By Bhawarlal Chandak, Former Deputy General Manager, SIDBI
Manufacturing's crucial role in economic prosperity, highlighted by Prof. Kaldor's research, prompted India to launch multiple initiatives like the National Manufacturing Policy 2011, Make in India and PLI Schemes. However, the sector's performance remains weak, with manufacturing IIP growing at just 3.1 per cent CAGR (FY 2012–24) and 1.9 per cent (FY 2019–24), well below policy targets of 12–14 per cent. The sector's GDP share has declined from 16 per cent to 13–14 per cent since the mid-2000s, challenging India's vision of becoming a high-income nation by 2047 (Viksit Bharat). This underperformance persists despite favourable demographics, strong infrastructure spending, and healthy corporate balance sheets.
THE STRUCTURAL SHIFT: FROM PRODUCTION TO FINANCIALISATION
Manufacturing's sluggish performance is commonly attributed to ill-defined external factors and reform gaps — a tenuous explanation without rigorous analytics. In contrast, the real reasoning emerges from an analysis of RBI's comprehensive database, spanning over 2.33 lakh company-years across six decades, which reveals two key trends: Corporates' declining productive investment and increasing financialisation since the mid-2000s [See Table]. Public Limited Companies (PLCs) experienced a significant shift in asset allocation between 1961 and 2023. The average share of Gross Fixed As
