Industry in India

Evolution of Industries in India

India's industrial history predates colonialism. Traditional cottage and handicraft industries, particularly handloom textiles, iron smelting, ship-building, and artisan metalwork, constituted a sophisticated manufacturing sector that supplied global markets through the trans-oceanic trade networks of the Arab, Portuguese, Dutch, and early English traders. The famous muslin of Dhaka, the silk of Varanasi and Murshidabad, the calico of Calicut, and the steel of Hyderabad (wootz steel) enjoyed export markets across Asia, Africa, and Europe. Estimates suggest India contributed roughly 25 percent of world manufacturing output in 1750, placing it alongside China as the dominant industrial economy of the pre-colonial world.

British colonial policy systematically dismantled this industrial base through a combination of mechanisms. Discriminatory tariff policy imposed zero or low duties on British machine-made textiles entering India while levying heavy duties on Indian textiles entering Britain, destroying the competitive position of Indian handloom producers. The drain of wealth through Home Charges, unrequited exports, and profit repatriation deprived the Indian economy of capital that might have financed industrial transition. The deliberate destruction of the shipbuilding industry of Surat and the Bengal coast, which competed directly with British yards, removed a major industrial sector. The destruction of the Dhaka muslin industry is particularly well documented: a combination of tariff discrimination and the competing cheapness of Manchester machine-made cotton eliminated what had been one of the finest textile industries in the world by the mid-nineteenth century.

The first phase of modern industrial development in colonial India was driven by Indian entrepreneurial capital rather than British investment in productive industries. The cotton textile industry of Bombay was pioneered by Parsi merchants such as Cowasji Nanabhoy Davar, who established the first cotton mill in 1854, and subsequently by Gujarati and Marwari trading communities whose mercantile capital sought industrial investment. Jute manufacturing was established in Bengal under British managing agency houses, particularly around Calcutta (now Kolkata) along the Hugli river, from the 1850s onward. The iron and steel industry had its modern origin in the establishment of the Tata Iron and Steel Company at Jamshedpur in 1907 by Jamsetji Tata, a pioneering act of indigenous industrial entrepreneurship in a field then dominated globally by Britain, the United States, and Germany. The coal mining industry expanded rapidly in the Jharia and Raniganj coalfields from the latter half of the nineteenth century primarily to supply the railways.

After independence, India adopted a mixed economy model informed by Fabian socialism and Nehruvian planning, embodied in the Industrial Policy Resolution of 1948 and more emphatically the Industrial Policy Resolution of 1956, which divided the economy into three sectors. Schedule A comprised seventeen industries exclusively reserved for the state, including defence, railways, atomic energy, iron and steel, heavy machinery, and coal. Schedule B comprised twelve industries in which the state would progressively establish a dominant role while the private sector could supplement. The residual industries were left to the private sector. This framework, combined with a system of industrial licensing under the Industries (Development and Regulation) Act of 1951, created a command economy in which the establishment of new industrial capacity, expansion of existing capacity, and diversification of product lines all required prior government permission.

The licence-permit-quota regime produced mixed results. On one hand, it enabled India to build a diversified industrial base, develop heavy capital goods industries, and prevent the concentration of economic power in a small number of private houses. The public sector enterprises established in this period laid the foundation of India's steel, machine tools, heavy electricals, fertilisers, and pharmaceuticals industries. On the other hand, the system generated severe inefficiencies: industries were protected from competition and had no incentive to improve productivity, technology, or quality; bureaucratic bottlenecks delayed investment decisions; the system bred corruption and rent-seeking; and the industrial structure became over-diversified without achieving scale in any segment. Import substitution industrialisation created industries that were globally uncompetitive and dependent on continued protection. The balance of payments crisis of 1991, precipitated by the Gulf War's impact on oil prices and remittances and a severe fiscal deficit, triggered the landmark economic reforms initiated by Finance Minister Manmohan Singh under Prime Minister Narasimha Rao.

