Much of India’s economic growth in recent decades has been powered by services, which account for over half of the country’s GDP, but only about a quarter of total employment. Services are also more difficult to export than products, even considering India’s prowess in the IT services sector. A strong manufacturing base is associated with higher rates of formal employment, wealth creation and a healthy balance of trade, but also with technical breakthroughs that increase productivity in other sectors too, such as mechanisation in agriculture.
These factors help explain the Indian government’s aim to expand manufacturing from around 16% to 25% of GDP by 2025. This means improving infrastructure and the investment climate. Initiatives such as Make in India are designed to entice foreign and local manufacturers to India’s 3,000 industrial zones.
Attracting investors is not the only challenge, however: industrial development tends to overstretch natural resources and increase pollution, waste and wastewater, with negative impacts on ecosystems and human health.
Environmental pollution is already an issue: in 2009 the Indian Central Pollution Control Board, declared 43 industrial areas ‘critically polluted’. India has also made ambitious commitments to curb greenhouse gas emissions to combat climate change. Further industrial development must take another path.
GIZ is working with the Ministry of Environment to promote sustainable and environment-friendly industrial production, with pilot projects in three industrial zones to showcase innovative and viable solutions. It is also helping to make new and existing industrial zones more resilient to the effects of climate change, and to improve resource efficiency, particularly in the construction and automotive sectors.
With support from its German partners, the Indian government is pursuing industrial expansion, but a more sustainable form of development, where resource usage is decoupled from production and ecosystems and human health are protected.