India's Post-1991 Industrial and manufacturing Policy Landscape

Four interrelated structural factors explain the persistent stagnation of India's manufacturing sector at 13-15% of Gross Domestic Product (GDP). Among them, weak integration into global value chains (GVCs) remains the most binding constraint. This limited participation in GVCs is itself the result of structural and policy constraints, particularly high infrastructure costs, such as unreliable power supply and elevated logistics costs, which reduce the competitiveness of Indian firms relative to East Asian economies.

Launched in September 2014, Make in India aimed to transform India into a global manufacturing hub. While FDI inflows rose significantly, manufacturing share of GDP did not increase, remaining stuck at 13-15%. The PLI Scheme (2020-Present) provided performance-based financial incentives and successfully boosted electronics and smartphone production (mobile phone production rose by ~146%). However, actual budget utilization remained low (around 6%), and domestic value addition in electronics remains below 20%, highlighting weak backward linkages.

Vietnam transitioned from an agriculture-dominated economy to a manufacturing-driven growth model, with manufacturing now contributing 25% of GDP. This was effective due to Export Processing Zones with functional infrastructure, strategic trade agreement architecture (like CPTPP), and a cost-competitive labor force. By contrast, India's equivalent SEZs suffered from policy reversals, and India has stayed outside mega-regional trade frameworks.

India's manufacturing stagnation reflects deep structural constraints, including services-led growth, a fragmented industrial base, and weak integration into GVCs. Vietnam's experience demonstrates that sustained industrial growth requires coherent alignment of trade policy, export infrastructure, and supply chain deepening, an approach India's industrial policy must now prioritise.