Policy Update
Sanju Joshi
Background
The ‘National Manufacturing Mission’ introduced in the Union Budget 2025-2026 by the Finance and Ccorporate Minister, Smt. Nirmala Sitharaman, is an extension to the ‘Make in India’ Project launched by Prime Minister Narendra Modi in 2014. Despite progressive results from “Make in India”, several structural challenges persist- such as inadequate infrastructure, complex regulations, and reliance on imports for critical components.
To address these problems ‘The Manufacturing Mission’ focuses on five major areas, that are:
- Ease cost of doing business
- Development for in-demand jobs
- Supporting MSME’s
- Accessing modern technology; and
- Producing quality products
The Mission aims to support small, medium and large industries, ensuring they can compete effectively globally. The Finance Minister stated that the National Manufacturing Mission would promote clean tech, and build an ecosystem for solar cells, EV batteries, and high voltage transmission equipment manufacturing at the local level.
Under the provision of the policy, the government will also introduce customised credit cards with a Rs 5 lakh limit for registered MSME’s. Also, a crucial component of this initiative is the support for start-ups with an allocated funding of Rs10,000 crore.
The broader vision of the Union Budget 2025- 26 related to ‘The National Manufacturing Mission’ focuses on ten key areas, including: supporting MSME’s and promoting exports, agricultural growth and rural prosperity, manufacturing and financial inclusion, inclusive growth and development and a special focus on the poor, youth, farmers, and women.
Functioning
The Manufacturing Mission is a planned executive policy backed by policy initiatives, industrial collaboration, and infrastructure development to enhance India’s manufacturing capabilities. Indian MSME’s employ over 7.5 crore people in around 1 crore registered MSME’s, generating 36% of our manufacturing. MSME’s are responsible for 45% of India’s export, hence, the ‘Manufacturing Mission’ government aims to enhance MSME’s investment and turnover limits by 2.5 and 2 times, respectively. An increase in government investment will financially and structurally support the manufacturing sector to increase its productivity and generate more employment.
The Government has also enhanced credit accessibility under the provision of ‘The Manufacturing mission’:
- For Micro and Small enterprises, credit guarantee increased from Rs 5 crore to Rs10 crore, leading to additional credit of Rs 1.5 lakh crore in the next 5 years.
- For start-ups, from Rs 10 crore to Rs 20 crore, with the guarantee fee being moderated to 1% of loans in 27 focus sectors important for Atmanirbhar Bharat; and
- For well-run exporter MSME’s, for term loans up to Rs 20 crore.
The Alternate Investment Funds (AIFs) have received commitments of over Rs 91,000 crore from various investors. Indian Government in addition to has contributed Rs 10,000 crore to the Fund of Funds to support these AIFs under the provision of ‘The Manufacturing Mission’.
For start-ups support a new Fund of Funds will be launched with a broader scope and an additional Rs 10,000 crore contribution from the government.
Vision of The Mission
India aims to become a global manufacturing powerhouse by establishing a robust manufacturing sector, attracting significant investment, fostering innovation, and creating a favourable ecosystem for domestic production, ultimately leading to the following outcomes:
1. Increased Manufacturing and share in GDP:
The Initiative aims to increase the contribution of the manufacturing sector in the GDP and create favourable conditions for entrepreneurship and innovations. The shortcomings of ‘Make in India’ was that it couldn’t accelerate the contribution of the manufacturing sector in the GDP. It remained stagnant at 17.7% in 2023. Therefore, the furthering ‘Make in India’ plans to further increase its contribution in GDP to 25% by end of 2025. However, achieving this goal in just one year seems very unrealistic.
Image Source: DowntoEarth
2. Technological Advancement:
Under the ‘Make in India’ Project, the government took initiatives to promote advanced technologies identifying its importance in the manufacturing sector. The initiatives focused on research and development in various sectors, encouraging collaboration between industry and academia, and fostering innovation-driven entrepreneurship. These initiatives have encouraged the adoption of digital technologies like Internet of Things (IoT) and Artificial Intelligence (AI) in the manufacturing sector.
3. Job Creation through Manufacturing mission:
Rooted on the ‘Make in India’ plan, ‘The Manufacturing Mission’ lays emphasis on creating jobs and expanding domestic manufacturing units. Industrial clusters and manufacturing hubs have played a significant role in boosting employment. Not only employment generation, the mission put great emphasis on upskilling and reskilling of workers. With change in technology and infrastructure, upgraded skills are required to maximize the efficiency of the economy and hence government initiatives such as Skill India Mission and National Skill Development Corporation (NSDC) have been instrumental in providing vocational training and certificate programs. These programs actively target both existing as well as new entrant workforce in the market.
