Prime Minister in his message to the report `National Strategy for Manufacturing (2006)' acknowledge that share of manufacturing in national income had shown only a marginal improvement from 15.8% in 1991 to 17% in 2003. He wanted it between 25% to 35%. This goal of 25% was never reached. Share of Manufacturing has come down to 15.2% in 2012-13 from 15.7% in 2011-12.
Despite regular announcements to boost up manufacturing with policy interventions, it seems India would never achieve the coveted 25% share. Researcher Dani Rodrik says de-acceleration in manufacturing is cyclic and inevitable, both developed and developing countries have gone through the phase of accelerated growth followed by decline in manufacturing. The critical difference is the peak reached before the decline sets in.In UK before world war 1 had 45% of workforce in manufacturing, now less than 10%. USA had 25-27% of workforce in manufacturing in early nineteenth century , now less than 10%. In Sweden manufacturing peaked to 33%, Germany to 40% before decline had set in.
India peaked at 13-15% in 2002 and has since trended down. When US, Britain, Germany, Sweden began to deindustrialize their per capita income reached $10,000 (at 1990 prices). India switched to service sector at much lower per capita income.
Will India stagnate as a service economy at low income level?
Read more at http://www.project-syndicate.org/commentary/developing-economies--missing-manufacturing-by-dani-rodrik#kTJKPCAZbH1yIdLC.99