India's Growth Story: Ten Years Of Reform, Resilience and Manufacturing Growth

India was a $2 trillion economy, overshadowed by policy uncertainty and infrastructure deficit in 2014. Fast forward to 2026, and it stands as one of the world's largest economies and is increasingly being viewed as a viable alternative to China in the global manufacturing landscape. But behind the rosy picture lies a different reality, where India is still struggling with structural challenges, including low labour productivity, a weakening currency, and other economic constraints.

The economic transition was much more visible between 2014 and 2026, have been digitisation and infrastructure. "This transition is shown in the success of UPI, which went from almost zero transactions in 2016 to more than 180 billion transactions per year in 2025, the creation of over 550 million Jan Dhan accounts, and mobile phone exports of more than USD 20 billion. India has emerged as one of the fastest-growing major economies and one of the largest economies in the world," stated Samir K Das, Assistant Professor of Economics, University of Petroleum and Energy Studies.

The China+1 Opportunity: Real Tailwind, Incomplete Capture

When global companies began to depend on China after COVID-19, India was among the loudest beneficiaries. Das is unambiguous about India's gains: "India has become a major beneficiary of the China+1 strategy, especially in electronics manufacturing. Apple and its suppliers' rise in India and mobile phone exports of more than USD 20 billion are examples of this change. Robust inflows of foreign direct investment and production-linked incentive schemes have boosted manufacturing capacity. Sustained improvements in logistics, talent development and export competitiveness will be crucial for India's transition from an alternate manufacturing destination to a global manufacturing powerhouse. This is a significant chance, albeit the transformation is still underway."

The Production Linked Incentive (PLI) schemes, in particular, have encouraged fresh investments across industries ranging from semiconductors to pharmaceuticals. These schemes enable India to emerge as a trusted manufacturing hub for global companies looking to diversify their supply chain.

However, this optimism comes with a note of caution. An Equirus report points out that while initiatives such as the PLI scheme and the China +1 strategy have undoubtedly attracted investment, they have not led to a significant increase in manufacturing's share of India's GDP. The gap between the service and the manufacturing sector means that the broader benefits of higher productivity and lower inflation remain limited. Das himself acknowledges that while progress has been made, India's economic transformation is still a work in progress: "Sustained improvements in logistics, talent development and export competitiveness will be crucial for India's transition from an alternate manufacturing destination to a global manufacturing powerhouse. The transformation is still underway."

India's Poor Labour Force Productivity Compared To Asian Nations

The gap between aspiration and structural reality is perhaps sharpest in the labour market. Khushali Dutt, Economist at Equirus, puts the challenge in stark comparative terms. "China and Vietnam's share of industry employment to total employment is 32% and 35% respectively. India's is 26%. The bulk of India's labour force-almost 42%- is employed in agriculture and is a major obstacle to industry-led productivity growth," Dutt told Goodreturns in an email interaction. She adds that China and Vietnam's significantly higher female labour force participation, particularly in manufacturing, has been a key driver of their industrial productivity leap, an advantage India has yet to replicate at scale.

Rupee's Fall A Double-Edged Sword

The rupee's record lows earlier this decade added another dimension to India's economic growth story. Das notes the currency pressure is a double-edged sword: "A devalued rupee benefits export-oriented sectors such as IT services, pharmaceuticals and engineering items by making their products less expensive to foreign buyers, but it also increases the cost of imports, especially crude oil, on which India is strongly dependent. The net effect on GDP depends on whether the gains from exporting are more than the inflationary pressures from higher import prices."

Measuring India's Economic Strength: PPP vs Market Exchange Rates

The GDP based on Purchasing Power Parity (PPP) versus market exchange rate lens offers a useful corrective to either excessive optimism or pessimism. As Das explains, "PPP demonstrates India's domestic purchasing power that puts it among the world's greatest economies. Market exchange rates are better indicators of how much India is involved in global trade, finance and investment."

According to International Monetary Fund (IMF) data, India's share of world GDP on a PPP basis increased from 5.84% in 2014 to 8.49% in 2026

Economic Cost of COVID

No honest account of India's decade can sidestep the massive shock that hit its informal economy in rapid succession: the COVID-19 pandemic in 2020. India's labour productivity is recovering post the COVID shock, but it is slow, highlighted Dutt.

"One thing that the pandemic induced is the return to agricultural and allied work due to the return of migrants to rural areas. We were seeing a sharp fall in total employment in agriculture, 51% in 2010 to 41% in 2019, which shot up to 45% in 2020 and was 42% in 2025. Hence, the pandemic disrupted the workplace transformation trend," added Dutt.

The structural significance of that reversal cannot be overstated. A workforce transitioning out of agriculture and into manufacturing or services is the foundation of the kind of industry-led productivity growth that powered China and Vietnam's economic ascent. COVID set that clock back by several years, and the recovery has been slow.

What the Next Decade Demands

India's growth story over the past decade is both impressive and unfinished. The country's digital transformation has been a remarkable success, bringing millions into a formal financial system and making services more accessible. Massive investments in roads, railways, airports and logistics have reshaped India's physical landscape. At the same time, the China+1 shift has opened new opportunities, attracting investments and boosting exports in a way that would have seemed highly ambitious in just ten years. Employment generation, productivity and development of human capital will be of the essence for the next decade.