India’s FY24-25 GDP growth of 6.5%, with a strong Q4 at 7.4%, signals economic resilience. Yet, the manufacturing sector’s GVA share has slipped to 27.1% from 27.8% last year, underscoring the need for targeted interventions. For financial institutions and investors, understanding the interplay of incentives, licensing, and state-central policies is critical to unlock opportunities in the manufacturing sector. This article explores how India is driving its manufacturing revival and implications for FY25-26.

Manufacturing growth moderated to 4% in FY24–25 down from 5.7% in FY23–24, according to the Index of Industrial Production (IIP). Global trade stagnation (exports at $437.4 billion in FY24-25, up just 0.1% YoY) and MSME credit constraints have weighed on the sector. Yet, bright spots include FDI inflows of $42.1 billion in H1 FY24-25 (up 26% YoY) and Gross Fixed Capital Formation (GFCF) growth of 7.1% peaking at 9.4% in Q4, signaling investment in electronics, EVs, and semiconductors.

Recent economic indicators shed more light on the sector’s trajectory. The Purchasing Managers’ Index (PMI) for manufacturing was 60.4 in June 2025, down slightly from 60.7 in May, yet still indicating strong expansion. Wholesale Price Index (WPI) manufacturing inflation eased to 1.97% in June 2025 from 2.04% previously, suggesting stable input costs. Merchandise exports reached $35.14 billion and imports at $53.92 billion, yielding a trade deficit of $18.78 billion, a sign of persistent global trade challenges. Bank loan growth stood at 9.50% as of July 18, 2025, supporting credit access for manufacturers. Forex reserves hit $696.67 billion, bolstering economic stability. Infrastructure output grew 1.70% YoY in June 2025, modestly aiding logistics and supply chains.

Despite policies like PLI schemes and relaxed FDI norms, India’s manufacturing growth remain under pressure. The 2025 U.S.-China tariff war is disrupting global supply chains pushing up costs for Indian manufacturers that are dependent on imported components.

The U.S. imposed reciprocal tariffs (25–50%) on Indian imports effective April 2025 further slowing manufacturing growth. Targeted sectors are automobiles, steel, aluminium, textiles, electronics, and gems and jewellery which represents a major share of India’s $86.5B exports to the U.S.

Sector	Tariff Rate	Annual Exports to U.S.	Impact
Automobiles & Auto Parts	25%	$8.5B+	Higher costs, reduced competitiveness vs. Vietnam/Philippines (20%)
Steel & Aluminium	50%	$5B	Severe cost escalation
Textiles	25%	$12B	Price pressure, demand risk
Electronics (Smartphones & Components)	25–27%	$13B	Costly exports despite semiconductor exemption
Gems & Jewellery	25%	$9B	Potential demand decline

China is losing ground in U.S. exports because of tariffs as high as 125%, which might seem like a big win for India. In some ways, it is—but the picture isn’t that simple.

• Autos: With Chinese auto parts now costlier in the U.S., Indian companies could step in. But many Indian manufacturers still rely on Chinese-made batteries and electronics, making their own costs go up.
• Semiconductors: India hopes to build a chip industry, and U.S. tariffs don’t target chips. Yet, China controls key materials like gallium and germanium. If it limits these exports, India’s chip plans could slow down.
• Electronics: Companies like Apple are moving some iPhone production to India, which helps. But India still imports three times more electronics parts than it exports, so higher prices for Chinese-made components squeeze profits.

Hence India is better placed than China to supply the U.S. but new U.S. tariffs on Indian goods (25–50%) make it harder to fully benefit whereas countries like Vietnam and the Philippines, facing only 20% tariffs, stay more competitive.

