NITI Aayog Report on Manufacturing Sector in India: Key Sectors, Challenges and Roadmap

Table of Contents

The NITI Aayog Report on Key Sectors to Position India as a Global Manufacturing Hub examines how India can strengthen its manufacturing capabilities, increase exports, generate employment and participate more deeply in global value chains (GVCs).

The report, prepared by NITI Aayog in collaboration with CRISIL Intelligence, initially assessed 62 manufacturing sectors and identified 12 sectors with strong potential for India to develop global leadership.

The report is particularly important because it argues that India’s manufacturing strategy cannot focus merely on increasing production. India needs to move towards higher domestic value addition, advanced manufacturing, technology development and deeper integration with global production networks.

What is the NITI Aayog Manufacturing Hub Report?

The report titled “Key Sectors to Position India as a Global Manufacturing Hub” is designed to identify manufacturing sectors where India has the greatest potential for future growth and global competitiveness.

The assessment considered factors such as:

Domestic and global market size
Market growth prospects
Employment potential
Strategic importance
Raw-material availability
Technology readiness
Financial viability
India’s position in global value chains
Infrastructure requirements
Policy support
International best practices

The study used a four-phase methodology, beginning with the screening of 62 sectors and culminating in sector-specific recommendations based on international benchmarking and industry consultations.

12 Key Manufacturing Sectors Identified

The report identifies the following 12 sectors as having significant potential for India:

Electronics
Telecom Equipment
Solar PV
Pharmaceuticals
Chemicals
Automobiles
Defence and Drones
Steel
Capital Goods
Textiles
Food Processing
Leather and Footwear

These sectors were assessed in terms of strategic alignment, financial viability and their potential position within global value chains.

Focus of Volume I

The first volume provides detailed analysis of four sectors:

Chemicals
Textiles
Solar PV Manufacturing
Telecom and Network Equipment

The remaining eight sectors are to be covered in subsequent volumes.

Why Manufacturing is Important for India

Manufacturing has traditionally been viewed as an important source of employment, investment, productivity growth and exports.

However, India’s manufacturing contribution to GVA has remained relatively stagnant, broadly within the 16–18% range over the past two decades.

The report also highlights India’s comparatively limited share in global manufacturing value added.

India’s share increased from around 1.5% in 1995 to 3.2% in 2023, whereas China’s share increased from approximately 5% to nearly 32% over the same period.

This illustrates the scale of India’s opportunity as well as the competitiveness gap that needs to be addressed.

Major Challenges Facing India’s Manufacturing Sector

1. Infrastructure and Logistics

High logistics costs and inadequate multimodal connectivity continue to affect India’s manufacturing competitiveness.

The report points to weaknesses involving:

Ports
Roads
Railways
Warehousing
Multimodal transport
Power infrastructure

India’s logistics costs are estimated at around 8% of GDP in the report.

Efficient logistics are particularly important for export-oriented manufacturing because delays increase both inventory costs and delivery times.

2. Import Dependence

Several manufacturing sectors remain dependent on imported raw materials, components or intermediate goods.

This creates vulnerability to:

Global supply-chain disruptions
Geopolitical tensions
Exchange-rate movements
Commodity-price volatility
External supply shocks

The report therefore emphasises strengthening domestic capabilities while simultaneously integrating Indian firms into international markets.

3. Limited Domestic Value Addition

One of the report’s central messages is that assembly alone is not enough.

India needs to progressively develop capabilities across the entire value chain:

Raw materials → Components → Manufacturing → Design → R&D → Branding → Global distribution

Greater participation in higher-value stages can improve productivity, technological capability and export competitiveness.

4. Technology and Skill Gaps

Advanced manufacturing increasingly depends on:

Automation
Artificial intelligence
Robotics
Advanced materials
Semiconductor technologies
Precision engineering
Digital manufacturing

The report highlights technology constraints and skill shortages as cross-sectoral challenges that need coordinated intervention.

5. Fragmented MSME Sector

MSMEs are an important part of India’s manufacturing ecosystem but many face difficulties in:

Accessing finance
Adopting modern technology
Scaling operations
Digitalisation
Meeting international standards
Connecting with global value chains

The report notes that MSMEs account for more than 95% of manufacturing units, making their technological and productivity transformation essential.

Sector-Wise Analysis

Chemicals

India’s chemical industry has significant potential because chemicals are essential inputs for pharmaceuticals, agriculture, textiles, automobiles and several other industries.

The report recommends:

Increasing domestic production
Reducing import dependence
Developing integrated manufacturing clusters
Improving infrastructure
Encouraging investment
Increasing downstream value addition
Promoting sustainable manufacturing

Certain chemicals continue to show substantial import dependence. For example, methanol’s import dependence was estimated at 85–90% in FY2025.

