7 Reasons Why India will be Top Destination for Manufacturing in 2025

The manufacturing sector is a cornerstone of India's economy. It accounted for about 14% of the overall GDP of the nation in 2024 and has employed millions of people across the country. India has been a rising manufacturing powerhouse globally and 2025 is expected to be a turning point. Given the better government focus and strong labor force, along with the increasingly effective infrastructure, India is likely to be sealed as a prime destination for global manufacturers.

The Indian manufacturing sector is experiencing rapid growth with advancements in Industry 4.0 technologies and smart manufacturing practices. IMARC Group's Smart Manufacturing Market Report explains how automation, IoT, and AI are transforming the sector to position countries including India at the forefront of innovation-driven manufacturing.

Here are seven reasons why India will dominate the manufacturing landscape in 2025:

1. Competitive Labor Costs and Competent Workforce

India provides a large population of skilled as well as semi-skilled workers, rendering it a relatively low-cost labor force for manufacturers. Labor expense in most the developed countries is relatively higher; India is an attractive source for global concerns due to the competitive wages. In addition, the Mission under the program of Skill India is upgrading skills of the working class by offering technical skills relevant to industries. The worker population ratio in India was 46.8% in FY2017-18, which rose to over 58.2% in FY2023-24, according to the data of the Directorate General of Employment. Labor force participation also rose to 60.1% in FY2023-24 from 49.8% in FY2017-18.

2. Infrastructure for Industry

India is witnessing an Infrastructural transformation that is impacting manufacturing. Projects like Dedicated Freight Corridors (DFC) and industrial corridors created between Delhi and Mumbai will make it easy to connect a production hub to ports. Besides, modern logistics parks, smart cities, and industrial clusters ensure that goods are transported efficiently to state-of-the-art facilities for manufacturers.

For businesses looking to establish or optimize manufacturing units in India, IMARC Group’s Factory Setup Services provide end-to-end solutions, from feasibility studies to facility design and operational planning. Leveraging this expertise ensures seamless integration with India’s rapidly evolving industrial infrastructure.

3. Government Support Through Policy Reforms

The Indian government has come up with a number of policies to encourage FDI and aid domestic producers. Policies such as Make in India and Production Linked Incentive (PLI) schemes for various sectors including electronics, pharmaceuticals, and automobiles provide incentives to the manufacturers. Simplification of regulations and implementation of Goods and Services Tax have streamlined operations, which have removed some of the hurdles for businesses.

4. Rising Domestic Market Demand Gaining Momentum

With a population above 1.4 billion, India can act as an interesting domestic market for manufacturers. Indian urbanization coupled with a growth of the middle-class population has stimulated demand for mass consumer goods like automobiles and electronic goods and all such product classes. Therefore, manufacturers setting up in India gain access to not just international markets but also a robust domestic customer base.

5. Strategic Geographical Location

The geographical location of India makes it easy for manufacturers to access Asian and global markets. It is at the crossroads of major trade routes, connecting the Middle East, Africa, Southeast Asia, and Europe. The western and eastern coasts have several ports, while new transshipment hubs add to India's appeal as a manufacturing and export base.

6. Focus on Sustainability and Green Manufacturing

India is increasingly focusing on sustainable manufacturing practices. With the growing awareness of renewable energy and carbon footprint reduction, manufacturers are being encouraged to adopt green technologies. The country is also emerging as a leader in renewable energy production, providing affordable and eco-friendly energy solutions for industries. In the Interim Budget 2024-2025, the fiscal allocation for developing solar power grid infrastructure skyrocketed to INR8,500 Crore (US$ 1.02 Billion), a remarkable surge from INR4,970 Crore (US$ 0.60 Billion) in 2023-2024.

7. Thriving Startup Ecosystem and Innovation

India is one of the biggest startup ecosystems globally, driven by innovation and collaboration. Many of these startups focus on manufacturing automation, Industry 4.0 technologies, and supply chain optimization. The dynamic ecosystem supported by government bodies and venture capital provides manufacturers with opportunities for innovation and scaling efficiently.

Conclusion:

India will become a prominent manufacturing hub in 2025 since it is characterized by its competitive labors, efficient infrastructure, favorable government policies, and expanding domestic demand. Whether you are an investor, a business leader, or a manufacturer seeking new markets, India is the destination to watch in 2025.

IMARC Group provides market research and pre-feasibility studies for companies willing to set up manufacturing plants in India. Covering everything from market trends and regulatory requirements, cost analysis to strategic planning, our reports provide every insight that companies need to overcome the intricacies of setting up manufacturing plants in India and thereby harness its high potential.

Let's help you tap into new opportunities in India's thriving manufacturing sector.