What will make India’s manufacturing competitive—policy reform, labor trust, or supply chains?

How can India build a globally competitive manufacturing hub?

Learn how India can build globally competitive manufacturing with competition, labor trust, stronger supply chains, and policy reforms to drive jobs and exports. Use this 5-step checklist today: benchmark costs vs. peers, streamline approvals, invest in vendor development, measure shop-floor participation, and prioritize export-ready quality. Continue reading for practical frameworks and copy-ready examples you can apply now.

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Discover how India can unlock jobs, growth, and equity through globally competitive manufacturing.

Getting Competitive (2020) explores how India can strengthen its manufacturing sector to become a globally competitive economy. It argues that outdated policies and management models must be replaced with approaches built on trust, collaboration, and long-term partnerships among industry, labor, and government. Drawing on real-world examples, it offers practical guidance for driving growth and reducing socioeconomic disparities.

For decades, India has tied its hopes for prosperity to industrialization. Leaders from the time of Independence recognized that only large-scale manufacturing could generate the jobs, wealth, and fairness needed to lift millions out of poverty. Yet despite abundant resources, a vast workforce, and favorable conditions in the early years, manufacturing never took off at the pace required. Other Asian nations surged ahead, while India struggled with outdated policies, inefficiency, and a deep trust gap between government, business, and society. By the time voters demanded change in 2014, frustration with unemployment, inequality, and corruption had become impossible to ignore.

At the heart of the challenge lies a simple but urgent question: How can India finally build a globally competitive manufacturing sector capable of delivering both economic growth and social justice?

In this summary, you’ll learn why past strategies fell short, how private industry must now take the lead, and what lessons from global experience – especially Japan – can help shape management practices, supply chains, and government–business partnerships to put India on a sustainable path to competitiveness.

Why manufacturing matters for India’s future

When India won independence, the nation’s leadership saw industrial growth as the only way to lift millions out of poverty. Farming alone couldn’t support a fast-growing population, and the limited land was already under strain. Expanding manufacturing was meant to provide new kinds of work, shift people away from dependence on agriculture, and modernize society. While the vision was sound, progress in building a strong manufacturing base has been far slower than expected.

Much of India’s population still lives in rural areas where poverty is most severe. Without large-scale job creation in sectors beyond farming, income gaps persist. Manufacturing offers the broadest platform for those opportunities because it doesn’t stand alone – it pulls in construction, logistics, mining, infrastructure, and a wide range of services. Think of the auto industry: when millions of cars are sold each year, the ripple effect stretches far beyond the factory floor. Jobs appear in transport, finance, insurance, advertising, repair shops, even tourism. A quick survey once found that nearly a fifth of new car owners hired drivers, instantly creating hundreds of thousands of jobs in a single year. Two-wheelers and commercial vehicles multiply this effect even further.

Some argue that technology and automation will shrink factory jobs, but the evidence shows that when productivity rises, sales expand and more indirect employment emerges. Low-tech consumer goods also continue to demand labor-intensive production, just as China has shown. The key is competitive manufacturing that delivers quality and price advantages, which in turn expands markets at home and abroad.

Countries like Japan, Korea, and China built their economic strength on manufacturing, pushing its share of GDP to around a third within two decades. India, by contrast, remains stuck at about 15 percent. The resources, workforce, and domestic market are all in place. What’s missing is consistent policy, effective implementation, and a shared determination to make manufacturing the engine of national growth.

To understand why manufacturing still lags, we need to look back at India’s policy choices.

The long struggle to build industrial growth in India

In the years after independence, India was burdened with deep poverty, widespread illiteracy, and severe shortages of essential goods. It soon became clear that agriculture alone could never provide enough jobs or prosperity for such a vast population, and that large-scale industrial growth was the only viable foundation for better health, education, and equality. Guided by socialist ideals and influenced by the Soviet model, policymakers placed the state at the core of economic planning.

The first policies gave some space to private enterprise but soon tightened control. Licensing rules dictated what could be produced, in what quantity, and even where factories could be located. Public sector enterprises were expected to lead heavy industry and infrastructure, but they were judged on social objectives rather than profits or productivity. Prices were fixed by the government, technology stagnated, and inefficiency grew. At the same time, private industry was deliberately kept small to prevent concentration of wealth.

By the 1970s, nationalizations extended to banks, insurance, and trade. These institutions often became vulnerable to political interference, handing out loans without commercial discipline. Public companies struggled, while private businesses were strangled by bureaucracy. Shortages, low productivity, and unreliable infrastructure, especially power supply, discouraged investment.

