In 2023, Bharat has achieved a significant milestone by overtaking South Korea to become the fifth largest manufacturing hub in the world, according to a report by the Global Times.
Bharat is now the 5th-largest manufacturing nation in the world, with $781 billion in output, Bharat stands just behind China, the US, Germany, and Japan.
Top 5 largest manufacturing nations in the world
| Rank | Country | Value of manufacturing output | % of the global manufacturing output |
| 1 | China | $. 5 trillion | 31.63% |
| 2 | USA | $. 2.5 trillion | 15.90% |
| 3 | Japan | $. 800 billion | 6.5% |
| 4 | Germany | $. 750 billion | 4.8% |
| 5 | India | $. 451 billion | 2.9% |
Bharat needs to double its manufacturing output in order to surpass Germany and Japan whereas we have a long way to go to level with USA and China. Bharat is mostly known for agricultural products, textiles, engineering goods, leather products, and chemicals.
| Country | GDP | Share of Manufacturing |
| USA | $. 30.51 trillion | 16.10% |
| China | $. 19.23 trillion | 32.50% |
| Germany | $. 4.74 trillion | 24.60% |
| India | $. 4.19 trillion | 17.90% |
| Japan | $. 4.19 trillion | 23.50% |
(2023 Data, https://ourworldindata.org/grapher/manufacturing-value-added-to-gdp?time=latest)
Though China is next to USA in terms of GDP, it is dominating the global trade by virtue of its strong manufacturing base and positioning itself as a global manufacturing hub. As can be seen from the above chart, though Bharat is in the list of top 5 countries in terms of GDP, its share of manufacturing in GDP is low compared to the rest of the 4 countries.
Top 10 exports from Bharat
India’s top 10 export product categories constitute two-thirds (62.7%) of the overall value of its global shipments.
- Mineral fuels including oil: US$75.4 billion (17.1% of total exports)
- Electrical machinery, equipment: $40.2 billion (9.1%)
- Machinery including computers: $32.5 billion (7.4%)
- Gems, precious metals: $29.9 billion (6.8%)
- Pharmaceuticals: $23.3 billion (5.3%)
- Vehicles: $22.1 billion (5%)
- Organic chemicals: $21 billion (4.7%)
- Cereals: $12.1 billion (2.7%)
- Iron, steel: $10.3 billion (2.3%)
- Articles of iron or steel: $10.1 billion (2.3%)
Bharat needs to increase the above top 10 export categories to three fourth (75%) of the overall value of its global shipments in the next five years.
Products Generating India’s Greatest Trade Surpluses
The following types of Indian product shipments represent positive net exports or a trade balance surplus. (Net exports is the value of a country’s total exports minus the value of its total imports.)
- Pharmaceuticals: US$20.5 billion (Up by 9.7% since 2023)
- Vehicles: $14.2 billion (Up by 8%)
- Cereals: $11.8 billion (Up by 5.6%)
- Clothing, accessories (not knit or crochet): $7.3 billion (Up by 5.5%)
- Knit or crochet clothing, accessories: $6.8 billion (Up by 14.2%)
- Fish: $5.9 billion (Down by -3.6%)
- Miscellaneous textiles, worn clothing: $5.4 billion (Up by 14.4%)
- Cotton: $5.3 billion (Down by -6.1%)
- Articles of iron or steel: $5 billion (Up by 5.5%)
- Coffee, tea, spices: $4.1 billion (Up by 25.8%)
Products Causing India’s Biggest Trade Deficits
Bharat incurred an overall -US$260.6 billion trade deficit for all products during 2024, expanding by 8.4% from -$240.6 billion in red ink one year earlier for 2023.
Below are exports from Bharat that result in negative net exports or product trade balance deficits.
- Mineral fuels including oil: -US$145.2 billion (Up by 10.6% since 2023)
- Gems, precious metals: -$53.4 billion (Up by 36.4%)
- Electrical machinery, equipment: -$44.8 billion (Up by 2.4%)
- Machinery including computers: -$29.1 billion (Up by 4.8%)
- Animal/vegetable fats, oils, waxes: -$15 billion (Up by 2.5%)
- Plastics, plastic articles: -$13.8 billion (Down by -10.8%)
- Optical, technical, medical apparatus: -$8.6 billion (Up by 14.1%)
- Copper: -$8.4 billion (Up by 22.8%)
- Fertilizers: -$7.6 billion (Down by -25.8%)
- Iron, steel: -$7.3 billion (Up by 3.5%)
Bharat needs to devise a strategy to convert its trade deficit to trade neutral and trade surplus in a span of 10 years and 15 years respectively.
