What is Two Nations Theory?

Why is it in the news?

Pakistan Army Chief, General Asim Munir, has urged Pakistanis to pass down the ideology that led to the creation of the Islamic Republic. In a public speech, Munir doubled down on the differences between Hindus and Muslims. He invoked the two nations theory as the basis of Pakistan's creation and identity. He said, “Our forefathers believed that we were different from Hindus in every possible aspect of life. Our religion is different. Our customs are different. Our traditions are different. Our thoughts are different. Our ambitions are different. That was the foundation of the two nations theory. It was laid on the belief that we are two nations not one. Speaking to the gatherings, he said that you must tell this to your children so that they never forget the story of Pakistan. He said that our forefathers made immense sacrifices and we too, have sacrificed alot for the creation of this country.

What is the Two Nations Theory?

According to the two nations theory, Hindus and Muslims in British India constituted two distinct nations based on their religious, cultural and social differences. It was held that both Hindus and Muslims could not coexist harmoniously within a single nation state due to irreconcilable differences in their ways of life, values and aspirations. Thus, the theory of two nations became the ideological basis for the creation of Pakistan and the Partition of India in 1947.

Causes of the genesis of the Two Nations Theory

1. Religious differences - Both Hindus and Muslims followed distinct religious practices, different belief systems, social structures and personal laws. The religious revialist movement like Shuddhi Campaign launched by Arya Samaj further exacerbated the differences between the two communities. The Wahhabi movement further deepened the differences between them.

2. Cultural and social differences - Both Hindus and Muslims practiced different customs and traditions. Their social practices like marriage, divorce, adoption were quite different from each other. Moreover, Muslims associated Urdu as their linguistic identity while Hindi was linked to Hindus.

3. Political and economic marginalisation of Muslims - After the 1857 Revolt, the Britishers crushed Muslims more than Hindus. The British Government were of the view that the revolt was the handiwork of Muslim zamindars and Nawabs. That’s why, after the failure of the Revolt, their jagirs and lands were confiscated and distributed among peasants. They were denied Government jobs. They lacked education. They have fewer economic opportunities. Hindus dominated in trade and Government jobs. This is why, Sir Sayyid Ahmad Khan emphasised upon modern education.

4. The divide and rule policy of the British Government - Till 1890, the Britishers supported Hindus and crushed Muslims. But after 1890, the British Government changed its attitude when the Congress became vocal about various demands like Indianization of higher government jobs, remission in taxes, separation of judiciary from executive, high import duties on British goods and revival of indigenous handicrafts industries. The British Government helped in the establishment of Muslim league in 1906 to safeguard exclusively the Muslim interests, introduced separate electorates for Muslims in 1909 whereby the rising Indian nationalism was torn asunder.

5. Failure of Hindu Muslim unity efforts - Although Lucknow Pact was signed in 1916 between the Congress and the Muslim League whereby, Congress legitimised the separate electorates, the mistrust between two communities persisted on account of the rejection of Congress with regard to proportional representation to Muslims and failure of the Nehru report (1928) to accommodate Muslim concerns.

6. Reverses of Muslim league in 1937 provincial elections - The Muslim league secured only 109 out of 482 Muslim reserved seats across provinces. It secured less than 25% of the Muslim votes. In Muslim majority provinces of Punjab, the Unionist Party and in Bengal Krishak Praja Party came out as the largest political parties, relegating the Muslim League. On the other hand Congress got majorities in 7 out of 11 provinces and in other two provinces, it formed a government with the support of other parties.

Before 1937 elections, the Muslim league focused upon securing separate electorates for Muslims, more representation in legislatures and protection of Muslim culture within a federal India. But after reversals in the 1937 election, the Muslim league started articulating two nations theory, advocating that Hindus and Muslims were distinct nations requiring separate political destinies. This culminated in the Lahore resolution of 1940 which demanded independent states in Muslim majority regions of North West India and Eastern India. In the 1945-46 election, the Muslim League strengthened its position by securing 425 seats out of 482 reserved Muslims seats in provincial elections. This landslide victory of Muslim league hardened its demand for a separate homeland for Muslims.