By the 1980s, the shortcomings of this model were undeniable. Yet reforms were blocked by vested interests that benefited from controls and by officials unwilling to admit past mistakes. Only the 1991 balance of payments crisis forced liberalization, with licensing dismantled and foreign investment eased. But after the immediate crisis passed, momentum slowed, and resistance resurfaced.

The 2000s saw a boom in information technology, which thrived precisely because government interference was minimal. But manufacturing continued to struggle with weak competitiveness and limited consumer demand. High taxes, especially on cars, dampened sales and kept production volumes low. Even today, despite improvements in ease of doing business, investments in manufacturing remain far below potential. For India to compete globally, policy must finally move beyond old habits and create an environment where both domestic and foreign investors see long-term opportunity.

Competition as the engine of growth

Think about what pushes athletes to run faster, jump higher, or break records that once seemed impossible. That same instinct to compete drives companies to become more efficient, inventive, and customer-focused. Where competition thrives, businesses sharpen their performance, consumers get better value, and entire economies advance. India’s manufacturing story took a different path.

After independence, leaders placed their faith in state-owned enterprises, drawing heavily from the Soviet model of centralized planning. The result was a vast public sector shielded from competition, with managers functioning more like bureaucrats than entrepreneurs. Licensing laws and restrictive regulations kept the private sector small, cautious, and often entangled in corruption. Shortages, rationing, and poor quality became the norm in industries ranging from steel and coal to telecommunications and even basic consumer goods.

The consequences were predictable: little incentive to innovate, weak productivity, and a domestic market starved of choice. Export competitiveness was out of reach, as firms faced no pressure to meet global standards. The contrast became clear after liberalization in 1991, when many public enterprises faltered once they finally had to compete with private and foreign players.

But there are examples that prove what happens when competition is allowed to work. Maruti Suzuki, launched in the early 1980s, revolutionized India’s car industry with affordable pricing, Japanese production systems, and relentless attention to quality. Demand exploded, competitors crumbled, and a new ecosystem of auto suppliers flourished. The company not only grew into one of the country’s most trusted brands but also showed how competitiveness can scale domestic industry to global levels.

The lesson is simple: to achieve rapid growth and create jobs on a massive scale, India must make fair competition the rule, not the exception. That means fewer barriers, faster approvals, efficient infrastructure, and policies that reward productivity and quality. Only then can Indian manufacturing truly compete on the world stage.

The rise and decline of India’s public sector

As India began charting its economic path, its leaders pursued a vision of rapid modernization and social justice. They put heavy industries and key infrastructure under state control, aiming to protect citizens while keeping politics free from excessive private influence. Public enterprises were expected to fuel growth, fund welfare, and set the standard for fair employment.

In practice, that vision never materialized. Public enterprises quickly became dependent on government funding rather than generating their own surpluses. Instead of driving industrial growth, they drained resources away from health, education, and infrastructure. Shortages of essential goods became common, fueling corruption, black markets, and widespread public distrust of business and politics. Bureaucrats and ministers controlled decisions, often without industrial expertise, and enterprises were treated more like government departments than commercial companies.

Workers, rather than being motivated partners in growth, were caught in a system where pay and promotions had little connection to performance. Overmanning, absenteeism, and weak discipline pushed costs up while productivity stayed low. Unions assumed the government would always bail out failing enterprises, removing any incentive for efficiency.

There were rare exceptions. Maruti Udyog thrived because it resisted interference, partnered with Suzuki, and avoided dependence on government money. In Gujarat, public enterprises improved when managers were granted real autonomy under strong political backing. But these examples were the outliers, not the norm.

Efforts to privatize after the 1991 crisis showed that performance often improved once enterprises left government control. Yet opposition, vested interests, and fears around national security slowed progress, with high-profile cases like Air India consuming vast sums of public money.

Without sweeping structural change, public enterprises can’t match the competitiveness of private industry. For India to accelerate manufacturing growth, resources tied up in loss-making units could be better used to build the foundations of a globally competitive economy.

Building competitiveness through people

When you think about what makes a country strong in manufacturing, it’s easy to picture natural resources or geography. But the real advantage lies in people – the way workers are trained, motivated, and trusted to contribute. Competitiveness depends less on raw materials and more on the partnership between leaders, managers, and employees, with every person involved in improving quality, productivity, and costs.

One of the biggest challenges in India has been the way workers have been treated. While managers receive training and development, the majority of employees – those on the shop floor – are usually managed through industrial relations departments focused mainly on avoiding strikes. This has left workers disconnected from the larger goals of competitiveness. Many come from agricultural backgrounds where work is flexible and social obligations are prioritized, making it difficult to adjust to strict industrial schedules. Without clear communication about how profits, productivity, and competitiveness secure their jobs, unions have often adopted an adversarial stance instead of seeing themselves as partners in growth.