4. Clean-Tech Manufacturing:
This will provide policy support and roadmaps for small, medium and large industries. Special emphasis will be given to clean tech manufacturing, fostering domestic production of solar PV cells, EV batteries, wind turbines, and high voltage transmission equipment.
Major Manufacturing Missions
National Toy Plan:
As a key component to India’s broader Manufacturing Mission, ‘The National Toy’ Plan aims at strengthening domestic production, reducing imports and increasing exports. As a part of ‘Make in India’ strategy, Indian Toy industry witnessed 52% decrease in overall imports of toys and 239% increase in exports of toys till FY 2021-22. With ‘The Manufacturing Mission’ India aims to support the toy industry to create high-quality, unique, innovative, and sustainable toys that will globally represent the brand ‘Made in India’.
National Leather and Footwear Plan:
The Indian leather and footwear Manufacturing sector is a major contributor to the Indian economy. The National Leather and Footwear plan aims to boost productivity, quality and competitiveness to India’s leather and footwear sector. Under the programme, the government has upgraded infrastructure, design capacity, technology and manufacturing components required for the accelerated growth of the sector. The scheme is expected to facilitate employment for 22 lakh individuals, generate a turnover of Rs 4 lakh crore, and achieve exports exceeding Rs 1.1 lakh crore.
Expected Impacts
- The union Ministry of Micro, Small and Medium Enterprises has been allocated a fund of Rs 23,168 crore, an increased budget plan of 4.6% over the 2024-25 budget. These increments are expected to improve efficiency, technological adoption, and employment generation.
- Exporter MSME’s will benefit from term loans up to Rs 20 crore with enhanced guarantee cover.
- Khadi villages and coir industries have been allocated a fund of Rs 1,532 crore with a 9% increment over the previous budget. The funding is expected to create more employment opportunities that will support artisans and small scale entrepreneurs while strengthening the MSMEs sector.
- Fund of Funds has been allocated to first time entrepreneurs and start-ups, providing necessary capital for innovation and growth. This initiative is expected to foster entrepreneurship and create employment opportunities.
Reference Case: China’s ‘Made In China’
In May 2015, China’s Premier Li Keqiang signed a national strategic plan and industrial policy to further the development of the manufacturing sector, which came to be known as ‘Made in China’. China is known as the ‘world factory’ of cheap low-tech goods, advantaged by lower labour cost and supply chains. However, China aims to move away from this image and wants to establish itself as a global producer of high-tech goods facilitated by higher labour cost and a rich economy.
Made in China 2025’s goals include increasing the Chinese domestic content of core materials to 70% by 2025. China is experimenting with the production of high-tech goods and services, with its semiconductor industry central to the industrial plan.
The Chinese government continues to invest heavily into industrial plans. In 2018, it committed to invest US $300 billion into achieving industrial success. In the wake of the COVID-19 pandemic, at least an additional $1.4 trillion was also invested into MIC 2025 initiatives.
Similar to China, India also committed to invest in its industrial plans to accelerate the growth of the economy and move from its status of Middle Income Country.
Way Forward
For India to be a global manufacturing powerhouse, a comprehensive and strategic approach is required that involves policy reforms, MSMEs empowerment, and sustainability. Expanding Production Linked Incentives (PLI) schemes, simplifying regulations, and fostering industry 4.0 adoption (AI, IoT, automation) will drive modernization. Strengthening MSMEs through easier credit access, supply chain integration, and targeted skill development is crucial for boosting domestic production. A sustainable manufacturing model, incorporating green energy, waste reduction, and circular economy principles, will ensure long-term resilience. Enhancing Global trade competitiveness through strategic FTAs, export incentives, and infrastructure improvements will further position India as a global manufacturing powerhouse.
Challenges Ahead
- Skills gap: The Indian education system still lags behind, creating a pool of unskilled and skill Inefficient labours. Bridging the gap between skill required and skill available in the workforce should be one of the major concerns of the government.
- Inefficient Infrastructure: Existing infrastructure lacks to stimulate the full potential of the Indian manufacturing sector. The Government should address existing infrastructure deficiencies, particularly in logistics and power supply.
- Environmental and sustainability issue: As a major developing nation and home to the largest population of the world, India faces significant environmental challenges, with rising pollution level being a key consequence of industrial expansion. Rising emissions from manufacturing facilities can hinder production capacity and can further pose long term sustainability risks. Hence, investment in renewable energy and sustainable manufacturing with policy support to control emissions are required.
References
About the Contributor: Sanju Joshi is a Research Intern at IMPRI, pursuing B.A (hons) In Economics from Delhi University.
Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.
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