Globally due to its investment intensiveness, manufacturing is a government supported activity with benefits of new technology and processes. A comparative study of development of the industry in East Asian countries including China reveal an active role for government in helping the industry to converge to a private, market driven path to global competitiveness through government coordinated effort by banks, external funding agencies, industry associations and research institutions. The resultant creation of appropriate institutions help reduce role of government in development of manufacturing industry after its performance consistently exceeded overall performance of respective economies. Given the role of government and market forces in shaping the policy environment of an industry, early state monopoly in the manufacturing industry in Indian followed by liberalization and market convergence as a political ideology was seriously questioned for the sub-optimal improvement in global scale efficiency of manufacturing industry. With societal and industry priorities codified in institutions, manufacturing industry policy in India that reflected state structure and power, was progressively getting out of tune with changing needs of global standards highlighting the need for appropriate institutions to restore the balance. In this paper it is attempted to review how institutional mechanisms can provide fillip to the Indian manufacturing industry.