Consequences of the Two Nations Theory

1. Partition of India between India and Pakistan.

2. Mass migration leading to the deaths of more than 10 lakhs people and exodus of 150 lakh people crossing borders. While the majority of Hindus and Sikhs moved to India, Muslims from India left for Pakistan. There was widespread atrocities on women of both communities.

3. Continued India Pakistan rivalry. Even after the creation of Pakistan, it did not resolve Kashmir and minority issues. India and Pakistan fought four wars. There is still continued tension between the two countries. Pakistan has been exporting terrorists into Kashmir and trying to liberate J&K from India. The terrorist activities are still going on within J&K at the behest of Pakistan. Thousands of people, terrorists and security forces have lost their lives in the last 40 years. The terrorist attack on 22nd April 2025 and killing of 26 tourists further exacerbated tension between two countries so much so that India suspended Indus water treaty for indefinite period, shut down imports and banned Indian Air Space for Pakistani airlines. India also cancelled all visas of Pakistani Nationals and directed them to vacate India. Similarly, Pakistan suspended the Simla Agreement. It banned its Air Space for Indian Airlines.

4. The two nations theory and the consequent partition of India further left permanent scars on the Hindu-Muslim unity in India. There have been hundreds of communal riots within India after independence.

5. Emergence of Bangladesh - The two nations theory failed to account for ethnic and linguistic diversity within Pakistan. Being aggrieved of marginalisation by Western Pakistan, the Bangla speaking Muslims of East Pakistan sought after independence in 1972.

Limitations of the Two Nations Theory

1. Oversimplification of religious identity - The theory based religion as the separate identity between Hindus and Muslims, thereby, ignoring linguistic, ethnic and regional diversity. It overlooked the fact that Punjabi Muslims shared more cultural traits with Punjabi Hindus and Sikhs than the Bengali Muslims. Similarly, Bengali Muslims of East Bengal had identical cultural traits with Bengali Hindus than Muslims of Western Pakistan. This led to the creation of Bangladesh in 1972.

2. The theory failed to address the Muslim minority issues in India and Hindu minority issues in Pakistan. The theory divided Muslim population into three countries of Pakistan, India and Bangladesh, thereby weakening their political stature within India. This gave rise to the Hindu Nationalists in India. Moreover, while the population of Hindus got reduced from 21% to 3%, in Bangladesh, the Hindu population dwindled from 31% to 8-9%. On the other hand, the Muslim population within India rose from 35 million to 180 million. Thus, the theory did not take into account the plight of the 1/3rd of Muslims who remained within India.

3. The theory disrupted the economy of India so much so that most of the food producing areas went to western Pakistan. It created a food shortage in India. While maximum jute producing areas remained in eastern Pakistan, the maximum jute factories were located around Kolkata. The social fabric of Punjab and Bengal was completely torn.

4. Two nations theory further destroyed the composite culture and Hindu Muslim coexistence developed through centuries by the efforts of saints of Bhakti and Sufi movements. It created a permanent chasm between two communities within India and Pakistan. It struck at the root of shared cultural practices in the field of architecture, sculpture, paintings, literature, music , dance, drama and cinema.

5.But in spite of the enunciation of two nations theory, India could not have been partitioned. If the Britishers would have been neutral. According to he noted scholar, Istiyak Ahmad, the partition was effected by the Britishers to subserve its imperialist interests in the Middle East and to get concession from Pakistan with regard to its air base and recruitments of Muslim Soldiers to serve the British Empire. According to him, a united India could not be a pliable tool of the British imperialists.

Conclusion

The two nations theory caused immense suffering among the people of the Indian subcontinent. It was an artificial theory to give ideological support to Ashrafia (Upper class)Muslims to get a separate homeland. Its emphasis solely upon religious identity, ignoring linguistic, ethnic and cultural cohesiveness was erroneous. Because of this theory, both Pakistan and India have been suffering. Lakhs of people on either side have been killed since partition. Pseudo war is still going on between both countries.

What is terrorism? What should India do to tackle the menace of terrorism

 Why is it in the news? 

1. 26 tourists including two foreigners were killed by a group of terrorists in the upper reaches of Pahalgam on 22nd April,2025.  A huge number of people were also wounded.

