India’s industrial sector showed signs of a stronger recovery in mid-2025, as several flagship schemes, policy reforms, and export performance began to boost manufacturing from earlier stagnation. Before this period, manufacturing growth was uneven: output struggled to maintain high growth consistently, and sectors outside a few strong performers lagged. Government efforts under schemes like the Production Linked Incentive (PLI), Skill India, PM MITRA, and the National Manufacturing Mission were implemented, but turning those into visible growth remained a work in progress.
Now, as of July 2025, the Index of Industrial Production (IIP) recorded a year-on-year growth of 3.5%, up sharply from 1.5% in June. The jump is driven by a 5.4% rise in manufacturing output, with electricity rising modestly and mining still in negative territory. Key sub-sectors registering strong growth include Basic Metals (12.7%), Electrical Equipment (15.9%), and Other Non-Metallic Mineral Products (9.5%). Use-based classification shows gains in infrastructure/construction goods (11.9%), intermediate goods, and consumer durables. These suggest that both new investment and demand for durable goods are contributing to the momentum.
On the trade front, exports are helping reinforce this industrial uptick. Between April and August 2025, India’s merchandise exports rose about 2.52%, reaching US$184.13 billion compared with the same period last year. Combined merchandise & services exports also showed growth of 6.18% YoY at US$349.35 billion during that window. These export gains, modest though they are, reflect improving competitiveness and demand in certain sectors and offer a buffer against domestic demand shortfalls.
The policy environment has been active: PLI and PM MITRA are meant to incentivize scale, competitiveness, and localization; Skill India supports talent pipelines; and the National Manufacturing Mission adds coherence across ministries and states. Together, these policies aim not just for incremental growth but for structural improvement, better factory capacity utilization, stronger supply chains, reduced dependence on imports in critical areas, and higher value addition. The growth in durable and construction-oriented goods suggests this is already having an impact in sectors more sensitive to domestic infrastructure and consumption demand.
Looking ahead, the benefits of this momentum could be substantial if properly leveraged. Higher manufacturing output could lead to more jobs (especially skilled and semi-skilled), higher exports, and improved trade balance. As domestic demand rises, particularly from infrastructure and housing, gains in construction, durable goods, and electrical equipment indicate multiplier effects across the economy. However, challenges remain: sustaining growth when mining is dragging; ensuring that policy incentives are matched by investment in technology, ease of doing business, logistics, power, and regulatory environment; managing global headwinds, trade barriers, and inflation; and making sure that smaller firms benefit rather than only large enterprises. If India navigates these well, there’s a credible path toward becoming a leader in global manufacturing, not just a participant.
Another domain showing strong signs of recovery is employment and the labor market. According to the latest PLFS data (August 2025), the male unemployment rate (UR) has eased to a five-month low of 5.0%, reflecting improvement in both urban and rural male labor markets. The Worker Population Ratio (WPR) overall has risen to 52.2%, and the female WPR is now 32.0%, showing modest gains in female workforce participation. These shifts suggest that the industrial resurgence is beginning to translate into jobs, though the pace of inclusion still has room to grow.
However, sustaining these employment gains will depend heavily on ensuring that growth is inclusive and consistent, not just in headline sectors. Challenges such as high input costs, logistical bottlenecks, regional disparities, and skill mismatches continue to limit how fast firms can scale or how evenly benefits are felt. In particular, small and medium enterprises may struggle to keep up unless policy incentives are accessible, the regulatory burden is reduced, and infrastructure support is improved. Only then can the manufacturing momentum shift from good headlines to widespread economic impact.