Manufacturing | Breaking the shackles


India’s manufacturing sector has had a long journey, from building the country’s industrial foundations to licence raj to liberalisation. The challenge now is to become globally competitive

A Hindustan Motors plant in Uttarpara, 1951; (right) an
automated M&M production line in Chakan, Maharashtra, 2018; (Photo: Getty Images)

Since Independence in 1947, the domestic manufacturing sector has travelled from building the country’s industrial foundation (1950-1960s) to the licence-permit raj (1965-1980s) and liberalisation in the 1990s to the current phase of striving for global competitiveness. Manufacturing now contributes around 17 per cent to India’s GDP and employs around 20 per cent of the country’s workforce.

Since Independence in 1947, the domestic manufacturing sector has travelled from building the country’s industrial foundation (1950-1960s) to the licence-permit raj (1965-1980s) and liberalisation in the 1990s to the current phase of striving for global competitiveness. Manufacturing now contributes around 17 per cent to India’s GDP and employs around 20 per cent of the country’s workforce.


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After the IT and telecom revolution in the late 1980s came liberalisation in 1991, when then PM P.V. Narasimha Rao and his finance minister Manmohan Singh took several measures to abolish the Licence Raj. Trade was liberalised and extensive reforms taken up in the financial sector.

The Atal Bihari Vajpayee regime (1998-2004) was marked by aggressive disinvestment of a few state-owned units. The UPA-I government under Manmohan Singh (2004-09), supported by the Left parties as it was, had no room for privatisation, but still sold 5-20 per cent stake in PSUs through IPOs and secondary issues. The Narendra Modi government, through its Aatmanirbhar Abhiyan, aims to build domestic capabilities so that Indian companies gain an edge in global markets, even while easing restrictions to attract more foreign investment.

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