2. This is the first major terror attack on civilians in Kashmir since the centre ended the special status of Jammu & Kashmir by abolishing article 370 in 2019.  

3. The resistant front, an offshoot of Lashkar-e-Taiba, claimed responsibility for the attack. However, the security agencies did not confirm the veracity of the claim. The outfit alleged that 85000 domicile certificates have been issued to non-locals, creating a pathway for demographic change in Jammu & Kashmir. Violence will be directed towards those attempting to settle illegally. 

4. Important world leaders like the US President Trump, France President Macron, the UKs Prime Minister Keir Starmer reacted sharply on the dastardly act of terrorists and extended full support to India and families of victims.   

 Government’s response

1. The Union Home Minister rushed to Srinagar to assess the situation. All top brass of Jammu & Kashmir officials were present during the meeting along with the Union Home Minister. 

2. Police and paramilitary forces launched a massive search for the perpetrators of the attack. 

3. India announced a closure of the border with Pakistan and curbs on the special visa programme. 

4. The Government has also suspended the Indus water treaty of 1960 whereby, the waters of rivers of Sindhu, Chenab and Jhelum were to be utilised by Pakistan and waters of rivers of Ravi, Beas and Sutlaj were to be used by India. 

5. India has also downgraded its diplomatic ties with Pakistan. The Bagha border was shut down for an indefinite period. 

What is terrorism?

1. Terrorism is the unlawful use of violence against civilians to achieve political, ideological, religious or social objectives. It creates a sense of fear among the population, coercing the government in accepting the demands of terrorists. The modus operandi of terrorists includes bombing of major Government installations, shooting of high profile personalities to create havoc among people, hijacking of aeroplanes and cyber attacks. These non-state actors are sometimes supported by a government to achieve the desired end. For example, terrorist outfits have been supported by the Pakistan Government to liberate Jammu & Kashmir from India for the last 30 years.  

2. These terrorist outfits often cross the line of actual control or international border and target security forces, civilians. They damage infrastructure. They resort to suicide (Fiyadin) attack. They adopt propaganda, radicalised youths to sustain insurgency. They smuggle weapons, explosives and funds across borders to sustain terror operations. 

Difference between terrorism and insurgency?

1. Definition : Terrorism involves the deliberate use of violence to create fear among the population and the government to achieve specific political, ideological or religious goals.  It is carried out by non-state actors. 

Insurgency is a prolonged, organised armed rebellion against the existing government in order to overthrow it. Thus, it wants to replace the existing government with its own government. 

2. Objectives : It wants to achieve a specific goal. Its main focus is to get maximum traction by causing high profile devastating acts. 

Insurgency on the other hand has a political vision. It wants to gain territorial control. It seeks to overthrow the existing government. 

3. Targets : Terrorist outfits target civilians, public infrastructure, bombing of crowded markets, thereby, disrupting normal life and creating panic among people. 

Insurgency on the other hand targets police and paramilitary forces, government infrastructure. It avoids widespread targeting of civilians so that they should not lose their support. 

4. Methods : Terrorists outfits operate clandestinely to evade detection. They rely upon the high impact of their terrorist activities. For example, Jaish-e-Mohammad (JeM) targeted CRPF in 2019 killing more than 40 security forces in Pulwama. 

Insurgency on the other hand resorts to sustained Guerrilla warfare, ambushes and sabotage to challenge state forces over time.  It seeks to control territory and establish a parallel government to disrupt state administration. 

In short, terrorism involves small groups having the target to achieve specific ends, on the other hand insurgency involves well organised groups with clear leadership and political objectives. 

Causes of terrorism?

Terrorism in India has stemmed from the variety of interconnected causes. Important causes for the rise of terrorism in India are

1. Cross border terrorism - Several terrorist outfits like Lashkar-e-Taiba (LeT) ,Jaish-e-Mohammad (JeM) are being supported by Pakistan to destabilise Jammu & Kashmir. These terrorist outfits have been engaged in J & K for the last 30 years. Thousands of civilians, security forces and terrorists perished. 

2. Feeling of separatism - States like Nagaland, Manipur, Mizoram, Tripura always sought for autonomy or secession from the Indian Union because of the perceived neglect or oppression. 

