THEBUSINESSBYTES BUREAU

NEW DELHI, JANUARY 29, 2026

India’s industrial engine is gathering fresh momentum, with the sector’s Gross Value Added expanding by a robust 7.0 per cent year-on-year in real terms during the first half of FY2025-26, underscoring a clear acceleration in industrial activity and reaffirming the economy’s structural strength amid a challenging global backdrop. The Economic Survey 2025-26, tabled in Parliament on Wednesday by Union Minister of Finance and Corporate Affairs Smt. Nirmala Sitharaman, highlights that the rebound marks a notable improvement over the 5.9 per cent growth recorded in the previous fiscal year, reflecting the cumulative impact of policy reforms, infrastructure expansion and technology-led transformation across industries.

The Survey points to manufacturing as a key growth driver, with Manufacturing GVA rising by 7.72 per cent in the first quarter and further strengthening to 9.13 per cent in the second quarter of FY26. This performance, it notes, is rooted in deeper structural shifts underway within the sector, including a gradual move towards higher-value manufacturing, improved availability of industrial infrastructure through corridor-led development, and rising adoption of technology, digitisation and formalisation across firms. These changes are reshaping India’s industrial landscape, enabling greater productivity, efficiency and global competitiveness.

Significantly, medium- and high-technology activities now account for 46.3 per cent of India’s total manufacturing value added, a milestone that reflects the growing sophistication of the country’s industrial base. The Survey attributes this transformation to targeted government initiatives such as the Production Linked Incentive schemes and the India Semiconductor Mission, along with the steady strengthening of domestic capacities in electronics, pharmaceuticals, chemicals and transportation. This shift has also translated into an improved global standing, with India’s ranking in Competitive Industrial Performance moving up to 37th in 2023 from 40th in 2022, signalling rising industrial capability on the world stage.

On the financing front, while bank-based industrial credit growth from commercial banks moderated to 8.24 per cent in FY25 from 9.39 per cent in FY24, the Survey emphasises that this does not reflect a slowdown in overall funding to industry. Instead, it highlights a diversification of financing sources, with non-bank financial flows to the commercial sector recording a strong compound annual growth rate of 17.32 per cent between FY20 and FY25. Quoting the Monthly Economic Review of August 2025, the Survey notes that the decline in bank credit coincided with an increase in the overall flow of financial resources to the commercial sector, pointing to a maturing and broadening financial ecosystem.

Core industries have continued to maintain strong momentum, reinforcing the industrial recovery. India remains the world’s second-largest producer of steel and cement, with the Survey underscoring the transformative changes witnessed in the steel sector over the past five years, driven by robust domestic demand from construction and manufacturing. In cement, India’s per capita consumption stands at around 290 kg, significantly below the global average of 540 kg, indicating substantial headroom for growth. The Survey notes that the government’s sustained focus on mega infrastructure projects—spanning highways, railways, housing, smart cities and rural development—is expected to significantly boost cement demand in the coming years.

Energy and raw material supply has also strengthened, with India’s coal industry reaching historic levels of production in FY25. Coal output touched 1,047.52 million tonnes, marking a 4.98 per cent increase over the previous year, providing critical support to power generation and energy-intensive industries. Meanwhile, the chemicals and petrochemicals sector continues to play a pivotal role in industrial development, contributing 8.1 per cent to the overall manufacturing GVA in FY24, reflecting its importance as a backbone for multiple downstream industries.

The automotive sector has emerged as another major growth pillar, recording nearly 33 per cent growth in production over the decade from FY15 to FY25. The Survey highlights that government-led initiatives to promote electric mobility have significantly reshaped the industry’s trajectory, leading to a sharp rise in electric vehicle registrations in recent years. Strategic policy interventions such as the PLI schemes for automobiles and advanced chemistry cell battery storage, the PM E-DRIVE scheme, PM e-Bus Sewa Payment Security Mechanism, and the scheme to promote manufacturing of electric passenger cars have collectively strengthened domestic manufacturing capabilities and accelerated the transition towards cleaner mobility.

India’s electronics sector stands out as a standout success story, having undergone a remarkable structural transformation in recent years. The Survey notes that electronics has climbed from the seventh-largest export category in FY22 to the third-largest and fastest-growing by FY25. This surge has been driven by a sharp rise in domestic production and exports, with the mobile manufacturing segment at the centre of this expansion. Mobile phone production value witnessed an extraordinary nearly 30-fold increase, rising from ₹18,000 crore in FY15 to ₹5.45 lakh crore in FY25, underscoring India’s emergence as a global manufacturing hub for electronics.

The pharmaceutical industry, another cornerstone of India’s industrial ecosystem, continues to consolidate its global leadership. Ranked as the world’s third-largest by volume, the sector meets around 20 per cent of global generics demand and exported to 191 countries in FY25. The Survey notes that the industry’s annual turnover reached ₹4.72 lakh crore in FY25, with exports growing at a compound annual rate of 7 per cent over the past decade, highlighting its resilience and expanding global footprint.

Overall, the Economic Survey 2025-26 paints an optimistic picture of India’s industrial sector, noting that strong momentum has been sustained despite an evolving and uncertain global environment. It credits reforms in infrastructure, logistics, ease of doing business and innovation systems for strengthening the foundations of industrial growth. Looking ahead, the Survey emphasises that the next phase of industrialisation will require a calibrated shift from a model focused largely on import substitution to one centred on scale, competitiveness, innovation and deeper integration into global value chains. Rather than striving for complete self-reliance across all segments, the Survey argues that India must build strategic resilience through diversification, deeper capabilities and greater private sector investment in research and development, technology adoption, skills and quality systems — laying the groundwork for sustained and inclusive industrial growth in the years ahead.