASI) 2024–25. The survey highlights the expansion of India’s formal manufacturing sector, with corporate manufacturing recording significant growth in Gross Value Added (GVA), investment and employment. However, disparities in industrial scale, regional distribution and labour productivity continue to pose structural challenges.

Annual Survey of Industries (ASI) 2024–25

What is the Annual Survey of Industries?

• The ASI is the principal statistical exercise conducted by MoSPI to assess the performance and structural characteristics of India’s registered manufacturing sector.
• It provides information on industrial output, employment, capital investment, input costs, productivity and value addition.
• It helps policymakers understand manufacturing trends and formulate evidence-based industrial policies.

Statutory Framework:

– Conducted under the Collection of Statistics Act, 2008, as amended in 2017, and the corresponding Rules of 2011.

Coverage:

The survey covers:

• Factories registered under Sections 2m(i) and 2m(ii) of the Factories Act, 1948, employing 10 or more workers with power or 20 or more without power.
• Bidi and cigar manufacturing establishments registered under the Bidi and Cigar Workers Act, 1966.
• Non-CEA electricity undertakings involved in electricity generation, transmission and distribution.
• Establishments employing at least 100 persons included in State Business Registers of Establishments.

Major Findings of ASI 2024–25

1. Expansion of Manufacturing Output and Value Addition

• Corporate manufacturing GVA increased by 9.28% compared to the previous fiscal year.
• The corporate segment contributes more than 89% of total manufacturing GVA.
• Net Value Added (NVA) per operational factory increased by 6.59%.
• GVA per person engaged registered a comparatively modest increase of 2.25%.

2. Rising Industrial Investment

• The gross value of installed plant and machinery increased by 7.25%.
• This indicates continued investment in industrial capacity, production infrastructure and technological modernisation.
• Expansion of manufacturing facilities under Production-Linked Incentive (PLI) schemes reflects the growing emphasis on domestic production capabilities.

3. Employment Generation

• The number of operating factories in the corporate sector increased by 3.45%.
• Total persons engaged grew by 7.57%, taking formal manufacturing employment beyond 2.10 crore.
• Food products, textiles, basic metals, motor vehicles and wearing apparel together accounted for over 41% of formal manufacturing employment.

4. Regional Distribution of Manufacturing

• Maharashtra, Gujarat, Tamil Nadu, Karnataka and Uttar Pradesh collectively contributed over 54% of India’s manufacturing GVA.
• This highlights the importance of established industrial ecosystems but also reveals the uneven geographical distribution of manufacturing activity.

Structural Composition of India’s Factory Sector

1. Unequal Distribution of Capital and Value Addition

The survey reveals a substantial difference between the number of small factories and their contribution to industrial output.

– Small factories (plant and machinery investment up to ₹5 crore):

• Constitute 78.69% of operational factories.
• Employ 34.32% of total workers.
• Account for only 10.55% of fixed capital.
• Contribute 17.61% of net value added.

– Large factories (investment of ₹10 crore and above):

• Represent only 15.84% of operational factories.
• Control 87.42% of fixed capital.
• Employ 59.66% of the workforce.
• Generate 76.82% of total net value added.

2. Concentration of Industrial Output

• Factories generating annual output above ₹10 crore constitute 47.63% of units but account for 95.55% of fixed capital and 97.87% of net value added.
• Conversely, factories producing less than ₹1 crore represent 18.34% of units but contribute only 0.08% of gross output.
• This reflects the persistent productivity and competitiveness gap between smaller and larger manufacturing enterprises.

Positive Implications of the Findings

1. Strengthening of Industrial Capacity

• The 7.25% increase in plant and machinery investment indicates growing productive capacity and industrial modernisation.
• It can support domestic manufacturing competitiveness and reduce dependence on imported industrial goods.

2. Expansion of Formal Employment

• Employment growth of 7.57% suggests that industrial expansion is generating additional employment opportunities.
• Automobile and electronics manufacturing clusters in Tamil Nadu and Haryana illustrate the potential of industrial ecosystems to absorb labour.

3. Resilience of Labour-Intensive Industries

• Food processing, textiles and apparel continue to play a significant role in manufacturing employment.
• Industrial clusters such as Tiruppur, Surat and Noida demonstrate the importance of traditional manufacturing sectors in supporting livelihoods.

4. Improvement in Factory-Level Efficiency

• The rise in NVA per operational factory indicates improved value generation and operational performance.
• Automation, better production management and digital supply-chain integration can further enhance industrial efficiency.

Key Challenges Highlighted by the Survey

1. Capital Concentration and the Missing Middle

• A large proportion of factories operate with limited capital but contribute relatively little to overall industrial value addition.
• Smaller enterprises often struggle to access affordable finance, modern machinery and advanced production technologies.
• This restricts their ability to move from low-value subcontracting towards higher-value manufacturing.

2. Regional Imbalances in Industrial Development

• More than 54% of manufacturing GVA is concentrated in five states.
• Several eastern and central states remain relatively underdeveloped in downstream manufacturing despite possessing substantial mineral and natural resources.
• Dependence on raw material extraction limits their participation in higher-value industrial activities.

3. Slow Growth in Labour Productivity

• While corporate manufacturing GVA grew by 9.28%, GVA per person engaged increased by only 2.25%.
• This indicates that output expansion is not translating proportionately into improvements in worker productivity.
• Limited technological adoption and inadequate workforce skills remain important constraints.

4. Economic Vulnerability of Micro-Manufacturing Units

• A considerable proportion of factories generate less than ₹1 crore in annual output.
• Very small units face low profit margins and, in some cases, negative value addition.
• High compliance costs, expensive credit, fluctuating raw material prices and energy costs affect their long-term viability.

Way Forward

– Accelerate MSME Technological Upgradation: Introduce targeted credit-linked subsidies, concessional financing and technology support to help smaller factories adopt CNC machinery, automation and digital enterprise management systems.

– Promote Balanced Regional Industrialisation: Develop industrial parks and manufacturing clusters in eastern and central India by leveraging PM Gati Shakti, dedicated freight corridors and improved multimodal connectivity.

– Strengthen Skill Development and Apprenticeships: Align vocational training and the National Apprenticeship Promotion Scheme (NAPS) with emerging industrial requirements to improve shop-floor skills and labour productivity.

– Develop Common Industrial Infrastructure: Establish shared testing laboratories, effluent treatment facilities, warehousing, logistics and reliable power infrastructure to reduce operating costs for smaller enterprises.

– Encourage MSME Integration into Global Value Chains: Improve quality certification, technology access, export financing and market linkages so that smaller manufacturers can participate in domestic and international supply chains.

– Improve Data-Driven Industrial Policymaking: Use ASI findings to identify sectoral and regional bottlenecks and design targeted interventions for employment generation, productivity improvement and industrial diversification.

Conclusion

The Annual Survey of Industries 2024–25 highlights the growing strength of India’s formal manufacturing sector through rising GVA, capital investment and employment generation. However, the concentration of capital and value addition among large factories, regional industrial disparities and relatively slow labour productivity growth reveal that industrial expansion remains uneven. Achieving the vision of increasing manufacturing’s contribution to 25% of GDP requires not merely expanding industrial output but also strengthening smaller enterprises, promoting geographically balanced industrialisation and ensuring productivity-led employment growth.

Source : PIB