3. Ethno-religious conflicts - Long standing disputes between different religions and ethnic groups have often led to communal violence in India. 

4. Nasalism - On account of social economic inequalities, land alienation and tribal exploitation, Naxalites have been resorting to violence against the Government. These naxalite groups are very much active in the states of Chhattisgarh, Jharkhand and Odisha.  

5. The rise of radicalisation of youths - Radicalization is a process by which individuals or groups adopt extreme political, religious or ideological beliefs often leading to the endorsement of use of violence to achieve the goal. It is driven by a combination of push and pull factors. Push factors include political grievances, economic marginalisation. Social alienation and psychological trauma on account of loss of one’s close relatives. Pull factors include ideological appeal to promise justice and empowerment, the use of social media to get messages from extremists and a sense of belonging to a particular terrorist group which provides them economic sustenance. 

Important terrorist outfits in India. 

1. Lashkar-e-Taiba - It was founded in 1987 by Hafiz Sayyid in Pakistan. It wants to liberate Kashmir from India. It attacks on security forces and civilians of Jammu & Kashmir. It is held responsible for the 2001 attack on Indian Parliament and 2008 Mumbai attacks. It is getting support from Pakistani ISI. It engages in cross border infiltration, usage media for propaganda and recruitment and indulge in suicide attacks and bombings. It is a major threat to the security of Jammu and Kashmir. 

2. Jaish-e-Mohammad (JeM) - It is a Pakistan terrorist outfit, established by Masud Azhar in 2000. It seeks to merge Jammu & Kashmir with Pakistan. It was involved in the 2019 Pulwama attack whereby 40 CRPF personnels were killed. It was involved in the Pathankot  air base attack in 2016. 

3. Hizbul Mujahideen (HM) - It was established in 1989 in Jammu & Kashmir. It is pro Pakistan. It seeks secession of Jammu & Kashmir from India and integration with Pakistan. It operates Guerilla warfare against Indian security forces. It adopts hit and run tactics. It coordinates with Pakistan based terrorist groups for arms, training and funding. Its influence has weakened because of the heavy crackdown by Indian security forces. 

4. Indian Mujahideen (IM)  - It emerged as an offshoot of the students Islamic movement of India (SIMI) in 2000. Its aim is to establish an Islamic caliphate in India. It believes in retaliating against perceived anti-Muslim policies. It is active across India, targeting urban centres outside Jammu & Kashmir. It was responsible for bombings in cities like Delhi (2011) and Hyderabad (2013). It collaborates with Pakistani based groups like LeT for funding and logistics. It operates in a very decentralised manner to evade detection. Its influence has become off late on account of countermeasures by security forces. 

5. Al Qaeda in the Indian subcontinent (AQIS) - It was founded in 2014 as a regional branch of Al Qaeda based in Pakistan. Its ideology is to establish an Islamic Caliphate in India. Its modus operandi is online propaganda to inspire lone wolf attacks. It targets disaffected youths in Jammu & Kashmir and other regions. Its area of operation is very much limited in India but its activity is a matter of concern because of its global network.   

6. Islamic States (ISIS) - Its branch emerged in 2016. Its aim is to establish a caliphate in India and wage war against the Indian State. 

7. It is active in the UT of Jammu & Kashmir, state of Kerala and others. It targets Shia Muslims, Hindus and security forces to create communal discord. 

It has a limited presence in India but poses a growing threat due to its global network. 

8. Communist party of India (Maoist) - It was formed in 2004 by the merger of two major Naxalite groups of People’s War Group (PWG) and Maoist communist Centre of India (MCCI). Its ideology is to overthrow Indian states and establish a classless society based on the principles of Marxism, Leninism and Maoism. It targets feudal structures, capitalism and state institutions. It claims to represent marginalised tribes and rural communities. It is very much active in the states of Chhattisgarh, Jharkhand, Odisha, Bihar, Andhra Pradesh, Telangana and Maharashtra, cumulatively called Red Corridor. It conducts raids upon Government officials, uses IED (Improvised Explosive Devices) against security forces. It runs parallel administrations in some areas, collecting taxes and providing relief to the local population to garner their support. It uses propaganda to mobilise tribal communities against land acquisition and industrial projects. The countermeasures by the security forces weakened their strengths in the states of Chhattisgarh and Maharashtra. In 2025, so far more than 100 Naxalites have been killed by security forces. 

