India’s Industrial Policy 2.0, through the BHAVYA scheme, aims to scale plug-and-play industrial parks nationwide; their long-term success will depend on integrated, inclusive, and ecosystem-driven industrial development rather than infrastructure alone.
With an outlay of approximately INR 33,660 crore (US$ 4 billion), the Union Cabinet announced the Bharat Audyogik Vikas Yojana (BHAVYA) in March 2026 to develop plug-and-play industrial parks across the country. While relatively understated, the announcement underscores India’s growing focus on supporting industrialisation and economic restructuring. The BHAVYA initiative aims to drive job creation across logistics, manufacturing, and services while developing core value-added infrastructure. Industrial parks in developing economies are increasingly being adopted to maximise scarce resources within defined geographic areas. Their strength lies in leveraging the country’s comparative advantage and enhancing its international competitiveness in global value chains.
Industrial parks in developing economies are increasingly being adopted to maximise scarce resources within defined geographic areas.
China offers a notable example of how governments have used industrial parks to drive technological innovation and industrial development. First established in the 1980s, China adopted this approach to promote institutional innovation within its export-oriented socialist economy. The United Nations Industrial Development Organisation (UNIDO) highlights that industrial parks in China have played a critical role in regional economic development, urbanisation, and improvements in living standards. China has over 2,500 national and provincial industrial parks, which contribute nearly 50 percent of the national GDP. Key parks are located near coastal areas and focus on the manufacturing of renewable energy equipment, electronics, biomedicine, textiles, clothing, footwear, and food processing. More recently, the country has been focusing on transforming its industrial areas into “Zero-Carbon Parks” to reduce carbon emissions. This not only supports the goal of achieving carbon neutrality but also creates new market opportunities in areas such as carbon trading, carbon asset management, energy auditing, and green finance services. These initiatives also align with global trade requirements for green labelling and provide a competitive edge.
China’s success story reveals that industrial parks are not merely infrastructure-led developments but also strategic, planned, and managed industrial ecosystems. Their focus is not limited to enhancing GDP or exports, but also on jobs, innovation, and environmental protection. They were planned with a clear objective to optimise access to labour, utilities, and transport to accelerate regional development. The parks were not constructed with a one-size-fits-all model, but by integrating local conditions and strengths. This was accompanied by a conducive regulatory framework and strong institutional management structures, with centralised, streamlined administrative authorities. They focused on innovation and on moving industries up the value chain through IP support, incubators, and talent programmes. Finally, they were built on a strong foundation to improve living conditions within the park by providing access to medical facilities, education, housing, and community development.
China’s success story reveals that industrial parks are not merely infrastructure-led developments but also strategic, planned, and managed industrial ecosystems.
India has achieved substantial success in establishing industrial parks. It has over 4,500 industrial parks, with the highest number located in states such as Andhra Pradesh, Maharashtra, Rajasthan, and Karnataka. Indian industrial parks, however, face several challenges, including a lack of investment, delays in clearances, and a tendency to adopt an infrastructure-first model rather than an ecosystem-based approach. In many cases, parks are established before assessing potential demand and suitability, indicating weak planning at the design stage. According to the Industrial Park Rating System (IPRS) 2.0 report, information gaps and lack of visibility remain key constraints in developing India’s industrial land ecosystem.
To counter this, the India Industrial Land Bank (IILB) has been created to improve transparency, thereby aiding planning and prioritisation. The report indicates an uneven distribution of parks, with the highest concentration in the western and southern regions. This calls for stronger strategic planning to ensure more balanced regional development, particularly in underrepresented areas such as the North-East, Central, and Eastern regions. Moreover, most industrial parks are publicly owned, with limited private-sector participation, which could result in lower investment and reduced capital allocation to these parks. However, the report insufficiently addresses worker living conditions, particularly housing, utilities, and connectivity. Studies of certain industrial areas in India have shown a lack of essential amenities, alongside high transportation and operational costs for workers, leading in the long run to negative spillovers on the profitability of industrial sites.
According to the World Economic Forum (WEF), traditional industrial policy often focused narrowly on subsidies, protection, or sector-specific incentives. Industrial Policy 2.0 is more systemic, seeking to integrate infrastructure, innovation, skills, finance, trade, technology adoption, sustainability, and cluster development into the competitiveness agenda. China’s industrial policy reflects this broader approach. For countries designing their own Industrial Policy 2.0, the key lesson from China is therefore not to replicate industrial parks, special economic zones, or incentive schemes, but to build an integrated ecosystem-based approach that allows reduced transaction costs, enables firm-level upgrading, deepens supplier networks, supports innovation, and connects production clusters to domestic and global markets.
The success of India’s Industrial Policy 2.0 will depend on strong industrial clusters; however, these must shift from mere production hubs to ecosystem-based spaces anchored in inclusion and sustainability.
The BHAVYA initiative is an important step towards shifting India’s industrial park strategy from a land-based model to an ecosystem-based approach. While industrial clusters have created basic physical infrastructure, the next stage of reform must focus on strengthening the ecosystem around enterprises. This would include strengthening business support services such as common testing, certification, design, skill centres, and industry–academia linkages. The parks must also invest in housing, mobility, healthcare, education, gender-sensitive infrastructure, and community amenities, enabling them to function as productive industrial ecosystems that drive regional development.
To remain competitive, BHAVYA-linked parks should integrate zero-carbon and technologically intelligent industrial ecosystems. This would require renewable energy, energy-efficient buildings, carbon accounting, and circular manufacturing systems. They need to enable firms to adopt cleaner production processes and support sustainability-linked certifications. On the digital front, AI-enabled common infrastructure can be developed to promote efficient planning and logistics optimisation. Additionally, connectivity should be treated as a cornerstone of industrial infrastructure, with parks designed to ensure strong links to multimodal logistics hubs, inland corridors, and export hubs, enabling their integration into global value chains.
The success of India’s Industrial Policy 2.0 will depend on strong industrial clusters; however, these must shift from mere production hubs to ecosystem-based spaces anchored in inclusion and sustainability.
Shruti Jain is an Associate Fellow with the Centre for Development Studies at the Observer Research Foundation.
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Shruti is an Associate Fellow at the Centre for Development Studies, Observer Research Foundation (ORF), where her research examines the intersections between policy, economic diplomacy ...
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