Key Sectors Driving FDI in India
- Information Technology & Digital Economy
- Automobile Industry
- Infrastructure & Real Estate
- Healthcare & Pharmaceuticals
- Renewable Energy
- Retail & E-commerce
Bharat needs to sustain its growth story in the above 6 sectors.
Future Potential of FDI in India
- Emerging Technologies & AI
- Semiconductor & Electronics Manufacturing
- Agritech & Food Processing
- Tourism & Hospitality
Bharat needs to exploit its potential in the above 4 sectors to expand its manufacturing and add value addition to its services sector in a focused manner. This requires investor friendly policies backed by well developed infrastructure, skilled manpower and Ease of Doing Business across the country to leverage on the future potential of FDI in the above mentioned four sectors.
With 17% of the nation’s GDP and over 27.3 million workers, the manufacturing sector plays a significant role in the Indian economy. Through the implementation of different programmes and policies, the Indian government was hoping to have 25% of the economy’s output come from manufacturing by 2025. However, it is still hovering around 16-17% of GDP.
Digital economy
Manufacturing sector in Bharat is gradually shifting to a more automated and process driven manufacturing which is expected to increase the efficiency and boost production of the manufacturing industry.
According to MeitY, India’s digital economy is projected to grow at twice the rate of the overall economy, accounting for 20% of the national income by 2029-30, surpassing both agriculture and manufacturing, driven by digital platforms and widespread digitalisation across sectors.
As per the survey conducted by Reserve Bank of India, capacity utilisation in India’s manufacturing sector stood at 76.8% in the third quarter of FY24, indicating a significant recovery in the sector.
The manufacturing sector of Bharat has the potential to reach Rs. 87,57,000 crore (US$ 1 trillion) by FY26.
Bharat has potential to become a global manufacturing hub and by 2030, it can add more than Rs. 43,43,500 crore (US$ 500 billion) annually to the global economy.
However, we need to address the following issues.
Issues:
- High logistics cost, regulatory burdens, energy inefficiencies.
- Despite the PLI scheme, large-scale industrial transformation is yet to occur.
- Jobless Growth
- High GDP growth has not translated into adequate employment.
- Youth unemployment rate hovers around 15–18%, with graduates struggling to find skill-appropriate jobs.
- Informal sector still dominates employment, with low job security and wages.
- Research & Development Deficit
- Bharat spends <0.7% of GDP on R&D, significantly lower than:
- China (2.4%)
- USA (3.5%)
- Israel (5%)
Innovation and knowledge-driven sectors remain underdeveloped, limiting long-term productivity gains.
According to the sixth annual Global Skills Report of Coursera, Bharat is ranked 87th, placing it in the lagging category in terms of skills. However, the country’s significant 1,648% increase in enrolments for GenAI courses reflects a strong interest in cutting-edge technology. Bharat has secured the second position in the QS World Future Skills Index 2025, which assesses how well countries are preparing their job markets for future demands.
Therefore, in order to emerge as a global manufacturing hub, Bharat has to make its FDI Policy investor friendly in the key sectors driving the economy and the sectors with future potential (as mentioned earlier), improve Ease of Doing Business, strengthen the infrastructure, invest more in R & D and focus on skill development. The government should review its programmes- Skill India, Startup India, Make in India, identify the gaps in their implementation and revamp the same.
MSMEs contribute 29% of GDP, 40% of exports and 60% of the workforce. MSMEs also play a significant role in the manufacturing segment. Behind the India’s success stories in automobile and pharma sectors MSMEs have played a key role in components manufacturing and contract manufacturing respectively. MSMEs can play an effective role in the value-added agricultural products. The role and importance of MSMEs cannot be overlooked in India’s efforts to become a global manufacturing hub. The industrial policies of the States should equally focus on promoting MSMEs in addition to large corporate houses if Bharat has to become a manufacturing power house.
The Union Cabinet on 28th March, 2025 approved the Electronics Component Manufacturing Scheme with a funding of Rs.22,919 crore to make Bharat Atmanirbhar in electronics supply chain. Similarly, on 1st July, 2025 the Union Cabinet has approved Employment-Linked Incentive scheme with an allocation of ₹99,446 crore to support employment generation primarily in the manufacturing sector. Bharat has the potential to expand its manufacturing base but it needs a proper strategic action plan and a well-integrated approach in its implementation. Let us hope that the suggestions given in this article will be duly considered to catapult India’s manufacturing to the next level in the decades to come.