9. People’s Liberation Guerrilla Army - It stands for Maoist ideology. It wants to protect tribal rights in the states of Chhattisgarh, Jharkhand, Odisha and Maharashtra. It adopts Guerrilla tactics to evade security forces. It conducts ambushes and attacks on security forces by the use of IEDs. It sabotages government infrastructure like roads, bridges to cut off the presence of government machinery. It conducted the 2013 Darbha Valley attack (Chhattisgarh) whereby 27 Congress leaders were killed. 

Thus, while terrorism in J&K is driven by cross border support, religious extremism and geo political factors, Naxalite violence is domestic insurgency rooted in social, economic and ideological grievances. 

10. Khalistan liberation force and Babbar Khalsa international are Sikh extremist groups seeking a separate Sikh state (Khalistan) in Punjab. They are very much active in Punjab and abroad. Off late their strengths have very much weakened. 

11. North East insurgent groups like ULFA-I and NSCN are active in the states of Assam Nagaland, and Manipur. They seek autonomy or secession in the Indian Union because of the Assam Accord in 1985 and Mizo Accord in 1987 and the implementation of Armed Forces Special Powers Act (AFSPA) broke the bone of different insurgent outfits in Northeastern regions and they have become now fragile. 

Consequences of terrorism 

1. Disruption of tourism in J & K

2. Damage to infrastructure from attacks

3. Loss of lives of civilians, security forces and terrorist

4. Exodus of Kashmiri Pandits

5. Causes political instability.

6. Hampers democratic processes

7. Creates wedge between different communities, thereby leading to communal tensions

8. Alienation of youths and their radicalisation

9. Strain on the government resources because of the heavy expenditure on security forces

10. Strained India-Pakistan relations, sometimes bordering on the outbreak of war. 

11.Air strikes by the security forces in the interior of Pakistan

Counter measures by the Government of India to tackle terrorism in India

1. India has enhanced border surveillance like drones, thermal imaging and motion sensors to curb cross border infiltration by various terrorist groups. 

2. India has adopted the comprehensive integrated border management system which includes electronic surveillance and physical barriers along the India-Pakistan border to prevent smuggling of arms and ammunition. 

3. The security forces conduct cordon and search operations on the regular basis to flush out militants and dismantle their hideouts on the basis of intelligence inputs. 

4. India has also conducted surgical strikes in 2016 and 2019 to deter cross border terrorism. 

5. In Naxal affected areas, the security forces launched operation Green Hunt (2009-13) and operation Prahar to target the strongholds of Naxalites in the state of Chhattisgarh, Jharkhand, Odisha. 

6. The security forces pressed into service the COBRA (Commando Battalion for Resolute Action) to flush out Naxal hideouts in dense forests, 

7. The Government equipped security forces with advanced weaponry, bullet proof vests and night vision devices to enhance operational efficiency. 

8. The government established the National Investigation Agency (NIA) in 2008 to investigate and prosecute terrorism related cases across India, bypassing state jurisdiction.    

9. Armed forces (Special Powers) Act (AFSPA)  was applied in the disturbed areas of Jammu & Kashmir and North Eastern regions.

10. UAPA (Unlawful Activities Prevention Act),1967, was further strengthened by designating individuals and organisations as terrorists. It provides prolonged detention without bail and seizure of assets linked to terror financing. 

11. The Government enacted the Prevention of Money Laundering Act (PMLA) 2002 to tackle and track illicit financial flows and provision for the seizure of ill gotten assets. It keeps a strict tap upon hawala transactions. 

12. India has banned numerous terrorist groups like LeT, JeM, Hizbul Mujahideen, CPI Maoist and Islamic State. 

13. Different intelligence agencies like Intelligence Bureau (IB), Research and Analysis Wing (RAW) and State intelligence agencies cooperate and coordinate among themselves to facilitate real time information exchange. 

