There’s a debate that never seems to end — should India focus on becoming a “services‑led” economy or build its strengths through “manufacturing”. For almost 15 years, India’s growth story has been powered by services — IT, finance, logistics, and a million other allied activities. Agriculture follows next, and manufacturing remains the smallest slice of the GDP pie.
But this week, S. Mahendra Dev, Chairman of the Economic Advisory Council to the Prime Minister (EAC‑PM), offered a refreshing reality check. Speaking at the Delhi School of Economics’ Public Policy Conference, Dev said something that quietly settles this debate — the services sector itself “cannot” expand without a strong manufacturing base. “Both are complementary,” he reminded. And that one line captures the core of what India’s growth model is all about.
Think about it. Every new factory, every production line, every export order triggers a chain of service‑based opportunities — from financial management to logistics, from design to digital infrastructure. When manufacturing grows, the service ecosystem automatically expands. That’s the forward linkage Dev spoke about.
Some economists like Raghuram Rajan have argued for tilting investment toward services — education, research, and skilling — instead of industry‑specific incentives like the Production Linked Incentive (PLI) scheme. The idea sounds logical until we ask — where will those skilled people find work if not within an expanding manufacturing network? Even artificial intelligence, which is reshaping both sectors, needs the backbone of robust industrial and digital production to deliver lasting employment.
India’s data supports this dual narrative. Manufacturing might still make up only 16–17 percent of GDP, but Dev pointed out that in absolute terms, it has grown from Rs 17 trillion to Rs 30 trillion in a decade — a 75 percent jump. At the same time, services continue to lead growth, expanding at 9 percent in the first quarter of 2025‑26. Both sectors are moving — and moving together.
Yet this growth is not solely about the size of the economy or the tick in GDP columns. It is about real lives—about creating jobs that matter, about raising standards, about formalizing an economy fragmented by informal employment. The services sector, too, benefits tremendously from this growth. Without manufacturing sparking new demand for its myriad offerings, services risk becoming stagnant. Here lies the genius of India’s economic dance: manufacturing’s gains become services’ fresh fuel, and vice versa.
So why does this matter? Because the India we dream of—a developed, prosperous society by 2047—depends on this synergy. It depends on building cities where factories and offices coexist, where a roadside vendor benefits from a booming local industry, where new challenges from factories birth new services and innovations.
The government’s push for “Viksit Bharat 2047” rests on exactly this integrated vision. It’s not about choosing one over the other but letting both feed into each other — manufacturing creating jobs and capacity, services adding efficiency and innovation. One without the other is like building a car without wheels or a driver.
So maybe the right question isn’t “Which sector should drive India’s growth?” The better question is: “How do we make them grow together?”
Because in the India story, manufacturing is the muscle — and services, the mind. You need both for the economy to run.
