India’s economy is sputtering, and the much-vaunted “Make in India” initiative, launched by Prime Minister Narendra Modi in 2014 to transform the country into a manufacturing powerhouse, is showing signs of exhaustion. Recent data reveal a troubling decline in industrial output, casting doubt on India’s growth prospects and exposing the government’s failure to deliver on its ambitious promises. With GDP forecasts dimming and structural challenges mounting, Mr. Modi’s administration appears ill-equipped to navigate the gathering economic storm.
A Slump in Industrial Output
The Index of Industrial Production (IIP), a key gauge of industrial activity, tells a sobering story. In February 2025, IIP growth fell to 2.9%, its lowest in six months. The slowdown spans critical sectors: manufacturing, which accounts for 78% of the index, grew by just 2.9%; mining limped along at 1.6%; and electricity production rose by a mere 3.6%. Primary goods, such as minerals and fuel, saw only 2.8% growth, while intermediate goods—partially finished products like chemicals and yarn—managed just 1.5%.
This broad-based decline reflects weak domestic demand, supply-chain bottlenecks, and global trade headwinds. Manufacturing’s lackluster performance is particularly alarming, given its role in job creation and economic dynamism. The “Make in India” campaign, which aimed to boost manufacturing’s share of GDP to 25% by 2025, has fallen flat. Data from the Ministry of Commerce and Industry show that manufacturing still hovers at 15-16% of GDP, unchanged from a decade ago.
GDP Growth in Jeopardy
The IIP’s slump bodes ill for India’s broader economic outlook. The government’s target of 6.5% GDP growth for the fiscal year 2024-25 (FY25) looks increasingly unattainable. Growth in the first three quarters stood at 6.7%, 5.6%, and 6.2%, respectively. To hit the annual target, the fourth quarter would need an improbable 7.6% surge—unlikely given the current industrial malaise.
The Reserve Bank of India (RBI) has lowered its FY26 GDP forecast from 6.7% to 6.5%, signaling deeper concerns about structural weaknesses. Inflation, at 5.2% in February 2025 per the Consumer Price Index, continues to erode purchasing power, while high borrowing costs—exacerbated by the RBI’s efforts to tame prices—constrain investment. Unemployment, already a worry, climbed to 7.8% in March 2025, according to the Centre for Monitoring Indian Economy, with manufacturing’s woes hitting urban workers hardest.
Policy Missteps Under Modi
Mr. Modi’s government must shoulder much of the blame. “Make in India” was launched with fanfare, promising streamlined regulations, foreign investment, and a manufacturing boom. Yet implementation has been hampered by bureaucratic inertia and a failure to address practical challenges. Foreign direct investment in manufacturing grew by just 3% in 2024, down sharply from prior years, per the Department for Promotion of Industry and Internal Trade. Investors cite high input costs, inadequate infrastructure, and a complex tax regime as deterrents.
The Goods and Services Tax (GST), introduced in 2017, has been a particular sore point. Its high compliance costs and frequent rate changes have burdened small manufacturers, undermining the sector’s competitiveness. Meanwhile, exports, a potential bright spot, fell by 2.1% in the third quarter of 2024, according to the Ministry of Commerce, as global demand weakened and India struggled to capitalize on trade opportunities.
Rather than tackling these issues, Mr. Modi’s administration has been distracted by political posturing and divisive rhetoric. Infrastructure projects, often touted as economic drivers, have prioritized optics over utility, while measures to boost manufacturing—such as tariff reforms or export incentives—have been conspicuously absent. The government’s inaction in the face of global uncertainties, including trade tensions and supply-chain disruptions, has left Indian businesses exposed.
A Gathering Economic Cloud
Without urgent course correction, India risks a deeper economic downturn. Manufacturing’s stagnation threatens to exacerbate unemployment and dampen consumer spending, creating a vicious cycle. The government’s failure to invest in skills training or green technologies further limits India’s ability to compete in a rapidly changing global economy.
Mr. Modi’s reluctance to prioritize substantive reforms over populist gestures is a critical misstep. Simplifying the GST, improving infrastructure, and incentivizing investment could revive industry, but such measures require political will that has so far been lacking. As global headwinds intensify, India cannot afford complacency. The promise of “Make in India” lies in tatters; unless Mr. Modi acts decisively, the economy may pay a steeper price.
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