The New Industrial Policy of 1991 constituted the most comprehensive transformation of India's industrial framework since independence. Industrial licensing was abolished for all but eighteen industries (subsequently reduced further), and the list of industries reserved for the public sector was contracted from seventeen to eight (later further to two: atomic energy and railways). Foreign direct investment limits were raised substantially across sectors, and automatic approval was granted for FDI up to specified thresholds. Import licensing was progressively dismantled and tariffs were reduced. The Monopolies and Restrictive Trade Practices Act was replaced by the Competition Act of 2002. These reforms unleashed a surge of private investment, enabled integration into global value chains, and produced the high growth rates of the 2000s, though the benefits of growth were unevenly distributed and the agricultural and informal sector workers saw slower gains.

Locational Factors of Industries

The location of industries is determined by a complex set of factors whose relative importance varies by industry type. Alfred Weber's least-cost theory of industrial location (1909) identified three primary determinants: transport costs (the weight of raw materials and finished products times the distance they must be moved), labour costs, and agglomeration economies. Weber introduced the concept of the material index, defined as the ratio of the weight of localised raw materials to the weight of the finished product, to determine whether an industry would locate near its raw material source (weight-losing industries with material index greater than one) or near the market (weight-gaining industries with material index less than one) or could locate anywhere along the route (footloose industries).

Raw material availability is the dominant locational factor for weight-losing industries that process bulky, low-value ores or fuels. Iron and steel plants are optimally located at the coalfield or iron ore field, or at the point of minimum transport cost between the two (which Weber called the transport isotim). India's classical steel plants at Jamshedpur, Burnpur, Bokaro, Durgapur, Bhilai, and Rourkela were all established in proximity to the coal-iron ore belt of the Chota Nagpur Plateau and Odisha, reflecting the weight of coking coal requirement (approximately 1.5 to 2 tonnes of coking coal per tonne of steel). Sugar mills in India follow a strict locational constraint tied to the perishability of sugarcane: juice content falls rapidly within 24 hours of harvesting, so mills must be located within 50 to 80 kilometres of the cane-growing area. This factor, combined with the geographical distribution of sugarcane cultivation, explains the concentration of sugar mills in Uttar Pradesh and Bihar (Ganga Plain, proximity to cane) and the southward shift of the industry to Maharashtra and Karnataka (higher sucrose content, cooperative mill structure, longer crushing season).

Power availability was historically the decisive factor for electricity-intensive industries. Aluminium smelting requires approximately 14,000 to 16,000 kilowatt-hours of electricity per tonne of aluminium and is therefore located near cheap hydroelectric power sources: the NALCO smelter at Angul in Odisha draws power from the Hirakud dam, the Hindalco plant at Renukoot in Uttar Pradesh is positioned near the Rihand dam, and the Bharat Aluminium Company at Korba in Chhattisgarh is adjacent to the Korba thermal power station. Similarly, the electro-chemical industry, electro-metallurgical industry, and chlor-alkali industry cluster near cheap power sources. With the development of a national grid and the emergence of power as a traded commodity, this locational constraint has weakened for industries that are not extremely power-intensive.

Labour availability and cost influence location for labour-intensive industries. The cotton textile industry's concentration in Mumbai was historically explained partly by the presence of a large pool of migrant workers from the drought-prone Deccan Plateau. The garment and leather industries of Chennai, Delhi, and Kolkata are strongly influenced by the availability of low-cost semi-skilled labour. However, as labour costs have risen in traditional industrial centres, labour-intensive industries have migrated to smaller towns and lower-wage states, a process visible in the garment industry's expansion into Tirupur, Ludhiana, and Jaipur. The emergence of electronics manufacturing clusters in Tamil Nadu (Sriperumbudur, Hosur), Karnataka (Bengaluru, Mysuru), and Andhra Pradesh (Tirupati, Sri City) has been accompanied by the development of engineering colleges that supply technical labour, illustrating the way labour quality rather than merely cost has become a locational factor for knowledge-intensive industries.

Market access is the dominant factor for weight-gaining industries and service industries. Consumer goods industries producing bulky finished products, food processing, beverages, furniture, and construction materials tend to locate near their markets. The metropolitan cities serve as the primary markets for consumer durables, and the clustering of consumer electronics assembly near Delhi, Mumbai, and Chennai reflects market proximity. Perishable goods industries, including dairy processing, bakeries, and ice cream manufacturing, are strictly market-oriented. The growth of secondary cities and the expansion of the middle class into Tier-2 towns have created new market centres that attract food processing and consumer goods industries.

