India, a nation with over 1.4 billion people, faces a formidable challenge: generating approximately 10 million new jobs annually to cater to its burgeoning youth population. While the services sector has been touted as a potential saviour, relying solely on it could leave critical opportunities untapped. A balanced approach that prioritises both manufacturing and urbanisation is essential for sustainable economic growth and job creation. The debate often pivots around India’s ability to compete with manufacturing giants like China.
However, dismissing manufacturing as unviable ignores India’s unique advantages. With a large, young labour force, a strategic location at the crossroads of global trade and a coastline that facilitates exports, India is well-positioned to carve out niches in sectors such as light industry, green manufacturing, and food processing. These industries offer significant potential for employment generation while fostering innovation and boosting productivity. Urbanisation, as a natural complement to manufacturing, can act as a powerful catalyst for economic development. Cities are not just hubs of economic activity; they are engines of creativity, collaboration, and innovation. Historically, urban agglomerations have driven economic transitions by fostering dense networks of production, services, and ideas. For India, a deliberate strategy to develop second- and third-tier cities could help alleviate the pressures on overburdened metros while spreading economic opportunities more evenly. The historical legacy of urban development in India presents both challenges and opportunities.
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Colonial-era urbanisation skewed development towards coastal cities, sidelining historic hinterland hubs. While metros like Mumbai and Kolkata continue to dominate, smaller cities remain underutilised. Drawing lessons from global examples, India can promote alternative urban centres by encouraging industrial and economic hubs in less congested areas. This would not only distribute the benefits of urbanisation but also create jobs closer to emerging industrial clusters. Moreover, manufacturing offers a unique advantage over services: scalability. Unlike many service jobs that are localised or require specialised skills, manufacturing can absorb a broader section of the labour force. It also builds resilience against external shocks, as self-sufficiency in essential goods becomes critical during crises. The integration of industrial policy with vocational training is a key to ensuring the workforce is equipped to meet the demands of modern manufacturing. The services sector, while valuable, has limitations in addressing India’s employment needs. Many service jobs suffer from low productivity, and high-end tradable services like IT and AIcater to a limited segment of the population.
To truly harness its demographic dividend, India must focus on tangible goods production alongside services, creating a symbiotic relationship between the two sectors. Ultimately, India’s economic future hinges on embracing manufacturing and urbanisation as complementary pillars of growth. A joint strategy that capitalises on these opportunities will ensure not just job creation but a more equitable and sustainable development trajectory for the nation.
