India’s manufacturing growth augurs well for IT industry
India’s manufacturing growth augurs well for IT industry
India’s ‘Make in India’ initiative has started to show results. Now, the country has emerged as the fifth largest manufacturing nation in the world. Surpassing UK, France & South Korea; India has emerged as a manufacturing powerhouse in 2025.
Apart from push for ‘Make in India’; adequate FDI flow has also made this possible. As we enter 2026, this movement is going to gain further momentum. From heavy metal sectors like steel and aluminium to electronics manufacturing and advanced defence equipment; India is slowly building a sound industrial base, spread across various states.
This definitely brings good news for the service sector. Contrary to popular belief, manufacturing sector has the potential to support the rest two sectors of the economy, namely services & agriculture. A good manufacturing base leads to more demand for services related to the specific segments.
China is leading the world in not only creating an excellent manufacturing base but also by supporting the innovation in this sector through its advanced research on services side. That is the reason that China is giving a tough competition to the US in all emerging technology fields- be it semiconductor or AI. Now, India has to learn from China’s success.
Currently, Indian economy is skewed towards services sector with a GDP contribution of around 55 per cent. Meanwhile, manufacturing sector only contributes around 16-17 per cent of the total GDP with rest coming from agriculture.
Such skewed distribution towards services has made India a net importer of several manufacturing goods, ballooning its trade deficit. Therefore, India’s emergence as the fifth largest manufacturing base of the world augurs well for the Indian economy.
From IT industry perspective, a manufacturing revolution will work in its favour. Currently, most of the revenue of IT companies are drawn from the US and Europe. Top firms don’t even draw more than 10 per cent of their revenue from India.
This can certainly change as India’s manufacturing base grows. As manufacturing sector grows, the real wages of workers rise up as seen in China. Many downstream industries come up all around the main industries.
For example, a good steel manufacturing base leads to sound auto component base. Similarly, aluminium, copper, energy segments create opportunities for their respective downstream industries. Due to such ecosystem, enterprises’ ability to spend on technology grows, leading to more projects for IT services companies. Ironically, many Indian IT services companies totally ignore India as a market, deploy subpar human resources in government projects and show superior attitude to government agencies.
This the very reason that global players like Accenture and IBM have huge engagement with Indian government projects and private sectors than most Indian IT players.
Of course, TCS has a good India presence and the company has benefitted hugely from such commitment. It’s time that other Indian IT services players treat India as an emerging tech market.
Otherwise, as India becomes a bigger economy, these domestic firms will lose out to foreign firms as clients value their long-term reliance on vendors.