Transport infrastructure, particularly rail and port connectivity, was historically the most critical factor for industries importing raw materials or exporting finished goods. The petroleum refining industry in India is almost exclusively port-oriented, with major refineries at Mumbai, Chennai, Kochi, Mangaluru, Vadinar, and Visakhapatnam receiving imported crude by sea. The proposed Petroleum, Chemicals and Petrochemicals Investment Region at Dahej in Gujarat clusters petrochemical downstream industries near a deep-water port. Government policy, in the form of industrial estates, special economic zones, growth centres, export processing zones, and production-linked incentive schemes, has become an increasingly significant locational factor, directing industrial investment through fiscal incentives, subsidised land, and infrastructure provision.

Agglomeration economies, the cost savings arising from the spatial concentration of related industries and supporting services, are a powerful force for industrial clustering. Ancillary industries supply components to large assembly plants; specialised repair and maintenance services develop; a trained labour pool accumulates; financial and insurance services oriented to specific industry needs emerge; and information flows among firms in the same industry accelerate innovation. Silicon Valley, the Detroit automotive cluster, and India's Surat diamond-polishing district all exemplify agglomeration. The industrial corridors now being developed across India are partly intended to create planned agglomeration zones that attract anchor investments and allow the benefits of clustering to develop organically.

Iron and Steel Industry

Iron and steel is the backbone of modern industrial civilisation, providing the structural material for infrastructure, machinery, transport equipment, and consumer durables. Steel output is an important indicator of a country's industrial development. India is currently the second-largest producer of steel in the world after China, with crude steel production of over 120 million tonnes per annum, and has ambitions to reach 300 million tonnes by 2030. India is also the largest producer of direct-reduced iron or sponge iron in the world, reflecting the prevalence of electric arc furnace-based mini-steel plants that use sponge iron as a substitute for scrap metal.

The iron and steel industry requires coking coal, iron ore, limestone (flux), manganese (for alloying), dolomite, and water in large quantities. Coking coal, with low sulphur and ash content and specific coking properties, is the most critical and weight-determining input: approximately 1.5 to 2 tonnes of coking coal are needed per tonne of pig iron. India's domestic coking coal reserves are limited and of poor quality (the Gondwana coal of Jharia has high sulphur content and poor coking properties), making the industry heavily dependent on imported coking coal, primarily from Australia, Canada, and the United States. Iron ore is abundant in India, with major deposits in the iron ore belt of Jharkhand-Odisha (Singhbhum-Keonjhar-Mayurbhanj belt, producing high-grade haematite ore), Chhattisgarh-Odisha (Bailadila, Dalli-Rajhara), Karnataka (Bellary-Hospet, Sandur), and Goa. India exports iron ore, primarily to China and Japan, though export restrictions have periodically been imposed to ensure domestic supply.

The integrated steel plants, which carry out the full sequence from iron ore to finished steel through the blast furnace-basic oxygen furnace route, are the largest units and were predominantly established in the public sector. Jamshedpur, established in 1907 by Tata Steel (then TISCO), was the first integrated plant and remains among the largest private steel producers. It benefits from proximity to the iron ore deposits of Noamundi and Barajamda and the coking coal of Jharia. Burnpur (Asansol), operated by the Steel Authority of India Limited under the IISCO brand, is located in the Damodar valley coalfield region and sources ore from Bihar and Odisha. The SAIL plants at Bhilai (Chhattisgarh), Rourkela (Odisha), Durgapur (West Bengal), and Bokaro (Jharkhand) were all established with foreign technical collaboration as part of the second and third five-year plans: Bhilai with Soviet assistance, Rourkela with West German collaboration, Durgapur with British assistance, and Bokaro with Soviet collaboration. These plants were sited to maximise proximity to both coal and iron ore in the Chota Nagpur-Odisha resource belt. The Visakhapatnam steel plant (Rashtriya Ispat Nigam Limited) is unique in being a coastal integrated plant, built in response to Andhra Pradesh's demand for a steel plant and designed to receive imported coking coal by sea while using iron ore from Bailadila transported by rail.

