Part 1 covered fiscal deficit, foreign direct investment, disinvestment, and India’s energy transition. Part 2 covered IT hiring and AI, internal migration, and the government’s pension expenses. Part 3 covered skilling and jobs, exports, and middle-class woes.
Manufacturing: Taking ‘Make in India’ from vision to reality
One of the major economic-policy initiatives of the BJP-led government over the past decade has been its production-linked incentive (PLI) scheme, intended to encourage onshoring of manufacturing across sectors. The past few years have seen companies across the world attempt to diversify production bases away from China, an effort that might well intensify under an American president who is noticeably more hostile to China than his predecessor.
While multinationals such as Apple have multiple units in India to assemble devices, it will take more to move headline numbers, especially since the post-covid bump has now all but dissipated. In four of the past seven years, growth in manufacturing has trailed overall economic growth.
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Another lever available to the government to push manufacturing is its own capital expenditure. In 2024-25, between April and November, industrial production of capital goods grew at an average of 4.5%, against 6.3% in 2023-24. So, the challenge for the government is manifold: take advantage of the global restructuring of the manufacturing sector to attract more business to India, and boost domestic capex to a greater extent than has happened so far.
Crop diversification: The imperative to farm beyond rice and sugar
India exported $13.2 billion worth of rice and sugar in 2023-24. Both are water-intensive crops—a kg of sugar needs 1,500-2,000 kg of water. They use up about 70% of India’s irrigation capacity, which reduces the water available to other crops, according to a 2020 report by Niti Aayog. Their export also means that India, a water-deficit country, is cross-subsidising water for the world.
There are other domestic implications. Take the two major paddy-producing states, Punjab and Haryana. Between 1980 and 2024, the area under paddy cultivation in these two states increased by 2.7 times and 3.1 times, respectively. As a result, ground water extraction in both states is above 100%—that is, more water is being taken out than is going back in.
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Jobs: Quantity and quality
The biggest challenge before the Indian economy is to create more jobs outside agriculture. In the six years to 2023-24, the number of workers in agriculture increased by 68 million, reversing the net movement outside agriculture in the 13 years before that. Initially, this could be attributed to the covid-19 crisis, as agriculture became a safety net. But even in 2023-24, when GDP grew by 8.2%, the agricultural workforce increased by 25 million.
The bigger picture is this: according to the International Labour Organisation’s report on India, between 2000 and 2012, employment grew at an average annual rate of 1.6% (even as gross value added grew at an average of 6.2%). Between 2012 and 2019, even as value added grew at a faster pace (average of 6.7% per year), employment growth was 0.01% per year—basically, zero.
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Further, the quality of employment remains of very low quality, with the bulk of employment being generated in the informal sector. On average, only one in five workers has a salaried job. But even among salaried employees, only around half have paid leave or any form of social security benefits (like provident fund). More non-agri jobs and better quality of employment are the needs of the day.
Bankruptcy resolution: Resolving insolvencies quickly and effectively
The Insolvency and Bankruptcy Code (IBC) was enacted in 2016 to provide a way out to businesses that could not service their debt. It was intended to resolve their state of limbo, enable a quick decision, and maximise the recovered amount.
The 2022-23 annual report of the regulator in this space shows that 6,571 cases had been admitted under the corporate insolvency resolution process (CIRP) as of 31 March 2023. Of the 4,515 cases that had been closed, 19% were withdrawn and 21% went into appeals/review. Of the remaining 60%, as many as 45% resulted in liquidation and only 15% led to a resolution. The average decision time was about 20 months for resolution cases and 15 months for liquidation cases.
In liquidation cases, the total liquidation value was only 7% of the admitted claims. Clearly, the push should be towards resolution. In resolution cases, while the realisable amount (estimation of recovery) being 168% of the liquidation value (estimated at the beginning of the process) is painted as a success, it was also only about one-third of the admitted claims. India needs to improve on all these fronts.
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