CarpeDiem IAS • CarpeDiem IAS • CarpeDiem IAS •

Villages Power Over Half of India’s Manufacturing

28 Sep 2025 GS 3 Economy
Villages Power Over Half of India’s Manufacturing Click to view full image


Context

  • Annual Survey of Industries (ASI) 2023–24 shows that rural areas now contribute 50.5%+ of India’s formal manufacturing output.

  • Urban share slipped below 50% during the pandemic years and now stands at 49.5%, continuing a four-year rural dominance.

Key Findings

  • Output Trends: Urban share declined from 50.5% (2018–19) to 49.5% (2023–24).

  • Other Indicators: Decline in urban share of:

    • Number of factories

    • Persons engaged in manufacturing

    • Wages to workers

    • Net Value Added (NVA).

  • Causes:

    • High land prices and scarcity in cities.

    • Environmental concerns pushing factories to outskirts/rural belts.

    • Cities transforming into service hubs while manufacturing shifts outward.

Expert Views

    • Urban land scarcity and eviction of units drive rural relocation.

    • Industrial activity prefers rural/semi-urban zones due to pollution norms and resource constraints.

    • Cities increasingly service-driven (IT, finance, logistics).

Implications

  1. Industrial Geography:

    • Shift towards peri-urban and rural clusters.

    • Emergence of new industrial belts outside metros.

  2. Urbanisation vs. Growth Debate:

    • Urbanisation usually boosts productivity (ADB Institute, 2016).

    • Shift away may limit knowledge spillovers, labour market efficiency.

  3. Employment & Migration:

    • Manufacturing slowdown (post-demonetisation, GST, pandemic) worsened job prospects.

    • Pushback to agriculture → higher disguised unemployment.

  4. Structural Transformation:

    • 2012 NBER study also noted rural relocation of plants, constrained by poor infrastructure and weaker education levels in rural areas.

    • India risks a premature deindustrialisation trend.



← Back to list