Table 1: Government incentives for Indian electronics industry

Let’s take a look at the output from the main industries in India between the period 2014 and 2024 (Refer “Table 2”): 

Table 2: Output from the main industries in India

Source: CMIE Industry Outlook

The foundation industries—iron and steel and power—and modern industries such as IT/ITES and automobiles have all shown strong performance, registering double-digit CAGRs over the last decade. Other key industries essential to a modern economy have also performed well, although textiles and crude oil have not grown at the desired pace. This perhaps explains India’s heavy reliance on crude oil imports.

Future growth sectors include iron and steel (with crude steel production expected to reach 300 mtpa in the near future), automobiles (India already ranks fourth globally), IT/ITES (with strong performance in AI- and IoT-driven enterprises such as GCCs, though more investment is needed in data centres) and energy.

Across these industries, several path-breaking developments are shaping the future. In iron and steel, electric arc furnaces are increasingly being deployed to process scrap, raising recycled input tonnage. Greater use of pellets in blast furnaces has reduced dust pollution while consuming iron ore fines that had accumulated to environmentally dangerous levels. Automation using IoT, high-speed processing equipment and sensor-driven, SCADA-controlled centralised systems has improved yields, reduced water consumption and significantly lowered emissions. Through the adoption of TQM and other management excellence practices, leading steel producers have been recognised as ‘Lighthouses’ by the WEF and recipients of Deming Awards.

The automobile industry has achieved unprecedented design capabilities, offering customers a wide choice of models. Many Indian vehicles are now more aesthetically appealing than their global counterparts. Recent SUVs from Kirloskar Toyota, Maruti, Tata and Hyundai can compete with global models. The industry has also cracked the complexities of EV manufacturing, with India emerging as one of the largest EV markets. R&D expenditure has increased from Rs 68 billion to Rs 121 billion over the past decade, reflecting a CAGR of 6 per cent per annum.

The IT/ITES sector has grown at over 13 per cent annually during the last decade, with export earnings reaching approximately Rs 13,000 billion in FY 2023–24. TCS recently announced a $ 1 billion investment in AI. GCCs have proliferated across India, though data centres are yet to witness comparable growth. As of March 2025, the United States leads globally with 5,426 data centres, followed by Germany (529), the UK (523) and China (449). The global data centre market is projected to reach $ 624.07 billion by 2029, according to Statista. India currently hosts 265 data centres. While high power and water consumption remain concerns, investments exceeding $ 70 billion announced by Amazon, Google and Microsoft could change the trajectory.

The energy sector in India is a mix of renewable and non-renewable sources, with the renewable segment growing rapidly, mainly due to India’s commitment to sustainability. In the conventional, fossil-fuelled sector, growth is continuing in view of the expected steep demand arising from increased industrial activity. As of 2023–24, renewable energy sales stood at about Rs 390 billion, compared with Rs 7,353 billion from the conventional sector. The CAGR over the last decade has been 16.75 per cent for renewables, compared with 10.06 per cent for the conventional sector, according to CMIE Industry Outlook data.

Recent developments include the use of hydrogen for mobility and small nuclear reactors (SMRs) for distributed power generation. With full government support for EVs in the automotive sector, the non-renewable sector could also see significant growth. However, for the foreseeable future, coal-fired power plants are likely to retain dominance. In terms of generation, conventional sources accounted for 1,364 GW in 2023–24, while renewables contributed only 255 GW (Source: CMIE Industry Outlook data).

Technology-led transformation

India’s future economic development will be driven by both the services and manufacturing sectors. Agriculture will also continue to grow, with new markets being explored and crop tonnages rising substantially. Indian farmers are outperforming many other countries in terms of output and practices.

The services sector comes naturally to India, with capabilities developed over centuries. Indians excel across diverse fields worldwide—not to suggest that others do not, but Indians are among the most capable globally. Manufacturing, however, does not come as naturally unless supported by extensive automation and the use of IoT and AI to control operations. While there is considerable momentum in this direction, much remains to be done.

Encouraging developments are emerging from IITs and government laboratories, but the industrial sector remains highly constrained in its approach to R&D and innovation. Even today, including in large companies, employees are not easily sent for training, as approval processes are lengthy and organisations hesitate to sanction expenditures of Rs 4–5 lakh despite rising corporate turnovers.

Recently, the government increased the sales threshold for classification under the small-scale industry category to Rs 2 billion, but large companies are yet to respond meaningfully. R&D, training and skilling expenses must be treated as investments and insurance for a secure future; failing this, India risks remaining a third-world economy despite its size.

About the author:

R Jayaraman is the Head, Capstone Projects, at Bhavan's S P Jain Institute of Management & Research (SPJIMR). He has worked in several capacities, including Tata Steel, for over 30 years. He has authored over 60 papers in academic and techno economic journals in India and abroad. Jayaraman is a qualified and trained Malcolm Baldrige and EFQM Business Model Lead Assessor.