Economic Survey 2025–26: Industry GVA Grows 7% YoY In H1 FY26, Up From 5.9%; Manufacturing Gains Momentum

New Delhi, Jan 29 (KNN) Tabled by Finance Minister Nirmala Sitharaman on Thursday, the Economic Survey 2025–26 highlights strong momentum in India’s industrial sector during the first half of FY2025–26, with Industry Gross Value Added (GVA) growing 7.0 per cent year-on-year (YoY) in real terms, recovering from 5.9 per cent growth in FY2024–25.

Manufacturing Growth Driven by Structural Shifts

The Survey notes that manufacturing GVA expanded by 7.72 per cent in Q1 and 9.13 per cent in Q2 of FY26, reflecting a clear pickup in activity. 

This growth is attributed to ongoing structural changes within the sector, including a gradual shift toward higher-value manufacturing, improved access to industrial infrastructure through corridor-led development, increased technology adoption, and greater formalisation across firms.

Medium- and high-technology industries now account for 46.3 per cent of India’s total manufacturing value added, supported by government initiatives such as the Production Linked Incentive (PLI) schemes and the India Semiconductor Mission. 

As a result, India’s global industrial standing has improved, with its Competitive Industrial Performance (CIP) ranking rising to 37th in 2023 from 40th in 2022.

Financing Trends Show Diversification

While bank-based industrial credit growth moderated to 8.24 per cent in FY25, compared to 9.39 per cent in FY24, the Survey highlights a diversification of funding sources. 

Citing the Monthly Economic Review of August 2025, it notes that the decline in bank credit coincided with an increase in overall financial flows to the commercial sector. Non-bank financial flows recorded a compound annual growth rate (CAGR) of 17.32 per cent between FY20 and FY25, indicating improving financial resilience.

Infrastructure, MSMEs and Global Integration

The Survey highlights the role of infrastructure and logistics reforms in supporting industrial growth. 

Under PM GatiShakti, over 1,700 data layers have been integrated to improve coordination, while 27 states have notified logistics policies to reduce costs and speed up project execution. 

Micro, small and medium enterprises (MSMEs) remain critical to employment and exports. The Survey emphasises cluster-based development, technology adoption, digital platforms, and improved access to credit to strengthen MSME participation in global value chains.

Core Industries Maintain Momentum

Core industries continue to perform strongly. India remains the second-largest producer of steel and cement globally. 

Cement consumption in India stands at around 290 kg per capita, well below the global average of 540 kg, suggesting significant scope for demand growth. The Survey expects cement demand to rise further, supported by large-scale infrastructure projects including highways, railways, housing, smart cities, and rural development programmes.

The steel sector has also undergone significant transformation over the past five years, driven by sustained domestic demand from construction and manufacturing.

Sectoral Performance Highlights

Coal production reached a record 1,047.52 million tonnes in FY25, registering a 4.98 per cent increase over the previous year.

The chemicals and petrochemicals sector contributed 8.1 per cent to total manufacturing GVA in FY24.

The automotive industry recorded nearly 33 per cent growth in production between FY15 and FY25, supported by policy initiatives promoting electric mobility.

The survey also highlights that government measures—such as the Production Linked Incentive (PLI) scheme for automobiles and auto components, the PLI scheme for Advanced Chemistry Cell (ACC) batteries, PM E-DRIVE, the PM e-Bus Sewa Payment Security Mechanism, and the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SMEC)—have driven a sharp rise in electric vehicle registrations.

Electronics and Pharmaceuticals Lead Value Addition

The electronics sector has witnessed a major transformation, emerging as the third-largest and fastest-growing export sector in FY25, up from seventh position in FY22. 

Mobile phone manufacturing has been central to this growth, with production value rising nearly 30-fold from Rs 18,000 crore in FY15 to Rs 5.45 lakh crore in FY25.

India’s pharmaceutical industry continues to strengthen its global position. The country is the third-largest pharmaceutical producer by volume, supplying nearly 20 per cent of global generic medicines. 

In FY25, the sector recorded a turnover of Rs 4.72 lakh crore, with exports growing at a CAGR of 7 per cent over the past decade, reaching 191 export destinations.

(KNN Bureau)