Metric	FY23–24	FY24–25	Notes
Manufacturing GVA Growth	5.7%	4%	Slower due to global trade slowdown (MoSPI, 2025)
Manufacturing GVA Share	27.8%	27.1%	Secondary sector share vs. services at 54.9% (MoSPI, 2025)
FDI Inflows (H1)	—	$42.1 Bn	26% YoY rise, led by electronics, automotive (RBI, 2025)
GFCF Growth	—	7.1% (9.4% Q4)	Boost in machinery, infrastructure investment (MoSPI, 2025)
Manufacturing PMI (June)	—	60.4	Strong expansion (HSBC, 2025)
WPI Manufacturing Inflation	2.04%	1.97% (June)	Stable input costs (MoSPI, 2025)
Merchandise Exports (June)	—	$35.14 bn	Reflects global demand (MoSPI, 2025)
Merchandise Imports (June)	—	$53.92 bn	Impacts input availability (MoSPI, 2025)
Bank Loan Growth	—	9.50%	As of July 18, 2025 (RBI, 2025)
Forex Reserves	—	$696.67 bn	As of July 18, 2025 (RBI, 2025)
Infrastructure Output Growth	—	1.70% (June)	Supports logistics (MoSPI, 2025)
Policy Repo Rate	6%	5.50%	Reduced by 50 bps in June 2025 (RBI, 2025)
CPI Inflation	4.9%	3.7% (proj.)	(RBI, 2025)

With consumer inflation hitting a six-year low of 3.2% in April 2025 and full-year CPI projected at 3.7%, the RBI cut the repo rate to 5.50%, lowering borrowing costs for manufacturers. This rate cut, combined with stable wholesale inflation and strong FDI inflows, is expected to support capital expenditure and machinery investments, potentially reviving manufacturing momentum in FY25–26 despite global trade headwinds. 

While fiscal incentives and infrastructure support are key enablers, regulatory simplicity is equally crucial.

1. Production Linked Incentive (PLI) Schemes 

The government’s flagship PLI program with an outlay of ₹1.97 lakh crore across 14 high-impact sectors like electronics, auto components, pharma, textiles, and advanced chemistry. 

As of 2025, the scheme has catalysed over $10 billion in electronics manufacturing investments alone, according to DPIIT. This has led to the creation of employment-intensive manufacturing clusters and helped scale domestic production for global supply chains. 

2. FDI Liberalisation 

To attract global capital and expertise, the government has liberalised Foreign Direct Investment (FDI) norms: 

100% FDI is now permitted via the automatic route in most manufacturing segments. As a result, India attracted $42.1 billion in FDI inflows during H1 FY24-25 (RBI, 2025), much of it directed towards industrial projects and factory infrastructure. 

These reforms have made India one of the most open and investment-friendly destinations among emerging markets. 

3. Infrastructure-Led Industrial Strategy 

The revival of manufacturing is also underpinned by major infrastructure investment programs, particularly: The National Infrastructure Pipeline (NIP), with over 9,000 projects across logistics, energy, and industrial corridors. 

Dedicated Freight Corridors and Industrial Corridors includes: 

• Delhi–Mumbai Industrial Corridor (DMIC)
• Bengaluru–Mumbai Industrial Corridor (BMIC) 
• Chennai–Kanyakumari Industrial Corridor (CKIC)

These efforts have greatly improved logistics competitiveness, reducing lead times and enabling scale manufacturing.

1. Gujarat: Advanced Manufacturing Powerhouse 

Gujarat’s policy supports deep industrial ecosystems via fiscal incentives and infrastructure readiness, especially for electronics, green energy, and precision manufacturing. 

• Key Policy: Gujarat Electronics Component Manufacturing Policy (GECMP) 2025 
• Focuses on electronic components, semiconductors, lithium-ion batteries, and PCB manufacturing. 
• Offers 100% top-up subsidy over Centre’s PLI (for select components). Provides capex support, interest subsidies, and land acquisition assistance. 
• Special zones such as Dholera SIR and GIDC estates streamline factory setup through plug-and-play infrastructure. 

2. Maharashtra: Infrastructure-Led Industrial Push 

Maharashtra leverages its logistics strength and urban infrastructure to support large-scale manufacturing and warehousing. 

• Key Focus (No fresh state industrial policy yet in 2025): 
• Drives manufacturing growth through multi-modal logistics and industrial corridors: Aurangabad Industrial City (AURIC), the Dighi Port Industrial Zone, and new estate development in Vidarbha & Konkan. 
• Manufacturing incentives are typically routed via District Industry Councils with sector-specific schemes announced for textiles, food processing, and green manufacturing.
• Emphasis on attracting FDI-led manufacturing in electronics, defence, and automotive. 

