CHENNAI: India’s ambitious target of becoming a manufacturing hub faces a reality check. A Niti Aayog report suggests a prolonged stagnation of its secondary (industrial) sector.
A Niti report, India's Services Sector: Insights from GVA Trends and State-level Dynamics (October 2025) by NITI Aayog, reveals that the industrial sector's share of Gross Value Added (GVA) has remained stubbornly stable, hovering around 28–29% for more than a decade, failing to deliver the industrial expansion necessary for job creation and balanced growth.
In the fiscal year 2023–24, the secondary sector's contribution stood at 28.8 percent of GVA, a figure virtually unchanged from its position in 2011–12. This lack of progress contrasts sharply with the booming services sector, which now accounts for a dominant 54.5 percent of GVA.
Manufacturing fails to shift the needle
The primary reason for the industrial sector's stagnation is the underwhelming performance of its core component: manufacturing. Throughout the entire period between 2011–12 and 2023–24, the manufacturing segment's share of GVA remained relatively stable, fluctuating narrowly between 17 percent and 18.5 percent.
According to the report, the share of manufacturing in 2023-24 was 17.5 percent, which has barely moved from 17.4 percent in 2011-12. Though it touched a high of 18.5 percent in 2021-22, and then fell back to 16.9 percent the next year.
This inability to expand its proportional share prevents the overall industrial sector from gaining ground against the services sector. Other key industrial sub-sectors also showed limited growth or declines. The Construction sector's share experienced a mild decline, falling from 9.6% (in 2011-12) to 8.9 percent (2023-24). Electricity, gas, water supply, and other utility services maintained a nearly constant share, only increasing slightly from 2.3 percent to 2.4 percent.
This unbalanced growth pattern—where industry lags expectations while services exceed them—is termed ‘dual divergence’. This raises concerns about inclusive growth, as the high-productivity, export-oriented services typically rely on a more skilled, urban workforce, while the industrial sector is traditionally a massive employer of semi-skilled labour.
The report aligns this trend with the phenomenon of ‘premature deindustrialisation,’ where a country begins to transition away from manufacturing at significantly lower income levels than those recorded by advanced economies during their industrialization phase. Sustained, long-term dynamism for the Indian economy is said to require stronger linkages between the booming services sector and a more robust manufacturing and industrial base.
