Nearly 20% of Registered Indian Factories Were Inactive in FY25

The number of registered factories across India increased significantly, rising by 14.5 per cent between the financial years 2015-16 (FY16) and 2024-25 (FY25), based on the most recent annual survey of industries. Despite this growth in factory registrations, a notable portion of these units were not functioning during the same period.

In FY25, approximately 18.13 per cent of all registered factories were inactive. This means that nearly one in every five factories listed was not operational, highlighting a gap between industrial capacity on paper and actual production output.

Factory expansion has accelerated in recent years. In FY24, factory numbers grew by 2.66 per cent, and in FY25, the increase was 2.64 per cent. However, the rise in quantity does not necessarily translate into enhanced industrial productivity or higher manufacturing capacity, as many units remain idle.

Examining the geographic distribution of factories reveals that three states—Tamil Nadu, Gujarat, and Maharashtra—hold a dominant position in India's industrial landscape. Together, these states account for around 38 per cent of the total registered factories nationwide. Despite this concentration, these states have shown a higher incidence of non-operational factories relative to the national average in recent years.

Looking deeper into economic output, Tamil Nadu's share of the country’s factory gross value added (GVA) has increased by 0.58 percentage points between FY16 and FY25. In contrast, Gujarat and Maharashtra experienced a decline in their shares of factory GVA, dropping by 2.47 and 3.59 percentage points respectively during the same period.

While Tamil Nadu recorded gains in factory output share, it still faces challenges in labour productivity. The output per person engaged in the state’s factories remains below the national average, indicating potential inefficiencies or underutilization of manpower within the industrial sector.

This data points to a complex picture of India’s manufacturing sector where growth in factory registrations coexists with significant operational challenges. The inactive status of a substantial fraction of factories suggests barriers such as financial constraints, infrastructural issues, or market conditions that prevent these units from functioning fully.

The role of major industrial states is pivotal in shaping India’s manufacturing landscape. Tamil Nadu’s modest gains in factory output contrast with the declining shares seen in Gujarat and Maharashtra, highlighting shifting dynamics within regional industrial hubs. Addressing labour productivity deficits and reducing the number of non-operational units could enhance overall industrial performance.

India’s manufacturing sector remains a critical engine for economic growth, employment generation, and export potential. Policymakers and industry stakeholders may need to focus on measures that improve factory utilization rates, boost workforce efficiency, and support the operational viability of new and existing units.

In summary, while the rise in factory registrations reflects expanding industrial ambitions, the significant proportion of inactive factories and uneven productivity across states underscore the need for targeted interventions to convert capacity into actual output. This dual challenge will likely shape the trajectory of India’s manufacturing competitiveness in the coming years.