India’s Workforce in Manufacturing Sector Declining Over the Last Decade

India’s manufacturing story over the last decade is not one of a simple collapse, but of a deeper failure: the sector has not grown into the mass employer the country needed. Large registered factories have added jobs, but manufacturing as a share of total employment has stayed flat or edged down, and the biggest damage has been felt in small, unincorporated, labour-intensive units that traditionally absorbed millions of workers. In a country that still needs non-farm jobs at scale, that is a serious structural weakness.

A quick look at the numbers shows why the concern persists. The Ministry of Statistics and Programme Implementation reported that manufacturing accounted for 11.6% of total employment in 2021-22, 11.4% in 2022-23 and 11.4% again in 2023-24. The ILO similarly says manufacturing employment has been broadly stagnant at about 12-14% over a much longer period. And a survey-based analysis by Data for India estimates the share of manufacturing workers in the total workforce fell from 12.6% in 2011-12 to 12.1% in 2017-18 and 11.7% in 2022-23. In other words, even where absolute worker numbers may have moved up in some datasets, manufacturing has not expanded its role in absorbing India’s workforce.

That said, the decline is not uniform across all parts of the sector. In registered factories, employment has actually risen. A government employment summary based on ASI data says the number of persons employed in manufacturing industries increased from 138.8 lakh in 2014-15 to 184.9 lakh in 2022-23, a rise of 33.24%. The Economic Survey 2023-24 also notes that factory jobs grew from 1.04 crore to 1.36 crore between 2013-14 and 2021-22, with annual growth of 3.6%, and that larger factories employing more than 100 workers grew faster than smaller ones. This is important because it shows the problem is not that every part of manufacturing is shrinking; the sharper weakness lies in its uneven structure. DGE Employment Situation in the Country

The real stress shows up in unincorporated manufacturing and small enterprises. The Economic Survey 2023-24 , using the Annual Survey of Unincorporated Enterprises, says employment in unincorporated enterprises fell from 11.1 crore in 2015-16 to 10.96 crore in 2022-23, and within that there was a reduction of 54 lakh workers in manufacturing. That is a striking number because small workshops, household units and informal enterprises are where India historically created labour-intensive jobs. If these units lose workers while bigger factories expand, the economy may still produce more output, but it will not generate work at the scale required.

This is why the phrase “manufacturing workforce decline” needs to be understood carefully. The strongest evidence is not of universal job destruction across all manufacturing, but of declining labour absorption, falling employment share, and a squeeze on the unorganised base of the sector. That is economically just as troubling, because India’s development challenge is not merely to have factories; it is to have factories, supply chains and ancillary units that can employ millions leaving low-productivity agriculture and informal services.

One major reason for this outcome is jobless or weak-employment growth. The ILO says that between 2012 and 2019, India’s gross value added grew at 6.7% annually, but employment growth was almost zero, just 0.01%. That is the classic signal of an economy expanding without creating enough work. Manufacturing should have been the bridge between growth and mass employment, but instead it remained stuck. India saw output growth, urban expansion and rising aspirations, yet the employment engine did not match the scale of those changes.

Another reason is the bias toward larger, more capital-intensive firms. The Economic Survey notes that factory employment grew 4.0% annually in factories with more than 100 workers, but only 1.2% in smaller factories. That suggests organised manufacturing has been expanding in ways that favour scale, capital and productivity, but not necessarily broad-based employment. In policy terms, this means India has done better at supporting islands of formal industrial growth than at building a dense, employment-rich manufacturing ecosystem across medium and small firms.

The small-firm problem is central. The Economic Survey says formalisation is progressing, but access to finance remains slow and compliance burdens still weigh heavily on enterprises. When credit is costly, power unreliable, logistics uneven and regulation complex, small manufacturers struggle to scale. They either remain tiny, informal and vulnerable, or they shut down. This hurts labour-intensive segments most, especially textiles, garments, leather, food processing, furniture and countless local workshops that are not visible in headline industrial output numbers but matter enormously for jobs.

