India’s industrial policy has undergone significant transformations since independence, reflecting the evolving economic philosophy and global landscape. From the inward-looking, state-led development model of the post-independence era to the liberalized, market-oriented approach initiated in 1991, the nation’s industrial strategy has continuously adapted to address contemporary challenges and leverage emerging opportunities. The “new industrial policy” in India, while not a single, formally gazetted document in the same vein as the Industrial Policy Resolution of 1956 or the New Industrial Policy of 1991, represents a comprehensive and dynamic set of reforms, initiatives, and strategic shifts implemented over the past decade, particularly intensified since 2014. This contemporary approach is designed to propel India into a new phase of industrial growth, making it a global manufacturing hub, fostering innovation, and creating large-scale employment.

The imperative for this new orientation stems from several factors, including the need to boost the manufacturing sector’s share in the GDP, which has stagnated around 15-17% for decades, falling short of the desired 25% target. Furthermore, global supply chain disruptions, rapid technological advancements, the imperative for sustainable development, and the burgeoning youth population demanding productive employment have necessitated a more agile, integrated, and forward-looking industrial framework. This policy continuum aims to enhance ease of doing business, attract foreign and domestic investment, promote indigenous manufacturing capabilities, integrate with global value chains, and build a resilient and competitive industrial ecosystem ready for the challenges of the 21st century.

Historical Evolution and Rationale for a New Policy

India’s industrial journey began with a strong emphasis on self-reliance and import substitution, epitomized by the Industrial Policy Resolution of 1956. This era saw the public sector playing a dominant role, with a complex licensing regime (the “License Raj”) that regulated private sector entry, growth, and investment. While this laid the foundation for heavy industries, it also led to inefficiencies, technological obsolescence, and a lack of global competitiveness. The economic reforms of 1991 marked a paradigm shift, liberalizing the economy by dismantling the License Raj, opening up to foreign investment, and privatizing certain public sector enterprises. This significantly improved industrial performance and integrated India into the global economy.

However, despite these reforms, challenges persisted. The manufacturing sector’s contribution to GDP remained relatively low, job creation in organized manufacturing struggled to keep pace with the growing workforce, and India lagged in global innovation indices. Infrastructure deficits, complex regulatory environments, skill mismatches, and the rise of protectionist tendencies globally further necessitated a renewed focus. The aspiration to move up the global value chain, leverage India’s demographic dividend, and achieve sustainable and inclusive growth provided the core rationale for the ongoing evolution towards a “new industrial policy.” This collective set of policy interventions seeks to address these structural issues while positioning India as an attractive destination for manufacturing and a hub for innovation.

Pillars and Key Initiatives of India’s Contemporary Industrial Policy

The “new industrial policy” framework is multifaceted, encompassing a wide range of reforms and initiatives that collectively aim to foster a conducive environment for industrial growth. While a formal, standalone “New Industrial Policy” document (like the proposed NIP 2017/2019 by DPIIT) has been debated and drafted, the government’s approach has been to implement these strategic shifts through a series of interconnected programs and reforms rather than a single, overarching policy declaration. The core pillars of this contemporary approach include:

1. Make in India Initiative

Launched in 2014, the “Make in India” initiative is arguably the foundational component of India’s new industrial push. Its primary objective is to transform India into a global manufacturing and design hub. It encourages both domestic and foreign companies to manufacture their products in India across 25 key sectors, ranging from automobiles and electronics to textiles and pharmaceuticals. The initiative aims to increase the manufacturing sector’s share of GDP to 25% and create 100 million additional jobs by 2022 (though these targets have been revised and are long-term aspirations). “Make in India” focuses on four pillars: new processes (ease of doing business), new infrastructure (industrial corridors, smart cities), new sectors (focus on high-growth areas), and new mindset (proactive government approach).

2. Ease of Doing Business Reforms

Recognizing that a streamlined regulatory environment is crucial for attracting investment, India has undertaken extensive reforms to improve its ranking in the World Bank’s Ease of Doing Business Index. These reforms include simplifying procedures for starting a business, obtaining construction permits, paying taxes, trading across borders, enforcing contracts, and resolving insolvency. The introduction of online single-window clearance systems, rationalization of labor laws, and decriminalization of minor offenses under various acts have significantly reduced compliance burdens and transaction costs for businesses.

