India’s manufacturing to rise 2.8x to $1.5 trn by 2035: Morgan Stanley

India’s manufacturing sector is projected to grow sharply, reaching $1.5 trillion by 2035 driven by industrial policies, reforms, and investments in energy transition, defense, and infrastructure.

Written by FE Bureau

July 21, 2026 22:26 IST

While the government put in place the "Make in India" theme a decade ago, manufacturing's share of GDP has stayed around 15%.

India’s manufacturing sector is likely to see sharp growth in the coming years, supported by industrial policy and reforms, Morgan Stanley said in a report. With India seen entering a multi-year capex super-cycle, the manufacturing sector is projected to expand to $1.5 trillion by 2035, 2.8x its current size, the report said.

“Success in expanding manufacturing is imperative to India’s medium-term growth trajectory,” said Morgan Stanley economists, led by Upasana Chachra. Morgan Stanley expects manufacturing’s share of GDP to rise to around 20% by 2035, from the near 15% currently, implying an incremental manufacturing base of about $930 billion.

“This is underpinned by our expectation that real manufacturing GDP CAGR will improve to ~9%, from the previous five-year CAGR of 6.5%, the report said. The boom in the manufacturing sector is seen driven by energy transition investment, defence manufacturing, industrial capacity expansion, and infrastructure development, according to the report.

While the government put in place the “Make in India” theme a decade ago, manufacturing’s share of GDP has stayed around 15%. “The gap between intent and outcome reflects certain known frictions such as high delivered costs, thin domestic supplier bases, and limited plug-in to global value chains,” Morgan Stanley said.

Morgan Stanley sees three drivers of growth in manufacturing: the current industrial policy in place since 2019 of targeted incentives and public capital expenditure; efforts to lift India’s export share and deepen global supply-chain integration; and multinational firms’ diversification strategies, which create opportunities to attract investment and capacity. “Supportive demographics, urbanisation, and improving infrastructure reinforce these trends,” the report said.

Downside risks to the projected rise in manufacturing include weaker domestic demand, geopolitical developments that weigh on global demand and investor confidence, political uncertainty, and slower execution of reforms and industrial policies, the report said.

This article was first uploaded on July twenty-one, twenty twenty-six, at twenty-six minutes past ten in the night.