Why 'Swadeshi' chest-thumping falls flat against production numbers
Despite the Centre's efforts to boost growth and crowd in private capex, huge corporate tax cuts, and cash handouts, industrial output has worryingly slowed down
Prime Minister Narendra Modi’s call for make in India and spend in India (‘atmanirbhar’ and ‘swadeshi’) may have hit the headlines frequently, after the Donald Trump administration in the US announced 50 per cent tariff, but these have been his pet themes for the past 11 years without producing the desired result.
Official data make three broad points:
- During FY13-FY25, ‘real’ growth in industry (mining, manufacturing and electricity, gas, water and other utilities) averaged 5.5 per cent and its manufacturing component 5.95 per cent – lower than that of total GVA’s 6 per cent – pointing to a drag on growth.
- ‘Real’ growth in industry GVA fell from 7.2 per cent in FY15 (when ‘Make in India’ was launched) to 4.5 per cent in FY25, while that of manufacturing GVA from 7.9 per cent to 4.5 per cent.
- Industry’s GVA share fell from 22.5 per cent in FY15 to 21.5 per cent in FY25 and manufacturing GVA share from 17.3 per cent to 17.2 per cent.
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These statistics provide the big picture. More granular pictures would emerge when growth in sectoral indices of industry (mining, manufacturing and electricity) and also of eight ‘core’ sectors or infrastructure sectors are tracked.
Industrial output growth below par
For a better perspective, the following graph maps annual average growth in sectoral indices of industrial production (IIPs) – under the 2004-05 IIP series and the current one of 2011-12 IIP series.
What the map shows is that industrial output growth has slowed down considerably, compared to the previous series period of FY05-FY11.
As against 8.8 per cent growth in general industrial output, it has fallen to less than half at 3.4 per cent. Notice the drastic fall in manufacturing IIP (from 10 to 3.3 per cent) – dragging down industrial IIP (general index) to 3.4 per cent.
Notice also that electricity IIP grew at 5.9 per cent – more than manufacturing’s 3.3 per cent and industry’s 3.4 per cent. Could this be because household consumption of electricity is rising faster than that of manufacturing’s or industry’s?
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How does growth in industrial outputs compare with the overall economic growth?
At current prices, GDP growth during FY13-FY25 was 10.9 per cent and at constant prices 6.1 per cent. That is, industrial output, individually and collectively fell way below GDP growth.
Two key points
There are two things to keep in mind in these two IIP series data.
One, the 2004-05 IIP series was replaced by the second (of 2011-12) in six years. But the second one continues into its 14th year. Next year a new series of 2022-23 will be introduced. Ideally, base year change should happen every five years – as per the recommendation of the National Statistical Commission (NSC).
Two, manufacturing’s weightage went up from 75.5 per cent to 77.6 per cent, while that of electricity went down from 10.3 per cent to 7.99 per cent and mining’s from 14.2 to 14.4 per cent when the base year change happened last time.
Infrastructure growth bad too
A similar comparison leads to the following graph.
Notice, except for electricity and fertiliser, growth in the other sectors, collectively called ‘core’ or ‘infrastructure’ sectors, have slowed down – averaging 4 per cent in the current IIP series, against 5.2 per cent in the previous one.
How do these high-profile sectors compare with GDP’s during FY13-FY25?
At 10.9 per cent in current and 6.1 per cent in constant prices, GDP growth is far higher than all, except steel (6.2 per cent) even at constant prices.
In Q1 of FY26, overall growth in core industries is 1.3 per cent. Commerce and industry ministry data shows, five sectors recorded negative growth (electricity, coal, crude oil, natural gas and fertilisers), refinery products 0 per cent; only steel (7 per cent) and cement (8.4 per cent) recorded positive growth.
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All this has happened despite the Centre taking a quantum jump in pumping money to create infrastructure, especially after the pandemic hit, to boost growth and crowd in private capex (the neoliberal economics India adopted in 1991 posits that government capex crowds out private capex and hence, bats for ‘small state’).
Centre’s capex push
The Centre’s capex has grown faster than any time in the living memory.
Along with grants-in-aid to states to push capex, “effective capex” has gone up from 2.9 per cent of GDP in FY17 (since when this data set is available) to 4.1 in FY25 and budget at 4.3 in FY26 (BE).
The following graph maps this extraordinary push.
Contradictory picture of growth
It appears counter-intuitive that industrial growth is subdued across the board despite higher fiscal push and robust GDP growth.
Starting in 2014, the Centre launched ‘Make in India’ mission, liberalised FDI regime, introduced single-window clearances, cut corporate tax, eased business regulations and decriminalised corporate violations (Jan Vishawas Act of 2023 amended 42 central laws administered by 19 ministries/departments , Jan Vishwas Bill of 2025 proposes to amend 16 central laws administered by 10 ministries/departments).
It also introduced multiple subsidy schemes, like production linked (PLI for 14 sectors) and design linked incentives (DLIs for semiconductors) schemes and cash handouts for India Inc’s ESI /EPF liabilities to boost jobs (PM-RPY of 2018, ABRY of 2021 ELI of 2025). It is even paying for internships (PMIS).
What went wrong then? One reason could be errors in data sets – one set out of sync with another. But that is highly unlikely.
There can’t be any explanations unless all the individual sectors are studied. The trouble is, only the Centre has the necessary resources – numerous ministries dealing with industry, think-tanks (NITI Aayog, NIPFP) and other institutions like the RBI and SBI, which routinely carry out studies on the state of the economy.
Yet, not one has attempted to unravel the mystery in the past 11 years.
Contradictory remedies
When the causes are not known, prescriptions are bound to fail.
The Centre’s tax cut and various subsidies like the PLIs, ELIs, internships (PMIS) etc., presupposes that India Inc is short on cash and needs help.
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Quite the contrary, the Economic Survey of 2023-24 said India Inc was “swimming in excess profit”.
Last Monday, SBI chairman CS Setty said India Inc was sitting on cash balance of Rs 13.5 lakh crore and doesn’t need bank credits to meet its capex requirements. But he didn’t explain why private capex fell from 16.8 per cent of GDP in FY08 to average of 10.9 per cent during FY13-FY24 (falling to 10.1 per cent in FY24).
Subdued industrial growth, subdued private capex and subdued bank credits to industry (large industry in particular) point to slowdown in demand – which is not adequately reflected in the GDP numbers. The answer could then be in creating quality jobs and ensuring better wages, with means other than PLIs, ELIs, PMIS, etc. which are not even arresting the rapid decline in industrial output.
Mere chest-thumping
A national daily tracked the Commerce and Industry Ministry’s replies to Parliament to discover that applications and clearances for PLI in sectors requiring large capex, like advance chemistry cell (ACC) batteries, high-efficiency solar PV modules and drones and drone components, are very low, while those for lower capex like food products, speciality steel sector, automobile and components etc. are high.
What does that point to? Why is the PLI disbursement until June 2025 is a mere 10.9 per cent (Rs 21,534) of Rs 1.97 lakh crore allocated in FY22?
The answers can be found in studies of all the infrastructure and industry sectors and also schemes giving large cash handouts. Mere calls to ‘swadeshi’ haven't worked and may not work in future either.