3. Infrastructure Development: Gati Shakti National Master Plan

Robust infrastructure is the backbone of industrial growth. The National Infrastructure Pipeline (NIP) outlines a massive investment plan across social and economic infrastructure projects. Building on this, the PM Gati Shakti National Master Plan, launched in 2021, is a transformative approach for economic growth and sustainable development. It is a digital platform that brings 16 ministries, including Railways and Roadways, together for integrated planning and coordinated implementation of infrastructure connectivity projects. The aim is to reduce logistical costs, improve project execution, and create multi-modal connectivity for seamless movement of goods and people, thereby boosting industrial competitiveness. Dedicated Freight Corridors (DFCs) and industrial corridors like the Delhi-Mumbai Industrial Corridor (DMIC) are critical components.

4. Skill Development and Human Capital Formation

A skilled workforce is indispensable for advanced manufacturing and innovation. The “Skill India” mission, encompassing initiatives like the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) and the National Skill Development Corporation (NSDC), aims to train over 400 million people in various skills by 2022. The focus is on bridging the skill gap, enhancing employability, and promoting vocational training and apprenticeship programs to meet the demands of emerging industries and technologies. Efforts are also underway to revamp ITIs (Industrial Training Institutes) and provide industry-relevant training.

5. Innovation, Technology Adoption, and Digital Transformation

The new industrial policy heavily emphasizes fostering an innovation ecosystem. “Startup India” provides a framework for nurturing entrepreneurship, offering tax incentives, funding support, and simplified regulatory processes for startups. “Digital India” aims to transform India into a digitally empowered society and knowledge economy by improving digital infrastructure, delivering government services electronically, and enhancing digital literacy. Initiatives promoting research and development (R&D), Artificial intelligence (AI) (ML), and Industry 4.0 technologies are central to making Indian industries globally competitive and future-ready.

6. Production Linked Incentive (PLI) Schemes

A significant recent addition to India’s industrial strategy is the widespread adoption of Production Linked Incentive (PLI) schemes. Introduced across 14 key sectors (including electronics, automobiles, pharmaceuticals, textiles, telecom equipment, and solar PV modules), these schemes offer incentives, typically ranging from 4% to 6% on incremental sales of manufactured goods, for products manufactured in India. The objective is to boost domestic manufacturing, attract large-scale investment in cutting-edge technologies, enhance exports, and create economies of scale, making Indian industries globally competitive. PLI schemes are crucial for encouraging global champions and creating robust local supply chains.

7. Support for Micro, Small, and Medium Enterprises (MSMEs)

MSMEs are the backbone of the Indian economy, contributing significantly to GDP, employment, and exports. The new policy framework includes various measures to support MSMEs, such as improving access to credit (e.g., MUDRA Yojana, Credit Guarantee Fund Trust for Micro and Small Enterprises - CGTMSE), facilitating market linkages (e.g., Government e-Marketplace - GeM), promoting technology adoption, and providing handholding for export diversification. The definition of MSMEs has also been revised to allow for greater growth without losing benefits.

8. Promotion of Green and Sustainable Industrialization

Recognizing the environmental impact of industrial activities, the new policy emphasizes sustainable development. This includes promoting energy efficiency, adoption of cleaner technologies, waste management, circular economy principles, and development of green industries. Policies encourage investment in Renewable energy, electric vehicles, and sustainable manufacturing practices to align industrial growth with environmental protection goals and global climate commitments.

9. Global Integration and Investment Facilitation

While promoting self-reliance (Aatmanirbhar Bharat), the policy also emphasizes integrating with global value chains. Efforts are underway to rationalize tariffs, negotiate free trade agreements (FTAs) with key economic blocs, and streamline investment procedures to attract Foreign Direct Investment (FDI). India has liberalized its FDI policy across various sectors, making it one of the most open economies for foreign investment.

10. Aatmanirbhar Bharat Abhiyan (Self-Reliant India Campaign)

Launched in response to the COVID-19 pandemic, Aatmanirbhar Bharat is an overarching vision that encapsulates many of the above initiatives. It emphasizes strengthening domestic capabilities, reducing reliance on critical imports, and boosting local manufacturing, while simultaneously promoting global competitiveness and integration. It focuses on five pillars: economy, infrastructure, system, demography, and demand. This framework aims to create a resilient, self-sufficient, and globally competitive India.

