UPSC Mains 2017 GS Paper 3 Q12: model answer
“Industrial growth rate has lagged-behind in the overall growth of Gross-Domestic-Product (GDP) in the post-reform period.” Give reasons. How far the recent changes in Industrial-Policy are capable of increasing the industrial growth rate?
What the question wants
Explain why industrial growth trailed overall GDP growth after 1991, and assess whether recent policy changes can raise it.
How to structure it
Reasons, then policy assessment.
- The lag
- Reasons
- Recent changes
- How far they can work
How to think it through
Manufacturing share stuck ~15–17% since 1991; services led growth. Reasons: infrastructure, land, labour laws, cost of capital, small firms, skill gaps, tariff cuts exposing industry, China competition, twin balance sheet, demand. Recent changes (2014–17 and later): Make in India, ease of doing business, GST, IBC, corporate tax cut 2019 (15% for new units), PLI 2020, Labour Codes 2025, PM Gati Shakti, National Manufacturing Mission 2025. Assessment: helped electronics and pharma; share still not 25%.
Model answer
Since 1991 India's services sector has grown faster than its factories, and manufacturing's share of GVA has stayed around 15–17%. China and Vietnam took a different road and became workshops of the world. India skipped a stage.
Why industry lagged
- Infrastructure: costly power, slow ports and logistics at around 13–14% of GDP for years.
- Land acquisition delays and high land prices.
- Rigid labour laws that kept firms small.
- High cost of capital and the twin balance sheet crisis after 2012.
- Skill gaps in the workforce.
- Competition from China after tariff cuts, especially in electronics and toys.
- Weak domestic demand in rural India.
- Inverted duties that made inputs costlier than finished imports.
- Low R&D and slow technology adoption among small firms.
Recent changes in industrial policy
- Make in India (2014) and ease of doing business reforms.
- GST (2017): one national market.
- IBC (2016): faster exit and recovery of bad loans.
- Corporate tax cut (2019): 15% for new manufacturing units.
- PLI schemes (2020) in 14 sectors.
- PM Gati Shakti (2021) and the National Logistics Policy (2022).
- Labour Codes in force from November 2025.
- National Manufacturing Mission announced in the 2025–26 Budget.
How far they can work
- Successes: mobile phone exports grew from almost nothing to over $20 billion a year; pharma and drones gained.
- Limits: manufacturing's share has not risen much; PLI favours large firms; MSMEs still struggle with credit.
- Results depend on state-level land and power reforms, and on trade deals.
- Jobs: PLI created about 14.6 lakh jobs by June 2026 (DPIIT), modest against the need.
Policy has removed many old brakes; India's factories now need demand, skills and markets to accelerate.
Draw: A two-line chart: GDP growth vs industrial growth since 1991.
Keywords, cases and data to drop in
manufacturing share 15–17%, premature deindustrialisation, logistics cost, twin balance sheet, Make in India, GST, IBC, corporate tax 15%, PLI, Gati Shakti, NLP 2022, Labour Codes, National Manufacturing Mission.
Where most answers lose marks
- Giving reasons without evaluating 'how far' the new policies can help.
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Question text as printed in the official UPSC Civil Services (Main) question paper. The model answer is original Battle IAS work; use it to learn structure, not to memorise.
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