Why a Small Share of India’s Factories Drives Most Manufacturing Output

New government data reveal how production is concentrated among large industrial plants—and what this means for smaller manufacturers, jobs and India’s growth ambitions.

India has a large manufacturing base, but its industrial output is far from evenly distributed. A relatively small group of large factories generates most of the sector’s production, while thousands of smaller units contribute a much smaller share of total output.

The latest detailed Annual Survey of Industries (ASI) data reveal the scale of this concentration. Factories generating annual output of ₹500 crore or more represented just 3.6% of operational factories in FY2024–25. Yet they accounted for 62.07% of total manufacturing output and nearly 61% of net value added.

The findings were released by the Ministry of Statistics and Programme Implementation (MoSPI) on November 4, 2026. They highlight an important feature of India’s industrial structure: manufacturing growth is increasingly supported by large-scale production, even as smaller factories continue to represent a substantial share of operating units.

The Manufacturing Output Gap

The difference between large and small factories is striking.

Factories with annual output above ₹500 crore represented approximately 3.6% of operational units. Their contribution included:

• 62.07% of total manufacturing output.
• Nearly 61% of net value added.
• Approximately one-third of total manufacturing employment.

At the other end, factories with annual output of up to ₹10 crore accounted for 52.36% of operational units. However, they contributed only 1.92% of total output and 2.12% of net value added.

This does not mean smaller factories are economically unimportant. Many provide employment, support local supply chains and manufacture specialised products. It does show that their individual scale and contribution to measured industrial output are considerably smaller than those of the largest plants.

The figures also concern registered manufacturing establishments covered by the ASI. They should not be interpreted as a complete picture of every informal or unregistered manufacturing activity in India.

Why Large Factories Dominate Production

Large manufacturing plants often operate with greater production capacity, specialised machinery and established supplier networks. They can spread fixed costs across higher volumes and invest in technologies that smaller businesses may find difficult to afford.

Capital intensity is another important factor. The ASI data show that factories with plant and machinery investment of ₹10 crore or more represented 15.84% of operational factories. Together, they accounted for 76.82% of total output and 78.07% of net value added.

These factories also held 87.42% of fixed capital deployed in the registered manufacturing sector.

This concentration of machinery and investment helps explain why large facilities contribute such a significant share of industrial production. However, it also highlights the financial and technological barriers facing smaller manufacturers seeking to expand.

More Output Does Not Automatically Mean More Jobs

The employment figures reveal another important aspect of India’s manufacturing structure.

Factories producing at least ₹500 crore annually accounted for roughly one-third of manufacturing employment, despite generating more than 62% of output. This indicates that large plants produce a substantial volume of goods relative to their share of the workforce.

Automation, machinery and production efficiency can help explain this difference. Large factories may use advanced equipment and specialised processes to increase output without expanding employment at the same pace.

The wider ASI results also show that manufacturing employment increased by 7.19% in FY2024–25. The manufacturing corporate sector recorded a 7.57% rise in the number of persons engaged.

However, gross value added per person engaged increased by only 2.25% in the corporate manufacturing sector. This suggests that the increase in employment was stronger than the growth in value added per worker.

The distinction matters because India’s industrial strategy needs to deliver both higher productivity and broad employment opportunities.

Small Factories Remain Important to the Industrial Ecosystem

The concentration of output should not lead to the assumption that smaller factories have little economic value.

Small and medium manufacturers frequently operate as suppliers to larger companies. They provide components, packaging, maintenance, fabrication, logistics and specialised services. Their role can be important even when their direct contribution to final manufacturing output appears limited.

Smaller units can also support regional employment and entrepreneurship. In many industrial clusters, they form the base of local production networks.

Their main challenge is often the ability to move from small-scale operations to more productive and competitive businesses.

Access to finance, modern machinery, skilled workers, reliable electricity and organised markets can influence whether a small manufacturer can expand. Compliance requirements and delayed payments may also restrict working capital.

The policy challenge is therefore not simply to increase the number of factories. It is to help viable smaller businesses improve their productivity and become stronger suppliers within larger industrial networks.

Manufacturing Growth Is Concentrated Across States Too

The survey also highlights geographical concentration in manufacturing value creation.

Maharashtra, Gujarat, Tamil Nadu, Karnataka and Uttar Pradesh together contributed more than 54% of India’s manufacturing gross value added in FY2024–25.

These states have developed industrial ecosystems supported by manufacturing clusters, infrastructure, skilled labour, logistics and established business networks.

Maharashtra and Gujarat have strong positions in several industrial segments. Tamil Nadu has an important manufacturing base in automobiles, engineering and other industries. Karnataka contributes through engineering, electronics and industrial activity, while Uttar Pradesh has been expanding its manufacturing presence.

This concentration creates opportunities for regions with established industrial infrastructure. It also raises questions about how other states can attract investment, develop supplier networks and create the conditions needed for manufacturing expansion.

Regional differences in infrastructure, access to finance and workforce skills can influence the ability of factories to compete.

Which Industries Drive Manufacturing Value?

The composition of manufacturing also matters. The ASI results show that five major industries—basic metals, motor vehicles, chemicals and chemical products, pharmaceuticals, and food products—together contributed more than 45% of manufacturing gross value added in FY2024–25.

These sectors have different production structures and investment requirements.

Basic metals depend on large industrial facilities and substantial capital investment. Motor vehicle manufacturing relies on complex supplier networks and advanced production systems. Chemicals and pharmaceuticals require specialised processes, technical expertise and regulatory compliance.

Food manufacturing has a broader range of business sizes, from smaller processing units to large integrated plants.

The concentration of output across these industries means that changes in investment, demand or input costs within a few major sectors can influence the wider manufacturing economy.

What the Findings Mean for India’s Manufacturing Ambitions

India’s manufacturing ambitions depend on developing a stronger industrial base that can compete in domestic and international markets.

Large factories will remain important because they can support high-volume production, advanced technology and large investment projects. They can also attract suppliers and create industrial clusters around major facilities.

But a manufacturing strategy based only on large plants would leave a significant part of the industrial ecosystem underdeveloped.

Smaller manufacturers need opportunities to upgrade machinery, improve quality standards and participate in organised supply chains. Better access to finance and technology can help them increase output and move towards higher-value products.

The relationship between large and small factories is therefore central to the next phase of industrial growth. Large manufacturers need reliable suppliers, while smaller businesses need access to larger markets and production networks.

The latest ASI findings show that India’s registered manufacturing sector is expanding, but its output remains heavily concentrated among a small number of large factories. The next challenge is to make that growth more productive and widely connected. Stronger supplier networks, better access to capital and technology, and improved regional infrastructure could help smaller manufacturers participate more meaningfully in industrial expansion. India’s manufacturing progress will ultimately depend not only on how much its largest factories produce, but also on how effectively the wider industrial ecosystem grows around them.