Objectives of the New Industrial Policy

The overarching objectives of this contemporary industrial policy framework are multi-fold:

  • Boost Manufacturing Contribution: To significantly increase the manufacturing sector’s share in India’s GDP, aiming for around 25% in the medium to long term.
  • Job Creation: To generate millions of high-quality employment opportunities, particularly in the organized manufacturing sector, to absorb India’s large workforce.
  • Enhance Global Competitiveness: To make Indian industries globally competitive in terms of cost, quality, and technology, thereby boosting exports and attracting FDI.
  • Foster Innovation and Technology: To build a robust ecosystem for research, development, and adoption of cutting-edge technologies (e.g., Industry 4.0, Artificial intelligence (AI), IoT).
  • Promote Sustainable Industrialization: To ensure that industrial growth is environmentally sustainable, resource-efficient, and inclusive.
  • Attract and Retain Investment: To create a highly attractive investment climate for both domestic and foreign capital.
  • Strengthen Domestic Value Chains: To build resilient and robust domestic supply chains, reducing undue reliance on imports for critical goods.

Challenges and Criticisms

Despite the ambitious scope and numerous initiatives, the “new industrial policy” framework faces several challenges:

  • Implementation Gaps: While policies are well-intentioned, effective and timely implementation on the ground remains a challenge, often hampered by bureaucratic hurdles, inter-ministerial coordination issues, and varying state-level capacities.
  • Land Acquisition and Environmental Clearances: Acquiring land for industrial projects and navigating complex environmental clearance processes can be time-consuming and pose significant impediments.
  • Logistics Costs: Despite Gati Shakti, India’s logistics costs remain relatively high compared to global benchmarks, impacting the competitiveness of manufactured goods.
  • Skill Mismatch and Labor Reforms: While skill development is a focus, the pace of skilling and the relevance of training to industry needs can still be improved. Labor law reforms, while initiated, continue to be a sensitive area.
  • Access to Affordable Credit: Especially for MSMEs, timely access to affordable credit remains a persistent challenge, limiting their growth potential.
  • Technological Adoption: While policies encourage technology adoption, the pace of integration of advanced manufacturing technologies (e.g., Artificial intelligence (AI), automation) across the vast industrial landscape, particularly for smaller units, is slow.
  • Global Headwinds: Geopolitical tensions, global economic slowdowns, and protectionist tendencies in major markets can impact India’s export ambitions and FDI inflows.
  • Balancing Aatmanirbhar Bharat with Global Integration: Striking the right balance between promoting domestic manufacturing and ensuring integration into global value chains without resorting to protectionism is a delicate act. Critics argue that an overemphasis on self-reliance could lead to inefficiency and higher costs.

Impact and Future Outlook

The cumulative impact of these various initiatives is gradually becoming visible. India has significantly improved its Ease of Doing Business ranking, although there is still scope for improvement. FDI inflows have touched record highs, reflecting increased investor confidence. Sectors covered by PLI schemes are witnessing new investments and increased domestic production, particularly in electronics, pharmaceuticals, and mobile phone manufacturing. The focus on infrastructure through Gati Shakti promises to reduce logistics costs and improve connectivity, which is vital for manufacturing. The startup ecosystem has boomed, making India the third-largest startup hub globally.

However, the journey is long, and sustained efforts are required. The manufacturing sector’s share in GDP, while showing signs of modest growth, still needs a significant push to reach the ambitious targets. Job creation, particularly high-quality manufacturing jobs, remains a critical area for sustained focus, especially with a large young population entering the workforce. The transition towards green manufacturing and circular economy principles will also be crucial for long-term sustainability.

India’s contemporary industrial policy framework is not a static document but a dynamic and evolving strategy. It represents a paradigm shift towards a more proactive, facilitative, and market-driven approach, while retaining a strategic role for the state in guiding investment and addressing market failures. The emphasis on ‘Make in India’ complemented by ‘Aatmanirbhar Bharat’, supported by a robust infrastructure push, skill development, and targeted incentives like PLIs, signifies a determined effort to transform India into a global manufacturing powerhouse and a resilient economy.

The continuous policy reforms, coupled with a focus on ease of doing business and infrastructure development, are aimed at enhancing India’s attractiveness as a global manufacturing and investment destination. The emphasis on integrating with global value chains while simultaneously strengthening domestic capabilities through programs like PLI schemes demonstrates a pragmatic approach to industrial development. India’s commitment to leveraging its demographic dividend through skill development, fostering innovation via the startup ecosystem, and adopting advanced technologies underscores a forward-looking strategy. Ultimately, the success of this multi-pronged industrial approach will be measured by its ability to generate sustainable economic growth, create widespread employment opportunities, and establish India as a key player in the global industrial landscape of the 21st century.