Problems facing the integrated steel sector include high input costs (particularly imported coking coal), aging technology and low productivity in some SAIL units, inadequate scrap availability, infrastructure bottlenecks (particularly port and railway capacity for ore movement), land acquisition difficulties for plant expansion, and environmental compliance costs. The mini steel plants, using the electric arc furnace route with sponge iron or scrap as feedstock and producing primarily long products (bars, rods, structural sections) for construction, have grown rapidly since liberalisation and now account for more than half of total steel production. They benefit from locational flexibility (being footloose relative to the integrated plants), lower capital cost, shorter gestation periods, and the ability to use domestic non-coking coal for sponge iron production. Their proliferation in states such as Chhattisgarh, Odisha, Jharkhand, and Karnataka has driven regional industrial development.

Cotton Textile Industry

The cotton textile industry is India's oldest and largest organised industry, with a history stretching from the pre-colonial handloom tradition through the establishment of the first modern power-driven mill at Bombay in 1854 to the present, when India is the world's second-largest producer and exporter of cotton textiles and garments after China. The industry spans an extraordinarily diverse range of units: from small handloom weavers organised in clusters such as the handloom belt of Varanasi, Chanderi, Pochampalli, and Dharmavaram, through the powerloom sector concentrated in Surat, Bhiwandi, Erode, and Tirupur, to the large composite mills that carry out spinning, weaving, and processing under one roof.

The classical concentration of the cotton mill industry in Mumbai (then Bombay) and Ahmedabad is explained by multiple overlapping locational factors. Proximity to the raw cotton growing areas of the Deccan black cotton soil region (the Vidarbha, Marathwada, and Gujarat zones were India's primary cotton producing areas) reduced raw material transport costs. The humid climate of Mumbai, being a coastal city, reduced the frequency of thread breakage during spinning and weaving, an important consideration before humidity control technology was available. The availability of capital from Parsi, Gujarati, and Parsi-Gujarati mercantile communities who had accumulated trading profits through commerce and Opium trade with China provided financing for the capital-intensive mill industry. Port facilities at Mumbai enabled the import of machinery and the export of finished textiles. The availability of labour from the drought-prone Deccan hinterland supplied a large urban workforce. Ahmedabad, located inland but accessible to the cotton-growing areas of Gujarat and Saurashtra and with entrepreneurial capital from the Jain and Bania communities, developed as the second major centre and earned the name Manchester of India. Mumbai earned the same epithet for its larger cluster of mills.

The composite mill sector of Mumbai declined dramatically from the 1980s onward, resulting in mass closures and the redevelopment of mill land for real estate, commercial, and entertainment uses. Several factors caused this decline: the prolonged textile mill strike of 1982, lasting 18 months, broke the organised labour force; the power loom sector in Bhiwandi and Malegaon, unencumbered by labour legislation, produced grey fabric more cheaply; the composite mills could not modernise their technology without large capital expenditure; and synthetic fibres and man-made fabrics gained market share at the expense of pure cotton. The real estate value of mill land in central Mumbai eventually made closure economically rational for mill owners, though this dispossessed tens of thousands of workers.

Tirupur in Tamil Nadu has emerged as India's largest centre for cotton knitwear and garment exports, accounting for roughly 45 to 50 percent of India's total knitwear export value. Its rise is explained by the clustering of spinning, knitting, dyeing, printing, and stitching units in close proximity, enabling rapid completion of an integrated production cycle; the entrepreneurship of the Goundar community who dominated the industry from its origins in the 1970s; the development of a dense network of ancillary industries and skilled workers; and the proximity of Coimbatore, a major spinning hub. Surat in Gujarat dominates the man-made fabric (polyester and polyester blends) weaving industry, with thousands of powerloom units producing fabric supplied to the broader Indian garment sector. Ludhiana in Punjab is the primary centre for woollen knitwear, particularly sweaters and hosiery, exploiting its proximity to the wool-producing areas of Rajasthan and Himachal Pradesh and the cold climate that generates domestic demand.

