India's Industrial Growth: Challenges & Way Ahead

Table of contents

The Union Budget 2025 focuses on reviving economic growth by stimulating aggregate demand, with a crucial emphasis on the industrial sector. Given the conservative GDP growth estimate of 10.1% for FY26, the budget prioritises fiscal consolidation, ensuring that the fiscal deficit remains under control while promoting investment and industrial expansion.

Fiscal Consolidation & Macroeconomic Stability

Pragmatic GDP Forecast: A realistic 10.1% GDP growth projection accounts for global uncertainties and domestic slowdowns, ensuring a stable tax revenue base.
Fiscal Deficit Management: A disciplined fiscal policy aims to reduce the deficit below 4% in the medium term, safeguarding market liquidity and financial stability.
Strategic Borrowing Plan: Gross borrowings are estimated at ₹14.8 trillion (up from ₹14 trillion in FY25), ensuring controlled debt financing without disturbing financial markets.

Revitalising Industrial Growth

The Budget adopts a two-pronged approach to stimulate industrial growth:

Broad-Based Economic Measures

Capital Expenditure (Capex): Allocation increased to ₹11.2 lakh crore, focusing on key sectors like roads, railways, and defence, generating significant economic activity.
Public-Private Partnerships (PPPs): Strengthening urban infrastructure with bond financing, ensuring long-term sustainability.
Demand Stimulation: Provide tax relief through revised income tax slabs and implement welfare schemes like PM-KISAN, MGNREGA, and PM Awas Yojana to boost consumption and economic revival.

Targeted Sector-Specific Policies

Manufacturing Focus: Prioritise electronics, toys, and footwear to capture shifting global supply chains and establish special leather and toy clusters to boost domestic production and employment.
Export Promotion: Launch Export Promotion Mission (a collaboration between Commerce, MSME, and Finance Ministries), develop BharatTradeNet for streamlined trade, promote Global Capability Centres (GCCs) in Tier-2 cities, and upgrade Air Cargo Warehousing for efficient logistics.
MSME Growth: Increase the Modified Interest Subvention Scheme loan limit to ₹5 lakh and support 5 lakh women entrepreneurs from SC/ST backgrounds through the New Women Entrepreneurship Scheme.

Challenges in Industrial Revival

Reassessing Export-Led Growth: With global trade uncertainties and ongoing tariff wars, over-reliance on exports may not provide the anticipated growth, requiring a more diversified approach.
Reforming Skilling Programs: Traditional skill development models are outdated, failing to keep up with rapid technological advancements; a shift toward industry-driven training is essential to meet future demands.
Evaluating PLI Schemes: A thorough evaluation of the Production-Linked Incentive (PLI) schemes is crucial to assess their real impact on improving industrial competitiveness and driving sustainable growth.

Way Forward

Government’s Role: Promote a light-touch regulatory framework that fosters trust-based governance, enhancing productivity and encouraging innovation.
Corporate Responsibility: With reduced government intervention, the private sector must ramp up investment and actively contribute to industrial revival, ensuring long-term growth.
Streamlining Regulatory Processes: Simplify compliance procedures and eliminate bottlenecks, enabling industries to operate efficiently and attract private investments.
Encouraging Sustainable Practices: Incentivise green technologies and sustainable production methods, aligning industrial growth with environmental responsibility for a resilient economy.
Strengthening Public-Private Partnerships (PPPs): Foster collaboration between the government and private sector to drive infrastructure development, innovation, and job creation.

This comprehensive approach will build a robust ecosystem of growth, where regulatory reforms and corporate participation come together to ensure long-term industrial resilience and economic prosperity.

Reference: The Hindu

PMF IAS Pathfinder for Mains – Question 69

Q. What are the key measures to stimulate industrial growth, and what challenges must be addressed for successful industrial revival? (250 Words) (15 Marks)

Approach

Introduction: Introduce the answer by highlighting the role of industrial growth in economic growth.
Body: Define the key measures to stimulate industrial growth and challenges in industrial revival.
Conclusion: Write an appropriate conclusion and highlight the need for a collaborative approach.