3. Tamil Nadu: Electronics & Mobility Hub 

Tamil Nadu focuses export-led manufacturing, value chain localisation, and workforce skilling to support high-volume manufacturing in electronics and EV sectors. 

• Key Policy: Tamil Nadu Electronics & Semiconductor Policy 2024 
• State-specific scheme for semiconductors, display modules, and component manufacturing. 
• Offers: Up to 50% capex subsidy top-up Payroll subsidies up to ₹20,000/month for new jobs.
• Developed TANSIDCO estates and Chennai–Kanyakumari Industrial Corridor (CKIC) for manufacturing-led regional development. 
• State supports a mature Apple ecosystem (Foxconn, Pegatron) driving smartphone exports. 

4. Uttar Pradesh: EVs and Emerging Clusters 

With targeted industrial zones and land bank expansion, UP is positioning itself as a cost-competitive destination for mid-size manufacturing 

• Key Policy: UP Industrial & Export Manufacturing Policy (Upcoming 2025) 
• Focus on building new manufacturing clusters for EVs, textiles, pharma, and engineering goods. 
• ·      Incentives include Capital subsidy up to ₹10 crore per unit 75% land rebate (first 200 acres), interest subvention, and stamp duty waivers.
• Kanpur’s ₹700 crore EV Manufacturing Park aims to attract Tier-1/2 suppliers and OEMs.
• Additional cluster-based incentives expected under upcoming Export Manufacturing Policy. 

5. Karnataka: High-Tech & Green Manufacturing 

Karnataka combines policy flexibility, digital governance (AI-based single-window system), and sector-specific clusters for electronics, defence, EVs, and biotech. 

• Key Policy: Karnataka Industrial Policy FY2025-30 
• Designed to attract ₹7.5 lakh crore investment and generate 20 lakh jobs in manufacturing.
• Companies can choose between a 25% capital subsidy or 2.5% PLI over 7 years. 
• Additional incentives for R&D and GCC co-location green manufacturing (ZLD, energy efficiency), Warehousing and logistics (20% capex subsidy), and Semiconductor & ESDM (electronics system design & manufacturing) sectors receive special attention. 
• Major projects by Applied Materials, Lam Research, and Foxconn are underway. 

6. West Bengal: Niche & MSME Manufacturing 

While not a mainstream manufacturing state yet, Bengal’s policies are tailored for labor-intensive, MSME-driven sectors with strong port access. 

• Key Focus: Industrial Infrastructure & Agro-Manufacturing Focuses on food processing, light engineering, and MSME manufacturing. 
• Offers capital and interest subsidies under the West Bengal Industrial Development Corporation (WBIDC) framework. 
• Major push in Haldia and Durgapur for integrated industrial parks. Incentives include 25% to 40% capital subsidies, land rebates, and power tariff reductions.

7. Andhra Pradesh: Manufacturing Revival through Incentives and Infrastructure

Andhra Pradesh is aggressively positioning itself as a manufacturing hub with a focus on attracting investments and creating jobs. 

The state has introduced several policies and incentives to boost the manufacturing sector.

• Key Policy: A.P. Industrial Development Policy 4.0 (2024-2029)
• Aims to attract global manufacturers with incentives like capital subsidies and 100% SGST reimbursement for MSMEs and food processing units.
• Incentives: Offers employment generation bonuses, sustainability perks, and support for marginalized entrepreneurs.
• Infrastructure Push: Plug-and-play industrial areas under APIIC, with growth hubs like Guntur boosting activity.
• The state’s industrial development policy identifies 12 sectors as thrust areas including chemicals and petrochemicals, pharmaceuticals, textiles, automobiles, electronics, and renewable energy component manufacturing.

8. Rajasthan: Skill-Driven Manufacturing Growth

Rajasthan is positioning itself as a skill-powered industrial hub, especially for MSMEs and emerging tech-led manufacturing. The state’s focus is on building a future-ready workforce and enabling low-cost, high-output ecosystems.