The handloom sector remains socially and culturally significant, employing approximately 4.3 million weavers and allied workers across India, making it the largest cottage industry after agriculture. Major handloom clusters include the silk sarees of Varanasi (Banarasi brocade), Kanchipuram (Kanjivaram silk), and Pochampalli (Ikat weave); the cotton sarees of Mangalgiri, Venkatagiri, Gadwal, and Narayanpet in Andhra Pradesh and Telangana; the Jamdani muslin of Dhaka-origin weavers now in West Bengal; the Patan Patola of Gujarat (double ikat silk); the Maheshwari and Chanderi cotton-silk fabrics of Madhya Pradesh; and the Muga and Pat silk of Assam. These handloom traditions face competition from powerlooms producing similar-looking fabric at a fraction of the cost and require policy support through the Handloom Mark scheme, cluster development, government procurement, and GI tag protection.

Chemical and Fertiliser Industry

The chemical industry in India is the third-largest in Asia and sixth-largest in the world by output, contributing approximately 7 percent of GDP and employing over 2 million workers. It spans basic chemicals (chlor-alkali, soda ash, sulphuric acid), petrochemicals (ethylene, propylene, benzene, and their derivatives), specialty chemicals (dyes, pigments, pesticides, pharmaceuticals), agrochemicals, and fertilisers.

The fertiliser industry is of critical importance to India's food security, as chemical fertilisers account for a substantial proportion of the yield increases achieved since the Green Revolution. India is the second-largest consumer of fertilisers in the world. The three principal plant nutrients are nitrogen (N), phosphorus (P), and potassium (K). India produces nitrogenous and phosphatic fertilisers domestically but must import the bulk of its potash requirement because commercially exploitable potassium deposits are absent in India (the only significant potash deposit is the Nagaur-Ganganagar saline belt in Rajasthan, not yet commercially produced). Urea is the primary nitrogenous fertiliser and is produced from ammonia synthesised from natural gas or naphtha through the Haber-Bosch process; India has large urea production capacity in states such as Gujarat, Uttar Pradesh, Andhra Pradesh, Punjab, and Rajasthan. Diammonium phosphate is the primary complex fertiliser and is partly produced domestically and partly imported. Fertiliser plants are typically located near ports (for imported raw material access) or near natural gas pipelines (for feedstock access). The Rashtriya Chemicals and Fertilisers complex at Trombay near Mumbai, the Fertiliser Corporation of India units at Sindri (Jharkhand), Gorakhpur, Ramagundam, and Talcher, and the private sector plants of IFFCO and Kribhco are the major producers. The Urea Production Policy of 2015 aimed at reviving closed public sector fertiliser plants at Gorakhpur, Sindri, Barauni, and Talcher through gas-based conversion, improving energy efficiency and reducing subsidy burden.

The petrochemical industry, which converts petroleum and natural gas into intermediate and final organic chemicals, is concentrated near the major petroleum refining centres. The Reliance Industries complex at Jamnagar is the world's largest single-location refinery-petrochemical complex, with an integrated refining, aromatics, polyester, and polymer chain. The ONGC Petro additions Limited (OPaL) plant at Dahej, the Haldia Petrochemicals complex in West Bengal, and the GAIL Pata complex in Uttar Pradesh are other major players. The proposed Petroleum, Chemicals and Petrochemicals Investment Regions at Dahej (Gujarat), Paradip (Odisha), Vishakhapatnam (Andhra Pradesh), Cuddalore-Nagapattinam (Tamil Nadu), and Jalandhar (Punjab) are intended to create large integrated zones that attract downstream chemical manufacturers to locate near feedstock suppliers, enabling the development of complete value chains.

The pharmaceutical industry is one of India's most globally competitive manufacturing sectors. India is the third-largest drug producer by volume and the largest supplier of generic medicines to the world, supplying approximately 20 percent of global generic drug exports. The industry provides affordable medicines to the United States, the European Union, and developing countries, and has become a key element of global public health infrastructure. Major clusters include the Active Pharmaceutical Ingredient industry concentrated in Hyderabad (Genome Valley, Patancheru industrial area), Ahmedabad, Mumbai, and Pune; and formulations manufacturing in Mumbai, Ahmedabad, Baddi (Himachal Pradesh), and Sikkim. India's strength in generics derives from the product patent regime that prevailed under the Patent Act of 1970, which protected only manufacturing processes and not products, enabling Indian companies to develop alternative manufacturing routes for patented drugs. The switch to product patents under TRIPS compliance in 2005 posed a challenge, but the Doha Declaration's public health flexibilities and compulsory licensing provisions have preserved India's ability to produce essential medicines in the public interest. Domestic R&D investment in pharmaceuticals remains low relative to global standards, and the sector remains primarily a fast-follower rather than a first-mover in drug discovery, with notable exceptions from companies such as Sun Pharma, Dr. Reddy's Laboratories, Cipla, and Lupin.