Informality deepens the problem. The ILO estimates that nearly 82% of India’s workforce is engaged in the informal sector and nearly 90% is informally employed. A 2025 PIB release on e-Shram says more than 31.38 crore unorganised workers have been registered on the portal. These figures show how much of India’s labour market still sits outside secure, contract-based, productivity-enhancing employment. Manufacturing cannot become a true ladder of social mobility if a large part of it remains precarious, underpaid and weakly protected.

Job quality has also suffered. The ILO says real wages of regular salaried workers either stagnated or declined in recent years, and self-employed earnings fell after 2019. It also notes that the share of regular formal jobs in total employment dipped to 9.4% in 2022. This matters because manufacturing is often expected to provide stable, wage-paying, productivity-linked work. If instead workers are pushed into vulnerable self-employment, low-paid contract jobs or irregular factory work, the sector may expand statistically without delivering social transformation.

The workforce problem is especially visible among the young. According to PLFS 2023-24 , overall unemployment for people aged 15 and above was 3.2%, but youth unemployment for the 15-29 age group was 10.2%, and educated unemployment was 7.1%. Earlier extraction from the same report shows graduate unemployment averaged 13.5%, with much higher rates among women. The ILO adds that graduate-level youth unemployment reached 29.1% in 2022. A manufacturing sector that is vibrant, labour-intensive and export-oriented should be a natural absorber of this young workforce. The fact that it is not doing so at scale is one of India’s biggest development failures.

Regional and structural mismatches add to the strain. A NITI Aayog discussion paper notes that industry and services contribute more than 80% of gross value added but employ only 54.4% of the workforce, while agriculture, with a much smaller output share, retains 45.6% of workers. It also finds that of the additional jobs created in industry between 2017-18 and 2019-20, 78% were in construction, not manufacturing. That tells its own story: when workers leave farms, many still do not find their way into factories. They are absorbed by construction, petty services or self-employment instead.

The social and economic costs are significant. A weak manufacturing labour market means fewer stable urban jobs, slower income growth, lower household consumption and greater inequality between workers in formal enclaves and those in the informal economy. It also means India risks missing the classic development path followed by many East Asian economies, where manufacturing acted as the great escalator that moved workers from low-productivity work to better-paid employment. When that escalator is weak, the demographic dividend becomes harder to convert into mass prosperity.

To be fair, policy has not stood still. Formal factory employment has risen, infrastructure has improved, and the state has pushed formalisation and worker databases such as e-Shram. Those are real gains. But the evidence suggests that policy success has been stronger in the organised end of the sector than in the broad middle and bottom where employment intensity matters most. India has been better at building manufacturing capacity than at building manufacturing employment depth.

What, then, should change? First, India needs a deliberate push toward labour-intensive manufacturing rather than relying mainly on capital-heavy expansion. Second, MSMEs need easier finance, simpler compliance and reliable infrastructure so that they can survive, formalise and hire. Third, skill development must be tied more closely to actual industrial clusters and apprenticeships, not treated as a standalone slogan. Fourth, industrial growth must become more geographically spread so that employment opportunities are not concentrated in only a few corridors. And finally, manufacturing policy must be judged not only by output, exports or investment, but by the number and quality of jobs it creates. These priorities flow directly from the diagnosis in the Economic Survey , NITI Aayog and ILO.

In the end, the most accurate conclusion is this: India’s manufacturing workforce has not declined in one neat, uniform line, but its employment power has weakened over the last decade in exactly the segments that matter for mass job creation. The organised sector has grown, yet manufacturing’s share of employment has stagnated, and the unincorporated base has lost workers. That is why the concern is real. India does not merely need more manufacturing. It needs manufacturing that hires, scales, formalises and lifts millions into better work. Until that happens, the sector will remain economically important but socially underperforming.