India’s export sector continues to shine as a key driver of growth, recording a robust 10.4 per cent increase in Q3 of FY2024-25, a notable improvement from the 3 per cent rise during the same period the previous year. The uptick comes amid growing global uncertainties and trade disruptions, underlining the resilience of Indian exporters. The export momentum is closely tied to India’s manufacturing performance. According to the HSBC Flash India Manufacturing PMI, the index rose to 57.6 in March 2025, up from 56.3 in February, indicating strong expansion. The Manufacturing Output Index surged to 60.6, the highest since July 2024, driven by a steady flow of domestic orders and international sales, despite higher input costs.

Amid these economic trends, a Reuters report suggests that the government may allow its $23 billion Production Linked Incentive (PLI) scheme to lapse. Initially launched in 2020 to boost domestic manufacturing and reduce dependence on China, the scheme attracted global players like Apple supplier Foxconn. However, many firms faced delays in meeting production targets, and only $1.73 billion of the allocated incentives had been disbursed by October 2024. The reported production under the scheme amounted to $151.93 billion, just 37 per cent of the target. Challenges such as bureaucratic hurdles and delays in incentive disbursement have impacted the scheme’s effectiveness. While the government has not made an official statement, industry experts anticipate modifications to the policy rather than a complete rollback, ensuring continued support for the Make in India initiative.

A crucial aspect of India’s manufacturing growth strategy is the micro, small, and medium enterprises (MSMEs) sector, which plays a significant role in the economy. From April 1, 2025, the government has revised MSME classification limits, increasing investment and turnover thresholds. Micro-enterprises will now have an investment limit of ?25 million (up from ?10 million) and a turnover cap of ?100 million (?50 million previously). Similarly, small enterprises will have new limits of ?250 million in investment and ?1 billion in turnover, while medium enterprises will have thresholds of ?1.25 billion in investment and ?5 billion in turnover. These changes will enable a larger number of businesses to retain their MSME status, ensuring sustained access to vital government support. Often, growing enterprises surpass previous thresholds and lose crucial benefits such as simplified credit access, lower interest rates, and targeted incentives. With the enhanced limits, businesses can now expand more confidently without the immediate concern of losing these advantages.

MSMEs are a backbone of India’s economy, contributing significantly to GDP and exports. Government data indicates that MSMEs’ share of gross value added (GVA) in GDP increased from 27.3 per cent in 2020-21 to 30.1 per cent in 2022-23. Exports from MSMEs surged from ?4 trillion in 2020-21 to ?12.39 trillion in 2024-25, underscoring their growing contribution to India’s global trade footprint. Given their pivotal role, MSMEs require a conducive policy environment to thrive.

Despite challenges, India has made substantial progress in key industries. Mobile phone production surged to $49 billion in FY24, a 63 per cent increase from 2020-21, while pharmaceutical exports nearly doubled to $27.85 billion in FY24 compared to a decade ago. The focus must now shift to localising the production of components and raw materials, which India has been importing majorly from China. MSMEs are expected to play a critical role in this effort, enhancing domestic supply chains and bolstering India’s self-reliance in manufacturing. As the government revises policies and MSME classifications, the sector stands to gain significantly, reinforcing its importance in India's economic growth trajectory.