With robust expansion in metals, autos, chemicals, and pharma, India’s formal manufacturing GVA rose 11.9% in FY24, driven by record new factory additions and rising employment.
Formal Manufacturing Sector Sees Strongest Growth Since FY22
India’s formal manufacturing sector grew at its fastest pace in two years during FY24, with gross value added (GVA) rising 11.9%, according to government data released on August 27.
- This marks the strongest expansion since FY22, as the broader economy continued to maintain over 8% GDP growth.
- The rise is largely attributed to a surge in fixed investments, capacity expansion, and a record increase in factory count.
Highest Number of Factories Added in Over a Decade
India added 6,727 new manufacturing units in FY24—a 2.7% increase, the sharpest since FY12.
- This signals renewed industrial momentum after two subdued years marked by global and domestic disruptions.
- Fixed capital formation in the sector jumped 12.2%, the highest in seven years, reflecting fresh capacity creation and modernization efforts by firms.
Key Growth Drivers: Metals, Autos, Pharma, and Food Processing
Sectoral data shows that the strongest growth came from:
- Basic metals
- Motor vehicles and parts
- Chemicals and pharmaceuticals
- Food processing
These industries are benefitting from export tailwinds, domestic consumption recovery, and government production-linked incentives (PLI).
Employment and Wage Trends Show Steady Gains
Labor market indicators in the manufacturing sector remained strong:
- Total workers employed grew 6.2%, while overall persons engaged rose 5.9%.
- Wages paid to workers increased 12%, indicating both higher hiring and improved pay scales.
- This is the third consecutive year of healthy employment gains, suggesting post-pandemic formalisation is firmly taking root.
Food and textiles remain the largest employment generators, contributing nearly 20% of total jobs in the formal manufacturing segment.
Regional Trends: Growth Concentrated in Five States
The top five industrial states—Maharashtra, Gujarat, Tamil Nadu, Karnataka, and Uttar Pradesh—accounted for:
- 55% of national manufacturing GVA
- Less than 50% of the total workforce
This indicates a regional imbalance, where output growth is concentrated, but employment gains are more dispersed, likely due to automation and productivity gains in high-output states.
Production and Input Trends: Slower Output, Lower Costs
While output growth moderated:
- Value of output rose 5.8%, with products and by-products growing 5.2%.
- This compares with double-digit growth in the previous two years but comes amid moderating input costs.
Fuel consumption declined 1.3%, and material consumption growth dropped to 3.4% from 24.2% in FY23—signaling better input efficiency and operational streamlining.
Profitability Rebounds but Borrowing Costs Climb
Corporate financials in the sector showed improvement:
- Net income rose 10.7%, reversing FY23’s slowdown.
- Profit margins improved nearly 10%, supported by lower input cost pressures.
However, interest expenses jumped 22.5%, outpacing a modest 2.8% rise in outstanding loans—highlighting the burden of higher borrowing costs despite cautious leverage expansion.
Outlook: Manufacturing Resurgence Gains Momentum
The FY24 performance confirms that India’s formal manufacturing sector is rebounding strongly on the back of:
- Policy support, including PLI schemes, logistics infrastructure upgrades, and ease of doing business reforms.
- Rising private sector confidence, reflected in factory openings and fixed capital formation.
- An improving labor market, with wage and job growth sustaining formalisation momentum.
However, rising interest rates, global demand volatility, and regional disparities remain key watchpoints for sustaining this growth trajectory.