The dyes and pigments industry is a speciality of Surat, Ahmedabad, and Mumbai, historically deriving from the supply relationship with the textile industry. India is one of the world's largest producers and exporters of synthetic dyes. The agrochemical industry, producing pesticides and herbicides, is concentrated in Gujarat (Ankleshwar, Vapi) and Maharashtra (Pune, Raigad). The chlor-alkali industry (producing caustic soda and chlorine through electrolysis of brine) is distributed across Gujarat, Andhra Pradesh, and Tamil Nadu, with locational preference for cheap power.

Electronics and IT Industry

The electronics and information technology industry is India's most globally visible and successful manufacturing and services sector. India's IT-BPM (Business Process Management) sector generated exports of approximately 190 to 200 billion dollars in 2023, making it the country's largest export earner and a primary source of high-wage employment for the English-educated technical workforce. The sector employs over 5 million directly and an estimated 15 million indirectly in the formal sector, with a disproportionate presence in urban areas of Karnataka, Tamil Nadu, Andhra Pradesh, Maharashtra, and the Delhi-NCR region.

The IT services and software industry is heavily concentrated in a handful of cities: Bengaluru, which accounts for roughly 35 to 40 percent of India's IT exports and has earned the global brand identity of Silicon Valley of India; Hyderabad (HITEC City); Chennai; Pune; Mumbai; Delhi-NCR (Gurugram, Noida); and Kolkata to a lesser extent. The locational factors that drove this concentration include the presence of technical educational institutions (the Indian Institutes of Technology, National Institutes of Technology, and large numbers of engineering colleges established from the 1960s onward) producing a large pool of English-speaking software engineers at internationally competitive wage rates; availability of large tracts of land for campus-style software parks outside city centres; fiscal incentives under the Software Technology Parks of India scheme (1991) that provided 10-year income tax holidays and duty-free imports; time zone advantage (the 5.5 hour difference from GMT places India between European and North American business hours, enabling round-the-clock service delivery); and the quality of infrastructure provided within Software Technology Parks (uninterrupted power, high-bandwidth connectivity) that compensated for inadequate urban infrastructure. The deregulation of telecommunications in the 1990s, the rapid fall in international bandwidth costs, and the expansion of undersea fibre-optic cables made long-distance digital service delivery economically viable.

Hardware electronics manufacturing has historically been weak in India relative to the country's software strength, reflecting the dominance of China, Taiwan, South Korea, and Vietnam in global electronics supply chains. The Electronics Policy of 2012 and the National Policy on Electronics 2019 recognised this gap and set targets for domestic electronics production. The Production-Linked Incentive (PLI) scheme for large-scale electronics manufacturing, launched in 2020, has attracted global companies including Apple's contract manufacturers Foxconn, Pegatron, and Wistron to begin or expand mobile phone assembly in India, with plants near Chennai, Bengaluru, and Pune. The PLI scheme provides financial incentives (4 to 6 percent of incremental sales above a base year) over five years for eligible companies meeting minimum investment thresholds. Samsung's large facility at Noida is among the largest mobile phone manufacturing plants in the world. India has also attracted investments in semiconductor assembly and testing from companies including Micron Technology (Gujarat), Tata Electronics (Gujarat), and CG Power (Gujarat), though full semiconductor fabrication (chip manufacturing) remains absent due to the enormous capital and water requirements and the need for an established ecosystem of specialised suppliers.

The semiconductor design ecosystem in India is however substantial: India has approximately 20 percent of the world's semiconductor design engineers, working in design centres of Intel, Qualcomm, Texas Instruments, NXP, Samsung, Arm, and Indian companies such as Wipro VLSI and Tata Elxsi in Bengaluru, Hyderabad, and Pune. The India Semiconductor Mission, launched in 2021 with a 10 billion dollar incentive programme, aims to establish a complete semiconductor ecosystem including fabrication, ATMP (assembly, testing, marking, and packaging), and compound semiconductors, positioning India as an alternative to Taiwan and China in the global semiconductor supply chain.