Key issue

India needs to move beyond commodity-oriented chemical production towards higher-value and technology-intensive chemical products.

Textiles

Textiles is particularly important because of its strong employment potential and linkages with MSMEs, rural economies and global trade.

However, the industry faces:

High logistics costs
Fragmented supply chains
Productivity constraints
Competition from other Asian exporters
Limited value addition
Insufficient global branding

The report recommends strengthening man-made fibres, modernising MSMEs, improving productivity and expanding international market access.

Technical Textiles

Technical textiles represent an important opportunity for diversification.

The domestic technical textile market increased from approximately $19 billion in FY2019 to $26.8 billion in FY2024, while exports increased from $1.99 billion to $2.59 billion during the same period.

This can help India move from traditional textile production towards higher-value, technology-oriented manufacturing.

Telecom and Network Equipment

Telecom equipment is strategically important for India’s digital infrastructure and technological self-reliance.

The report estimates India’s telecom and network equipment market at nearly $25 billion in FY2025, with potential to reach approximately $50 billion by 2032.

However, imports remain significantly higher than exports.

The sector therefore requires:

Greater component localisation
Domestic R&D
Technology development
Skilled workforce
Export-oriented manufacturing
Stronger domestic supplier ecosystems

The broader objective is to develop a complete telecom manufacturing ecosystem, rather than concentrating primarily on assembly.

Solar PV Manufacturing

Solar PV manufacturing represents the intersection of:

Energy security + renewable energy + industrial policy + technology + global trade

India has expanded solar manufacturing capacity significantly.

According to the report, solar module capacity listed under ALMM increased from approximately 2.3 GW in 2014 to 100 GW in August 2025. Solar cell manufacturing capacity increased from less than 1.2 GW in 2014 to 25 GW in March 2025.

However, upstream manufacturing remains a major weakness.

India continues to depend on imports for critical inputs such as polysilicon and wafers.

The report therefore recommends strengthening:

Upstream manufacturing
R&D
Manufacturing productivity
Skilled manpower
Domestic supply chains
Technological capabilities

Global Value Chains and India

A major theme of the report is Global Value Chain integration.

A country does not become a manufacturing leader merely by producing large quantities. It must capture value at multiple stages.

For India, this means moving from:

Assembly-led manufacturing

towards:

Design + Components + Technology + Manufacturing + Branding + Exports

The report’s international benchmarking exercise examines leading manufacturing countries to identify lessons related to industrial policy, trade agreements, skills, investment climate, technology and company strategies.

What Can India Learn from Global Manufacturing Leaders?

The report’s assessment of leading manufacturing economies suggests that manufacturing success rarely comes from one policy intervention.

Instead, successful manufacturing ecosystems generally combine:

Long-term policy consistency
Industrial clusters
Infrastructure
Skilled workforce
Technology investment
R&D
Targeted incentives
Strong domestic suppliers
Export orientation
Global market integration

The report specifically draws lessons from countries including China, Vietnam, South Korea and Singapore.

Way Forward for India’s Manufacturing Sector

India’s manufacturing strategy should focus on five broad priorities.

1. Build Complete Industrial Ecosystems

Instead of isolated factories, India needs integrated clusters containing:

Suppliers + manufacturers + logistics + R&D + skilled workforce + finance

2. Increase Value Addition

India must move from low-value assembly towards components, design, technology, intellectual property and branding.

3. Strengthen R&D

Greater private-sector participation in research and product development is necessary for technological competitiveness.

4. Modernise MSMEs

MSMEs need better access to technology, finance, skills and international markets.

5. Improve Export Competitiveness

Trade agreements, efficient logistics, international standards, quality certification and global branding can help Indian companies expand overseas.

Significance of the NITI Aayog Manufacturing Report

The report is important because it provides a sector-specific roadmap rather than a one-size-fits-all manufacturing strategy.

It recognises that different sectors face different constraints.

For example:

Chemicals require stronger domestic feedstock and downstream capabilities.
Textiles need greater productivity, MMF competitiveness and market access.
Telecom equipment requires component localisation and technology development.
Solar PV needs stronger upstream manufacturing and R&D.

This sector-specific approach is central to the report’s strategy.

Conclusion

The NITI Aayog Manufacturing Hub Report presents a clear message: India’s manufacturing opportunity is substantial, but achieving global competitiveness will require more than increasing factory output.

India must build globally competitive companies, complete industrial ecosystems, advanced technological capabilities and deeper participation in global value chains.

The identification of 12 priority sectors provides a framework for targeted industrial policy, while the analysis of chemicals, textiles, telecom equipment and solar PV demonstrates the specific reforms required at the sectoral level.

Ultimately, India’s manufacturing transformation will depend on the combination of infrastructure, technology, skills, finance, policy stability, logistics, domestic value addition and global market access.