India’s manufacturing output grew by 7.3% in July 2026, and the latest industrial production figures show a further acceleration to 9% in August. Women’s participation in the labour force has also increased substantially over the past decade. Yet neither development has been accompanied by the structural transformation that successive governments have sought to achieve. Manufacturing continues to account for a relatively modest share of national output, while much of women’s employment remains concentrated in agriculture and self-employment. The distinction between growth in economic activity and changes in the composition of output and employment is central to understanding India’s development challenge.
The figures indicate genuine economic progress. Manufacturing output has increased, and more women are participating in economic activity. However, the persistence of manufacturing’s relatively low contribution to GDP raises questions about the sector’s capacity to absorb India’s expanding workforce. Likewise, higher female labour force participation offers an incomplete picture of employment conditions unless the nature and remuneration of work are examined.
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Why manufacturing’s GDP share remains stubbornly low
Manufacturing has accounted for roughly 15–17% of India’s GDP over an extended period, according to a NITI Aayog assessment. This broad stability has persisted despite successive industrial policies intended to expand domestic production. The National Manufacturing Policy of 2011 sought to raise manufacturing’s contribution to GDP to 25%. Make in India, launched in 2014, renewed the emphasis on industrial investment, while production-linked incentive schemes introduced from 2020 sought to encourage investment and domestic production in selected sectors.
These interventions have contributed to capacity expansion in several industries. Their success, however, cannot be judged solely by additional production or investment. A sustained increase in manufacturing’s share of GDP would indicate that the sector was expanding faster than the economy as a whole. Its continued concentration within a relatively narrow range suggests that the desired shift in the composition of economic activity has been limited.
The distinction becomes particularly relevant when interpreting recent industrial production figures. The Index of Industrial Production release for August 2026 reported manufacturing growth of 9% over the corresponding month of the previous year. Such figures reflect industrial expansion and provide useful evidence of economic momentum. They cannot, by themselves, establish whether manufacturing is increasing its contribution to national value added or generating employment proportionate to investment.
A sector can record healthy annual growth without increasing its share of GDP if other sectors are growing at comparable rates. Moreover, output growth can be driven by improvements in productivity, greater capacity utilisation or capital-intensive investment, none of which necessarily produces an equivalent increase in employment. An assessment of industrial policy therefore requires separate measures of production, value added and jobs.
The government has acknowledged the need for a more ambitious transformation. The Union Budget 2025–26 announced the National Manufacturing Mission to strengthen industrial competitiveness, with attention to the cost of doing business, workforce readiness, MSMEs, technological capabilities and product quality. The Budget also announced initiatives for footwear, leather and toys, industries with considerable potential for labour absorption.
The Mission subsequently set out targets of raising manufacturing’s contribution to GDP to 25% by 2035 and creating 143 million jobs. These are ambitious objectives, particularly given the limited change in manufacturing’s economic share over the preceding decade. Achieving them will require industrial growth to translate into a larger contribution to national output and sustained employment generation.
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Female labour force participation conceals a jobs divide
A comparable distinction is necessary when examining women’s participation in India’s workforce. The Periodic Labour Force Survey recorded an increase in the female labour force participation rate, for women aged 15 and above, from 23.3% in 2017–18 to 41.7% in 2023–24. This represents a substantial improvement after years of concern about India’s exceptionally low female participation rates.
The latest evidence nevertheless calls for closer examination. The PLFS Annual Report for calendar year 2025 shows that employment among women remains heavily concentrated in self-employment, particularly in rural areas. Under the survey’s usual-status measure, 70.7% of employed rural women were self-employed, compared with 40.4% of employed urban women. Only 9.3% of employed rural women were regular wage or salaried workers, against 50.9% in urban areas.
The 2025 figures must also be interpreted with care because the PLFS underwent changes in its sampling design and survey methodology. They cannot be treated as directly comparable with earlier estimates without accounting for those changes. Nevertheless, the composition of women’s employment establishes an important point: higher labour force participation does not necessarily imply a corresponding increase in regular, wage-paying jobs.
The Economic Survey 2025–26 provides further evidence of this divide. During July–September 2025, agriculture accounted for 59.1% of female employment under the current weekly status measure, compared with 34.8% for men. Only 21.3% of employed women were regular wage or salaried workers, while another 28.8% were classified as helpers in household enterprises.