The consumer electronics industry produces televisions, refrigerators, air conditioners, washing machines, and mobile phones for the domestic market, with assembly operations concentrated near major consumption centres such as Delhi-NCR (Noida, Greater Noida), Pune-Mumbai, Chennai, and Bengaluru. The domestic market for smartphones, which stood at approximately 150 million units per year by the early 2020s, is the primary driver of mobile phone manufacturing investment.

Industrial Policy and New Economic Framework

Industrial policy in India has evolved through several distinct phases. The Industrial Policy Resolution of 1948 accepted a mixed economy model with the state leading in strategic industries. The IPR 1956 formalised the three-schedule structure (state monopoly, state leadership, and private sector industries) and provided the ideological framework for the licence-permit-quota raj that governed investment decisions for three decades. The MRTP Act of 1969 imposed restrictions on large industrial houses (those with assets above 25 crore rupees) to prevent monopolistic concentration, but in practice discouraged large-scale private investment in several industries.

The New Industrial Policy of 1991 was a watershed: abolition of industrial licensing for all but a handful of industries, reduction of the public sector reserved list, liberalisation of FDI, and removal of MRTP Act restrictions on large houses. Subsequent policy evolution has been incremental. The Companies Act 2013 introduced mandatory corporate social responsibility spending of 2 percent of average net profit for qualifying companies, mandated gender diversity on boards, and created a framework for class action suits. The Insolvency and Bankruptcy Code 2016 was a major structural reform that provided a time-bound resolution mechanism for stressed assets, replacing a fragmented insolvency framework that had allowed promoters to retain control of defaulting companies for years through litigation.

The Make in India initiative launched in 2014 set a target of raising manufacturing's share of GDP from approximately 15 percent to 25 percent by 2025 and creating 100 million manufacturing jobs. It identified 25 sectors as focus areas and sought to improve the ease of doing business, reduce regulatory clearance timelines, and attract FDI. The Production-Linked Incentive scheme, launched in 2020 and subsequently extended to 14 sectors including mobile phones, pharmaceuticals, automobiles, textiles, food processing, solar modules, and speciality steel, provides output-linked financial incentives to manufacturers achieving a minimum incremental production threshold above a base year. The PLI scheme represents a shift from input-side support (subsidised land, power, capital) to output-side incentives tied to actual production growth, aligning incentives more directly with manufacturing scale.

The National Manufacturing Policy 2011 proposed the establishment of National Investment and Manufacturing Zones as greenfield integrated industrial townships with world-class infrastructure. The industrial corridor programme, initiated by the Delhi-Mumbai Industrial Corridor project, expanded this concept to a network of planned industrial regions linked by high-capacity freight rail corridors. The Delhi-Mumbai Industrial Corridor spans six states along the Western Dedicated Freight Corridor and includes integrated manufacturing clusters at Dholera (Gujarat), Shendra-Bidkin (Maharashtra), and Vikram Udyogpuri (Madhya Pradesh). The Chennai-Bengaluru Industrial Corridor, Bengaluru-Mumbai Economic Corridor, Amritsar-Kolkata Industrial Corridor, and East Coast Economic Corridor (Vizag-Chennai) are in various stages of planning and development. These corridors aim to replicate the planned industrial park model of China's Special Economic Zones and export processing zones, providing plug-and-play infrastructure to reduce the transaction costs of establishing manufacturing operations.

Industrial Regions and Corridors of India

India's industrial geography is characterised by pronounced regional concentration, reflecting historical factors (colonial port-city orientation, resource distribution), infrastructure availability, and the agglomeration tendencies of manufacturing. Six major industrial regions have historically dominated India's industrial map.

The Mumbai-Pune industrial region is the most diversified and financially important industrial zone, encompassing the original cotton mills of Mumbai (now largely shut or converted), the engineering industries of Pune (auto components, tractors, machine tools), the chemical and petrochemical complex of Thane-Belapur and Raigad, and the emerging IT-manufacturing corridor of Pune-Aurangabad. The region benefits from the country's best port infrastructure at Mumbai and Nhava Sheva (Jawaharlal Nehru Port), the largest financial market, and proximity to the western consumer market.