14. The central government has taken several measures for the development of infrastructure like roads, schools, hospitals. It focused upon skilled development and job creation for Kashmiri youth. An effort has been made to promote tourism to revive the economy of Jammu & Kashmir. 

15. Similarly, in the Naxal affected areas, an effort has been made to improve access to education, healthcare and housing of tribal youths. The Government launched rehabilitation along with the surrender policy. The surrendered Naxalites are provided vocational training and stipends. 

16. The central government as well as state government in J&K launched de-radicalisation programmes by associating and collaborating with local leaders to counter extremists narratives propagated by terrorist groups. 

17.  The government has restored democratic process in J & K by conducting local elections and by empowering Panchayati Raj institutions. 

18. The Government of India used international fora like the UN and Financial Action Task Force to hold Pakistan accountable for supporting terrorism in J&K. India pushes for the extradition of terrorists like Hafiz Sayyed and Mashud Azhar.

19. The enforcement directorate and financial intelligence unit freeze assets linked to terror financing, crackdowns on drug trafficking and armed smuggling along the India Pakistan border. 

Conclusion

1. The Government has employed a multipronged approach to counter terrorism. It has enhanced intelligence gathering, strengthened security operations and made stringent laws to tackle terrorism. It also launched socio economic development programmes, counter radicalisation and sought international cooperation. After the revocation of article 370 and downgrading of the state of Jammu & Kashmir to union territory the frequency of terrorist activities has come down in recent years. Similarly, the pro-active approach of the security forces in Naxal affected areas further weakened the strongholds of naxalites in different states of India. It is hoped that by sustained efforts, the Governments would be able to dismantle terrorist networks in J&K and naxalite strongholds in central India.

Why has Industrial Production dipped recently in the month of February in India?

 Why is it in the news? 

1. The index of industrial production grew at its slowest rate in six months, clocking a pace of 2.9% in February, thereby decelerating growth across all sectors according to data from the Ministry of Statics and Programme implementation. 

2.A combination of high base effects along with a slowing growth and manufacturing sectors led to the growth falling in the month of February 2025. Mining sector growth slowed to 1.6% in February as against 8.1% in the same month of the previous year. Manufacturing sector grew at a pace of 2.9% as against 4.9% in the previous year. Electricity production dipped to 3.6% in the month of February 2025 against 7.6%  last year. 

3. As per use based classification, capital goods output grew the fastest at 8.2% in the month of February 2025 against the 1.7% in the corresponding month in 2024. All other goods categories registered a slower output growth in February 2025 compared to the corresponding month last year. Intermediate goods output grew the slowest at 1.5%, consumer non durable at 2.1% against 3.2% the last year.  

4. ​In February 2025, India's consumer durables sector experienced a year-on-year growth of 3.8%, marking a significant slowdown compared to the 12.6% growth recorded in February 2024.

The deceleration in consumer durables growth reflects challenges such as subdued urban demand and global economic uncertainties. However, the resilience in capital and infrastructure goods points to ongoing investment momentum, potentially offsetting some consumption weaknesses.​

What is the index of industrial production? How is it calculated?

1. The index of industrial production is a monthly economic indicator published by the National Statistical Office to measure the short term changes in the volume of production of selected industrial sectors in India. It is a key measure to track industrial activity and is often used by policy makers, economists and analysts.   

2. IIP includes three major sectors : These are manufacturing, having a weightage of 77.6%, mining 14.4% and electricity 8.0%. 

3. IIP is also classified by use based sectors like primary goods, capital goods, intermediate goods, infrastructure/construction goods, consumer durables and consumer non-durables. 

4. To calculate IIP, the base year is 2011-12. The formula for IIP is IIP=∑(Wi​×Ri​)​ / ∑Wi​

Where:

Wi = Weight of i-th product.

Ri = Production index of i-th item = Current production / base year production * by 100. 

Sector	Weight	Base year Production	Current Production	Ri
Manufacturing	77.6	100 units	110 units	110
Mining	14.4	100 units	90 units	90
Electricity	8.0	100 units	105 units	105

IIP = ( 77.6 * 110) + (14.4 * 90) + (8.0 * 105) 

77.6 + 14.4 + 8.0

   =  8536 + 1296 + 840 

100

= 10672/100 = 106.72 

So the IIP would be an increase of 6.72% in industrial production compared to the base year. Thus, IIP is a crucial indicator of India’s industrial performance and provides valuable insights for policy formulation. However, being a volume index, it does not reflect price changes or productivity improvements. 