Other countries offer valuable lessons. Japan, for example, rebuilt after World War II by making workers equal stakeholders in manufacturing success. Leaders kept pay gaps small, lived simply, and earned trust, while employees were encouraged to contribute ideas and improvements. This culture of teamwork created world-class quality and productivity, giving Japan a dominant global position.

India has seen glimpses of this model at work. Maruti, set up with Suzuki in the 1980s, made worker trust a priority. Executives wore the same uniforms, ate in the same canteens, and tied incentives to attendance and productivity. Workers were invited to suggest improvements and even promoted into supervisory roles. The result was a company capable of exporting cars to Europe and Japan and eventually achieving the largest market share in India.

If India wants to build globally competitive manufacturing, it has to treat its human resources as its greatest asset, making workers genuine partners in progress. Though harnessing human potential is vital, lasting progress also requires private industry to step up.

Building India Inc

For decades, India’s ambition has been clear: create a strong economy and a fair society through industrial growth. The state tried to do this by running large public enterprises, but the results fell short. Today, the responsibility has shifted to the private sector, which now carries the weight of making Indian industry both globally competitive and socially responsible.

That shift can only work if the government and private enterprise act as genuine partners. The state must provide reliable infrastructure, affordable energy, and transparent regulations that allow businesses to thrive without unnecessary delays. Industry, in turn, has to show it takes social concerns seriously, balancing growth with environmental protection and public safety. Some states have started improving their systems, but uneven electricity supply, weak transport networks, and bureaucratic red tape still add heavy costs for businesses. Removing these obstacles would make manufacturing more competitive and create the jobs India urgently needs.

But success depends on more than government action. Private sector leaders must rethink how they operate. For too long, practices such as siphoning money from companies, generating black money to fund political parties, and indulging in ostentatious consumption weakened balance sheets and eroded public trust. These habits left companies unable to invest enough in research, technology, or capacity, which is why manufacturing’s share of GDP has barely moved in decades.

But the opportunity is huge. The car industry shows what’s possible: India is already the fourth largest producer, yet ownership remains low compared to China, and exports are rising steadily. Similar potential exists across manufacturing if companies focus on competitiveness, innovation, and scale.

To achieve that, business leaders need to embrace ethical practices, adopt more effective management models – such as those pioneered in Japan – and present themselves as trusted partners in nation building. If they succeed, India Inc can finally become a reality.

Building strong supply chains for global competitiveness

One of the biggest reasons India’s manufacturing sector has struggled to compete globally is the weakness of its supply chains. For decades, component makers were sheltered from competition, rarely pushed to improve quality, cut costs, or invest in technology. Public sector policies focused more on protecting small firms and creating jobs than on building efficiency. In the private sector too, supply units often operated as family-run extensions of large firms, with little pressure to raise standards. The result was a system that lacked the reliability and capability global manufacturers look for.

The auto industry became a striking exception, thanks to Maruti Suzuki. When the joint venture launched in 1982, not a single local supplier could meet the standards required. Yet within a few years, a new approach to vendor development changed the landscape. Maruti treated suppliers as partners, offering technical and managerial support, guaranteeing long-term relationships, and ensuring prompt payments. Vendors were encouraged to grow, invest, and improve, with Suzuki engineers guiding them directly. By insisting on high standards – such as road-testing parts for tens of thousands of kilometers before approval – Maruti built a network of suppliers able to compete globally. This approach helped India become one of the world’s largest car producers and turned auto-components into a major export sector.

So what’s the lesson? Supply chains are the backbone of manufacturing competitiveness, but they require investment, scale, and trust-based partnerships to thrive. Many Tier 2 and Tier 3 suppliers remain too small and underfunded, limited by outdated policies and lack of access to capital. If definitions and incentives for small industries were rethought, and if original equipment manufacturers across sectors adopted the kind of partnership approach pioneered in the auto industry, India could unlock the full potential of its manufacturing base. A globally competitive economy depends on nothing less.

Conclusion

The main takeaway of this summary to Getting Competitive by R. C. Bhargava is that India’s path to prosperity runs through competitive manufacturing. Decades of experiments with state-led growth, excessive controls, and fragmented supply chains slowed progress, but the potential remains enormous.

By creating fair competition, building trust between workers and management, strengthening supply networks, and encouraging ethical private enterprise, India can finally unleash the scale of industrial growth that generates millions of jobs and narrows inequality. Other nations have shown what’s possible, and India now has the resources, workforce, and ambition to match them. With clear priorities and shared commitment, the future can be brighter than ever.