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In an unprecedented shift, the Indian manufacturing sector has experienced a remarkable 200% increase in job growth rate over the past two years. This growth in employment in the manufacturing sector represents a dramatic turnaround, positioning the sector as a key player in India’s job market.

Manufacturing vs. Services: A Changing Landscape

The growth trajectory of jobs in manufacturing has significantly outstripped that of the services sector. While the services industry, dominated by IT and non-IT sectors, has long been the primary source of employment since the IT boom of the early 2000s, its growth rate has slowed. In stark contrast, manufacturing jobs have soared, highlighting a pivotal shift in India’s employment dynamics.

Employment in Manufacturing Sector: From 2021’s low of -27% (29.83 million jobs), the manufacturing sector’s job growth has rebounded to an impressive 18.4% projected growth in 2024, equating to 42.2 million jobs.

Employment in Services Sector: The services sector’s growth rate has decreased from 49.9% in 2021 to an estimated 23.1% in 2024, reflecting a notable deceleration.

Key Drivers of Manufacturing Job Growth

Several factors contribute to this robust growth in the manufacturing sector:

Government Initiatives

Government policies such as the PLI scheme and the newly introduced Employment-Linked Incentive (ELI) scheme are providing significant boosts. The Rs.10,000 crore budget allocation for ELI aims to generate an additional 8 million jobs in the next three years and skill 10 million youths over five years.

Infrastructure and Capacity Expansion

Enhanced infrastructure and strategic capacity expansions by companies are creating new job opportunities.

Technological Advancements

Innovations in manufacturing technology are driving efficiency and job creation.

Domestic Market Expansion

A growing middle class with increasing disposable income is boosting demand for high-quality manufactured goods, which is subsequently driving new employment in the manufacturing sector.

Production Linked Incentive (PLI) Scheme

The introduction of the PLI scheme has led to a dramatic reduction in imports, from 75% in FY18 to just 4% in FY23, highlighting a significant shift towards domestic production.

Key sectors such as mobile phones, pharmaceuticals, electronics, and medical equipment have greatly benefited from the scheme. Currently spanning 14 industries, the scheme is set to expand to include 5 more, further promoting domestic manufacturing. Additionally, the scheme has created nearly 700,000 direct and indirect jobs, and anticipated increases in investments are expected to further enhance opportunities for employment in the manufacturing sector.

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As the manufacturing sector continues to expand, it is expected to generate 6.5 million jobs in 2024, reflecting an 18.4% growth rate. This positive trend underscores the sector’s potential to drive economic growth and employment in India.

The resurgence in manufacturing job creation is a testament to the sector's vital role in India’s economic landscape. With continued support from government policies and market demand, the manufacturing sector is poised to further its impact.

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The blog is an excerpt from the article published in The Economic Times