Why has industrial production dipped recently in India?

1. The industrial production in India has experienced a severe slowdown in the month of february 2025 at 2.9% YoY basis falling short of the anticipated 4% growth. There were several factors for the poor growth of the industrial sector. These are : 

• weak domestic demand - Consumer demand in rural areas has been sluggish because of the stagnant wage growth and high borrowing cost. This led to the low spending on consumer goods leading to the lower production of consumer durables and non-durables. 

• Global economic headwinds - The slow down in the global demand has adversely affected India’s export of textiles, pharmaceuticals and electrical equipment. The declines in export, in turn , led to the contraction in the output of manufacturing goods. 

• Under performance of production linked schemes - India’s $23 billion production linked scheme aimed at boosting domestic manufacturing has underperformed. Only a fraction of the allocated funds has been disbursed. Thus, the scheme has failed to meet production targets. 

• Adverse weather conditions - Excessive rainfall in August 2024, disrupted mining activities, thereby, contributing a contraction in the mining sector and affecting overall industrial output. 

• High interest rates - The policy of the Reserve Bank to hike interest rates to combat inflation have increased borrowing cost, leading to reduced consumer spending and lower corporate investments. 

How can the growth in industrial production be increased?

1. Boost domestic demand by lowering interest rates to encourage consumption and investment. That's why the RBI has reduced the Repo Rate from 6.25% to 6% to enhance consumption demand. Secondly, there is a need to enhance rural income through MGNREGA , MSP rationalisation , rural infrastructure  and enhanced amounts under PM-Kisan. There is also a need to give tax incentives so that people may purchase durable as well as non durable goods. 

2. Strengthening of manufacturing ecosystem should be resorted to by revamping PLI scheme, ease of doing business, ease compliance burden of MSMEs through digital single window system and adopting cluster based development sectors like textiles, electronics and pharmaceuticals. 

3. Improving infrastructure by accelerating projects under PM Gati Shakti, providing continued power supply for industrial clusters and industrial corridor development. 

4. Increasing export competitiveness by reducing logistic costs from 14% of GDP in India to 8% of GDP like in China, making headway by signing free trade agreements with different countries of the world  for having wider access to the global market and incentivising high value exports over raw materials/ traditional items. 

5.  Innovating and skilling through expansion of skill India Mission with a focus on AI, Robotics, Electronics and Green tech, strengthening research and development through public and private partnership and establishing innovation clusters like IITs and IIITs. 

6. Disposal of litigation through fast track courts and acquisition of land within the time limit. 

Government Efforts 

1. The Government made several provisions for the improvement in the industrial production in India in the Union Budget 2025-26. This includes the launching of a National Manufacturing mission with a focus on cluster based development, support for MSME and start up by providing loans up to 2 crores to 5 lakh first time entrepreneurs for women SC and ST categories. 

The budget further revised the classification norms for MSMEs for better access to beneficiaries. The budget also allocated 1.5 lakh crore interest free 50 year loans to interest for capital expenditure. It also provided for the expansion of PM Gati Shakti for better logistics and industrial connectivity. It further created a 25 thousand crore maritime development fund to support ship building. 

It also increased allocation for research and development and innovation hub under start up and digital India. It also pushed for adoption of industries 4.0 technologies like Ai, IOT and automation in industrial processes. 

2.The budget further rationalised custom duties on critical raw materials to reduce input costs. 

Conclusion

The Union Budget 2025-26 reflects a strategic push towards strengthening India’s industrial base through support to MSMEs, infrastructure expansion and sector specific initiatives. 

To boost industrial production in India, a multi pronged strategy is essential. While there is a need to improve infrastructure, simplify regulation, enhance skill development, support MSMEs and promote technology adoption, there is further need to have coordinated efforts from the government, industry and financial institutions so that India can unlock its manufacturing potential and emerge as a competitive global industrial hub.