The Hugli industrial region along the banks of the Hugli river in West Bengal was the earliest centre of colonial-era industrialisation, dominated by jute mills, engineering workshops, and paper mills. Calcutta (Kolkata) served as the colonial capital and commercial hub, and the Damodar Valley provided coal and power. The region declined relative to western India after independence due to militant trade unionism, infrastructural deterioration, and the absence of proactive investment promotion. The jute industry, which once made Bengal the world's largest jute goods exporter, has contracted sharply due to competition from synthetic substitutes, though natural fibre jute products have found renewed markets in eco-packaging and geotextiles.

The Chota Nagpur industrial region, spanning Jharkhand, southern West Bengal, northern Odisha, and northern Chhattisgarh, is the resource base for India's heavy industries. Abundant coal, iron ore, manganese, copper, mica, and bauxite deposits support iron and steel, copper smelting, aluminium, cement, and power industries. Jamshedpur, Bokaro, Durgapur, Asansol, Ranchi, and Rourkela are the major industrial centres. Despite its resource wealth the region is characterised by relatively poor human development outcomes, tribal displacement from mining and industrial projects, and environmental degradation.

The Bengaluru-Chennai-Coimbatore triangle in southern India is the most dynamic industrial growth region of contemporary India, combining traditional industries (cotton textiles in Coimbatore, silk in Kanchipuram, leather in Vellore and Chennai) with modern industries (IT in Bengaluru and Chennai, automobiles in Chennai, aerospace and defence in Bengaluru, machine tools and pumps in Coimbatore). Chennai has emerged as India's automobile capital, hosting manufacturing plants of Hyundai, Ford, Renault-Nissan, BMW, and Royal Enfield, as well as a major cluster of auto component manufacturers. Bengaluru's aerospace cluster includes Hindustan Aeronautics Limited, the Indian Space Research Organisation, the Defence Research and Development Organisation, and numerous private sector aerospace manufacturers.

The Gujarat industrial region, centred on the Ahmedabad-Surat-Vadodara-Bharuch corridor, is among the most investment-friendly in India. Traditional strengths in cotton textiles, chemicals, and petrochemicals have been supplemented by the Jamnagar refinery-petrochemical complex of Reliance Industries, automobile manufacturing (Suzuki in Gandhinagar, Tata in Sanand, Ford previously), diamond polishing in Surat (which processes approximately 90 percent of the world's rough diamonds by volume), and the pharmaceutical and specialty chemicals clusters of Ankleshwar and Vapi. Gujarat's proactive industrial policy, Vibrant Gujarat investor summits, well-maintained port infrastructure, and reliable power supply have consistently ranked it among the highest in India's ease of doing business indices.

The Delhi-NCR industrial region, encompassing Delhi, Gurugram, Faridabad, Noida, and Greater Noida, is the largest consumer goods manufacturing cluster, reflecting market proximity to North India's largest urban agglomeration. Electronics assembly, garments, automobile components, pharmaceuticals, and food processing are the dominant industries. The region faces severe challenges of industrial land scarcity within Delhi (where polluting industries have been progressively relocated following Supreme Court orders), infrastructure congestion, and worsening air quality that has led to periodic industrial shutdowns under the Graded Response Action Plan for pollution control.

Special Economic Zones in India were established under the Special Economic Zones Act 2005, modelled on China's highly successful SEZ programme. SEZ units and developers receive significant fiscal concessions including exemption from customs duty, central excise, service tax, and initially income tax holidays. By 2022, over 370 SEZs had been formally approved, of which around 260 were operational. However, the Indian SEZ programme has produced mixed results relative to its Chinese counterpart. Indian SEZs are predominantly IT-software parks (services) rather than manufacturing-focused, reflecting the comparative advantage of Indian industry. The sunset clause on income tax exemptions, imposed by the 2016 Finance Act (phasing out the 10-year income tax holiday), reduced the attractiveness of SEZ status and triggered a slowdown in new SEZ development and some denotification of existing zones.