Introduction

The manufacturing sector has been the relentless focus of India's policymakers, since Independence and the first Industrial Policy Resolution of 1948, right up to 2019 as the Government of India attempts to execute successfully the ‘Make in India’ strategy. In 1948, the share of manufacturing in India's gross domestic product (GDP) was nearly 10 per cent. In 2015–16, it stands at a mere 15 per cent. At its peak, the share of manufacturing approached 20 per cent of GDP in the heyday of the thrust for capital intensive manufacturing in the 1960s and 1970s, but as the economy began to liberalize from the early 1980s, it is the share of services which grew steadily. The share of manufacturing in GDP has remained largely stagnant since 1980 at around 15–16 per cent of GDP.

What is remarkable about the trajectory of manufacturing in India is how little it has changed despite changes in policy over the decades. The 1948 Industrial Policy Resolution based on the ‘Bombay Plan’ stressed a continuous increase in production and an equitable distribution of wealth. The 1956 Industrial Policy Resolution decisively shifted focus to a public sector led basic goods first industrial strategy in order to achieve the goal of a socialist pattern of society. The first baby steps towards liberalization began in 1973, when the Industrial Policy Statement identified industries in which large private sector industrial houses and foreign investors could invest. In 1977, The Janata Party government's Industrial Policy statement emphasized small scale industry and village enterprises. In 1980, at the time of Indira Gandhi's comeback, the Industrial Policy Statement laid the foundation for competition and export orientation for the first time. Finally, in 1991, the Industrial Policy Resolution took a giant step towards liberalization by dismantling industrial licensing for a large number of industries, by permitting 51 per cent foreign direct investment (FDI) in several sectors and by forming a more liberal regime for technology acquisition. Despite all of those twists and turn in India's policies towards manufacturing, the most recent ‘National Manufacturing Policy’ of 2011 laments ‘the share of manufacturing in India's GDP has stagnated at 15–16 percent since 1980 while the share in comparable economies in Asia is much higher at 25–34 percent’.