Economic Survey 2025: Pitch for geography-specific industrial strategy

The Economic Survey 2024-25 on Friday called for adopting geographic-specific industrial strategies to address the high level of variance in industrialisation across Indian states.

The survey, tabled by Union finance minister Nirmala Sitharaman in Parliament, highlighted that four Indian states—Gujarat, Maharashtra, Karnataka, and Tamil Nadu—account for about 43% of the total industrial gross state value added (GSVA), while six northeastern states, excluding Sikkim and Assam, account for only 0.7% of the industrial GSVA.

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The survey said there is a need to focus on industrial strategies appropriate to unique geographies like the Northeast, adding that this would also be required to provide better leverage to all states to use their industrial sectors to generate higher income levels for their populations.

The survey pointed out that construction activity, which is closely linked with infrastructure development, urbanization, and real estate trends, also shows inter-state differences. 

In this context, it indicated Kerala is comparatively less industrial than many other states but it is a positive outlier in terms of construction activity, which contributes about half of its industrial gross state value added (GSVA).

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The survey analysed that the mining sector contributes about 8% to the total industrial output. It specified that the mining activity is highly concentrated within the top five states—Assam, Chhattisgarh, Gujarat, Maharashtra and Odisha, accounting for about 60% of the all-state mining GSVA.

The Economic Survey 2025, quoting varied research papers, highlighted that state-level policies play a crucial role in shaping the economic growth patterns across Indian states. 

It further emphasized that factors like the regulatory environment, infrastructure development, and state-level reforms have been shown to significantly influence industrial growth patterns.

The survey pointed to the quintessential aspect that states should prioritize business reforms to achieve buoyancy in some industrial or service sectors. 

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It asserted that states should make it easier for businesses to commence operations and grow, resulting in faster convergence of living standards and per capita incomes.

Along with a sharp variance in industrial development, the distribution of service sector activity also reveals a pronounced geographic dispersion. For 2022-23, Karnataka and Maharashtra account for more than one-fourth of the total service sector GSVA of all states. These states, along with Tamil Nadu, Uttar Pradesh, and Gujarat, together share more than 50% of the total service sector GSVA. 

“These states also have more than 50% of the total industrial GSVA, suggesting that both feed into each other. On the other hand, another set of 19 states collectively account for only one-fourth of the service sector GSVA of all the states,” the survey said.

"As per DPIIT’s Business Reforms Action Plan (BRAP), which ranks states based on their performance in introducing business reforms, states with service intensity backed by industry are states which have introduced larger numbers of reforms in comparison to their peer states and fall in top achiever and achiever’s category. Thus, introducing business reforms is essential to industrial and service development in the state," the survey said.