These employment categories have different implications for economic security. Regular salaried employment generally offers more predictable earnings, although it does not automatically guarantee formal contracts or social protection. Self-employment can provide substantial incomes and autonomy, particularly in productive enterprises. But own-account work and unpaid assistance in household businesses may also reflect limited access to remunerative employment.
This distinction is especially relevant in rural India, where agricultural activity can accommodate additional family labour even when the marginal contribution to output is limited. Some women may choose such work because it offers flexibility alongside household responsibilities. Others may remain in agriculture because suitable alternatives are unavailable. The aggregate participation rate cannot distinguish adequately between these circumstances.
The continued burden of unpaid domestic and care work further constrains women’s employment choices. Without affordable childcare, reliable transport and suitable workplaces, the movement from household-based activities into regular paid employment remains difficult. The problem is particularly acute where industrial and service employment opportunities are concentrated far from rural settlements.
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India’s unfinished transition from agriculture to industry
India’s development experience differs from the pattern followed by several East Asian economies, where manufacturing played a major role in moving workers out of agriculture and into more productive employment. India’s early industrial strategy, influenced by the Mahalanobis model, placed considerable emphasis on capital-intensive heavy industry. The licensing system subsequently constrained industrial expansion and competition, while labour-intensive manufacturing failed to develop on a comparable scale.
Economic liberalisation removed many of those restrictions and encouraged private investment, but the expansion of modern services and capital-intensive industries did not generate the broad manufacturing employment base envisaged by earlier development strategies. Large numbers of workers consequently remained in agriculture or moved into informal activities with relatively low earnings.
The relationship between manufacturing’s limited GDP share and women’s concentration in agricultural employment is significant, although it should not be treated as a simple causal equation. Changes in agricultural productivity, household income, education, social norms and the availability of local employment also influence women’s participation. Nevertheless, the insufficient availability of attractive non-farm jobs is an important constraint on the movement of labour towards more productive activities.
This explains why improvements in female labour force participation and manufacturing output can coexist with persistent weaknesses in employment quality. India’s challenge involves the capacity of firms to expand and the ability of workers, particularly women, to enter productive employment on acceptable terms. Higher output alone offers no assurance that this transition will occur.
Industrial policy must reward employment creation
The National Manufacturing Mission provides an opportunity to address these weaknesses, although its effectiveness will depend on how incentives and institutional responsibilities are designed.
Production-linked incentives primarily reward incremental output or sales. They can encourage investment, improve production capacity and support industries that require substantial capital expenditure. But their employment effects differ considerably across sectors. Introducing carefully designed employment-related criteria alongside existing incentives could encourage firms to create additional jobs without undermining productivity or competitiveness.
Such criteria would need safeguards against temporary hiring and the substitution of existing workers. They should also recognise that capital-intensive production can generate indirect employment through suppliers and associated services. The relevant measure is therefore sustained additional employment, including its quality and remuneration, rather than an arbitrary requirement to maximise headcount.
Labour-intensive industries such as textiles, garments, footwear, leather products and toys deserve particular attention. These sectors have historically provided opportunities for women entering industrial employment in several developing economies. Their expansion depends on competitive production costs, reliable infrastructure, access to export markets and stable trade policies.
For smaller enterprises, the availability of credit and the burden of regulatory compliance remain important constraints. Measures that facilitate expansion from micro enterprises into larger employing establishments could help create more regular jobs. Support should also extend to domestic supplier networks, where improvements in productivity and market access can generate employment beyond the firms receiving direct incentives.
Women require additional support to take advantage of such opportunities. Investment in childcare facilities, safe transport and connectivity between residential settlements and employment clusters could improve access to factory and service-sector jobs. Industrial planning should incorporate these requirements rather than treating female employment as a separate welfare consideration.
Finally, the National Manufacturing Mission’s targets for 2035 should be supported by publicly available milestones covering manufacturing value added, employment generation and the contribution of labour-intensive industries. Separate reporting on women’s regular wage employment would make it possible to assess whether industrial expansion is improving access to remunerative work. Without such indicators, progress could be measured largely through output and investment announcements.
India has spent more than a decade attempting to raise manufacturing’s contribution to national income. The latest production figures show that industry can expand at a healthy pace, while labour surveys confirm that more women are participating in economic activity. The unresolved question is whether industrial policy can create the volume and quality of employment necessary to reduce dependence on agricultural self-employment. The National Manufacturing Mission’s success should ultimately be judged by that transition.
Vansh Mittal is an economics student and Dr Lakshay Sharma Assistant Professor at School of Social Sciences, CHRIST University Delhi NCR Campus.