India's manufacturing must grow 10% annually to reach 2040 goal: BofA

A BofA Securities report states India's manufacturing sector needs to grow 10% annually for 15 years to hit its 25% GDP share target by 2040. This could expand the sector from USD 500 billion to nearly USD 2.3 trillion, a 3.5x increase.

BofA Report Projects Ambitious Growth Path

India needs to grow its manufacturing sector by at least 10 per cent annually over the next 15 years to move closer to its target of raising manufacturing’s share of the economy to 25 per cent by 2040, according to a report by BofA Securities.

The report said that assuming annual GDP growth of around 7 per cent, India’s manufacturing sector could expand from around USD 500 billion in 2024 to nearly USD 2.3 trillion by 2040, representing an almost 3.5-fold increase. “If India manages to hit this threshold, its manufacturing sector can expand from ~USD 500bn in 2024 to almost USD 2.3trn by 2040, an almost 3.5x increase,” the report stated.

Key Requirements for Expansion

It added that India’s manufacturing share could exceed 30 per cent if the sector grows at a faster pace. However, BofA Securities said this would require major changes to existing constraints and significant capacity creation in emerging areas such as artificial intelligence and semiconductors, including for exports.

The Critical Role of Exports

The report highlighted that a significant increase in exports will be critical for India to achieve a major expansion in manufacturing. Despite several policy measures, manufacturing’s share of GDP has remained relatively stagnant, with growth largely driven by domestic consumption rather than external demand.

India currently accounts for less than 2 per cent of global goods exports, and the report said this share could face further pressure as AI-driven trade expansion accelerates globally. According to the report, India’s manufacturing gross value added (GVA) reached USD 533 billion in 2025. It said India has gained significant market share compared with several major economies outside China, including Indonesia, South Korea, Mexico and Vietnam. However, Vietnam and Bangladesh have recorded faster overall manufacturing growth, supported by their export-led economic models.

The report noted that India’s weak performance in goods exports contrasts with its services sector, where information technology and business process outsourcing have helped the country secure more than 4 per cent of global market share.

Current Manufacturing Landscape and Challenges

“India’s manufacturing sector, weighed down by a large stock of regulatory burden and pricing constraints, has focused on areas of domestic consumption needs, rather than with an export orientation,” the report said.

According to the report, high domestic tariffs have encouraged international manufacturers to set up production facilities in India primarily to cater to the domestic market. As a result, manufacturing remains concentrated in sectors such as petrochemicals and automobiles, where foreign competition is relatively limited.

Machinery and equipment, coke and petroleum, rubber and chemicals accounted for around 59 per cent of manufacturing value added in FY24. Basic metals contributed 15 per cent, while textiles and apparel accounted for 11 per cent.

The report said this manufacturing structure is also reflected in India’s trade pattern, with the country largely importing capital and intermediate goods while exporting consumer products. This indicates that India’s manufacturing base remains focused largely on processing and meeting domestic demand, rather than becoming strongly export-oriented, it added. (ANI)

(Except for the headline, this story has not been edited by Asianetnews Editorial staff and is published from a syndicated feed.)