A study published in the September 2026 issue of Sarvekshana, Journal of National Statistics Office (NSO), titled “Role of the size of the factories in efficiency-A study based on data from Annual Survey of Industries (ASI) 2022-23” by Anindita Sinharay and Rahul Kumar Gupta brings out interesting insights into the structural characteristics of the manufacturing sector in India.
The study highlights the extraordinary concentration of manufacturing activity in the large manufacturing factories, those that employ more than 200 workers. As per the ASI 2022-23, out of an estimated 2.06 lakh factories in operation in India, 75,069 factories (36.3 per cent) employed up to 10 workers, 72,115 factories (34.9 per cent) employed 11 to 50 workers, and 37,881 factories (18.3 per cent) employed 51 to 200 workers, while only 21,459 factories (10.4 per cent) employed more than 200 workers.
This last category, which constituted only 10.4 per cent of total factories, generated a whopping 72 per cent of the country’s gross value added (GVA) from manufacturing, amounting to Rs 15.9 lakh crore, and accounted for 92 lakh workers, or 63 per cent, of the country’s total industrial employment of 1.46 crore. By contrast, factories employing up to 50 workers constituted over 71 per cent of all factories, while they contributed only 10 per cent of the manufacturing GVA.
Micro factories employing up to 10 workers accounted for 36.3 per cent of factories but contributed just 2 per cent of GVA, and employed only 3.38 lakh workers, or 2.3 per cent of the total. The total GVA of the manufacturing sector in the country was estimated at `21.97 lakh crore in 2022-23.
The reasons are not difficult to discern-larger factories have better access to capital, technology, skilled labour and organised supply chains and hence can operate at scale.
It is a fundamental structural weakness of our manufacturing sector that the pathway through which small enterprises can graduate into medium and large enterprises through increasing access to technology and capital, skilling, and integration into organised supply chains is extremely narrow, limiting their ability to move up the manufacturing value chain. This phenomenon, often described as
the ‘missing middle’, inhibits the development of a broad-based manufacturing ecosystem as the smaller factories remain trapped in low-productivity activities.
The study also reveals a striking disparity between formal credit and value addition; micro factories carry a formal loan-to-GVA ratio of 85 per cent, compared with around 39 per cent for large factories.
Thus, it is not merely inadequate access to formal credit, but also the limited productive capacity of smaller enterprises to deploy borrowed capital effectively. Their low-capacity utilisation and limited scale prevent them from translating that borrowed capital into proportionate output. The study further highlights the inadequacy of two critical productivity-enhancing inputs: only 11 per cent of the overall manufacturing workforce is female; their share rising marginally from 8.5 per cent for micro factories to 11.5 per cent for large ones, and the sharp disparity in shop-floor enablers, such as research and development and worker training.
Across all operating factories, a mere 2.7 per cent maintained an active R&D unit, while only 6.7 per cent provided formal skill training to workers. The study also points out the significant gap that exists between India and other major economies in terms of value addition in the manufacturing sector: the value additions in the USA, China, and Germany were about 10 times, 6.5 times, and twice as much as that of India. We have a lot of catching up to do.
But the skewness and concentration of economic activity towards the upper end are not limited to manufacturing alone; they characterize the Indian economy as a whole.
Agriculture, for example, exhibits a more striking imbalance between the number of landholdings and the area cultivated. In India, marginal, small, semi-medium and large farmers are defined by the sizes of their operational landholdings: for these groups, these sizes are below 1 hectare, between 1 and 2 hectares, 2 and 4 hectares, 4 and 10 hectares, and above 10 hectares, respectively (1 hectare equals 10000 square metres, or 2.47 acres).
The latest data pertain to the 10th Agriculture Census 2015-16 (the results from the 11th Census, 2021-22 are not yet available), according to which marginal and small farmers together account for 86.07 per cent of all operational holdings, but operate (i.e. cultivate or lease) only 46.94 per cent of the total agricultural land. Semi-medium farmers account for 9.55 per cent of holdings and operate 23.84 per cent of the area. Medium and large farmers together account for just 4.37 per cent of holdings but operate 29.23 per cent of the agricultural land.
Large farmers constitute only 0.57 per cent of holdings, yet operate 9.07 per cent of agricultural land. Thus, here also, a small segment controls a disproportionate share of productive assets, while millions of small agricultural households remain constrained by inadequate capital and low productivity, which impacts the growth of the sector as a whole.
In the corporate sector, the top 10 per cent entities (ranked by revenue) accounted for approximately 92.7 per cent of aggregate net profits in 2024-25, according to a Mint analysis of 5,096 BSE-listed companies. The concentration was not limited to one or two sectors but was found to be pronounced in agriculture, financial services, construction and real estate, infrastructure and engineering, and logistics.
Only five business groups-Reliance, Tata, Adani, Aditya Birla, and Bharti-accounted for 24 per cent of total business assets and 16 per cent of total income in India’s non-financial corporate sector in 2023-24. Even the exports sector shows the same scenario, with the exports being dominated by a relatively small number of large exporters.
As per the World Bank’s India Country Economic Memorandum 2024, the top 1 per cent of exporters accounted for approximately 54 per cent of total export value, and the largest exporting firms (superstar exporters) collectively accounted for about 60 per cent of export value.
The concentration becomes even more striking when we examine the distribution of income and wealth. As per estimates of the Paris-based World Inequality Lab’s, in 2022-23, the top 1 per cent of India’s population had a disproportionately high 22.6 per cent of national income and 40 per cent share of national wealth, while the bottom 50 per cent of the population accounted for 15 per cent of national income and only 6.4 per cent of national wealth.
The top 10 per cent of the population accounted for 57.7 per cent of national income and 65 per cent of national wealth. We do live in an unequal world, and economic inequality is certainly not unique to India. As long as there is scope and opportunities for upward social and economic mobility, this also should not worry us unnecessarily.
Economic concentration is not necessarily the same thing as economic inefficiency, and large enterprises can even be instrumental for capital-intensive investments, economics of scale, upgradation of technology, and ability to compete internationally.
But this raises an important question regarding the increasingly unequal distribution of the capacity to generate growth and capture its economic returns. The state here has a proactive role to play to enhance the capacity of sectors that are lagging behind if we have to realise our goal of Viksit Bharat by 2047, for which we need a sustained 8 per cent annual growth till then.
The state must play a procative role in preventing economic concentration from becoming self-reinforcing when access to capital, technology, skills, and markets is determined only by the scale of operations, and smaller units are excluded from accessing them, hindering their upward mobility.
Public procurement and contracting preferences can be powerful engines for their growth, coupled with a regulatory environment that fosters enterprise growth rather than penalise them simply for crossing arbitrary size thresholds by imposing and enforcing costly regulatory compliances.
Viksit Bharat cannot be built on islands of exceptional productivity surrounded by millions of smaller enterprises, farmers, and workers currently operating at the margins of the productive economy. The missing middle holds the key to rapid growth.
The writer is a former Director General at the CAG of India and a Visiting Professor at IIM Calcutta