• Key Focus: Skilling, MSME Enablement & Export Infrastructure
• Drives industrial growth through the Rajasthan Skill Development Policy 2025, with training programs in automation, AI, and smart manufacturing.
• Policies such as the MSME Policy 2024 and Export Promotion Policy 2024 aim to enhance competitiveness, cut logistics costs, and support market access.

Incentives & Support:

• Revamping Industrial Training Institutes (ITIs)
• Model Career Centers for job placement
• ODOP Policy 2024 to promote district-specific products
• Capital subsidies, logistics support, and simplified financing for MSMEs

9. Madhya Pradesh: Sector-Specific Industrial Push

Madhya Pradesh is making a decisive shift from generic industry promotion to targeted sectoral development through a suite of 10 new policies.

• Key Focus: Large-Scale Investment, Sectoral Incentives & Job Creation

Its Industrial Promotion Policy 2025 and Development Policy 4.0 prioritise high-potential sectors like EVs, aerospace, textiles, and food processing. The goal is to create 20 lakh jobs and grow industrial output to ₹6 lakh crore by 2030.

Incentives & Support:

• Capital subsidies, interest support, and green incentives
• Dedicated policy arms for each focus sector
• Stronger investor engagement via the Global Investor Summit platform

State	Ease of Licensing / Setup	Single Window Portal	Key Observations
Gujarat	Very easy and quick. The process is clear and approvals are well coordinated through GIDC.	Investor Facilitation Portal	Fastest approvals for land, utilities, and EPC clearances.
Maharashtra	Partly smooth. It’s easier in big cities, but rural/industrial zones can be slower.	MAITRI	Infra strong, but fragmented district-level approvals.
Tamil Nadu	Quick approvals, especially in industrial corridors like CKIC.	SIPCOT Portal	High compliance support, especially for electronics/export units.
Uttar Pradesh	Getting better. Dedicated officers help in big projects, but full digital ease is evolving.	Nivesh Mitra	Industrial parks under UPSIDA are relatively efficient.
Karnataka	Very efficient. Most steps are digital and quick, especially for tech or large-scale units.	E-Udyami	Karnataka Udyami Mitra tracks approvals in real-time.
West Bengal	Mixed experience. Industrial areas are smoother but remote areas take longer.	Silpasathi	MSME setups smoother than large greenfield projects.
Andhra Pradesh	Offering a hassle-free application and tracking process for incentives.	AP Industries Portal	The state is committed to improving EoDB with digital tools to support manufacturers.
Rajasthan	Improving with digital initiatives but varies by district.	Rajasthan Investment Facilitation Portal	Faster approvals in urban areas; rural zones need better coordination.
Madhya Pradesh	Streamlined through MPIDC’s single-window system.	MPIDC Portal	Efficient for large projects; MSMEs report smoother processes.

The central-state coordination on manufacturing policy has already begun to show strong macroeconomic and investment results: 

• Gross Fixed Capital Formation (GFCF), a key measure of investment in productive assets rose 7.1% in FY24-25, with Q4 growth reaching 9.4% (MoSPI, 2025). This signals a healthy expansion in industrial capacity. 
• According to the UNCTAD World Investment Report (2023), India ranked 40th globally in competitiveness and attracted 1,008 new greenfield projects, underlining investor confidence in India’s industrial strategy. 
• The IMF (2025) estimates that India’s manufacturing growth could sustain a 5–6% annual pace in FY25-26, contingent on the pace of structural reforms in land, labor, and logistics. 

These national-level reforms complement and amplify state-specific actions: 

• Gujarat is aligning its own PLI enhancements with Centre’s electronics incentives.
• Tamil Nadu’s CKIC project builds on central infrastructure pipelines. 
• Karnataka and UP are tailoring capital subsidies and infrastructure tools in tandem with national priorities.
• Andhra Pradesh’s A.P. Industrial Development Policy 4.0 supports the Centre’s focus on sustainable manufacturing and job creation.
• Rajasthan’s skilling and ODOP strategies support the Centre’s mission on workforce readiness and localized industrial clusters.
• Madhya Pradesh’s sector policies reinforce national PLI schemes, particularly in electronics, pharma, and EVs, making it a natural fit for central-level incentives.