Best of the Week: India's manufacturing dream has a labour problem

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Picture this: It’s 6.30 am, somewhere in Manesar or Hosur, and a factory supervisor is already on the phone, begging local contractors to send over enough workers to keep the assembly line running. This isn't a one-off crisis, it's India's new normal, and it's threatening the country's biggest economic ambition of becoming a manufacturing powerhouse.

Take Ankit Mathur of Greenway Grameen Infra. When demand for his biomass cookstoves spiked in March, he needed 40 extra workers. He got half, after two frustrating weeks of contractors ghosting his calls. In Bengaluru, a garment maker has 20 sewing machines sitting idle, not for lack of orders, but because "no one wants to work in factories anymore." They'd rather deliver food on bikes.

India actually has more factories and workers than ever, 200,000-plus factories employing 18.5 million people, nearly double 2001 levels. So why the shortage? It comes down to a mismatch. Educated young Indians increasingly want office jobs, not shop floors. Meanwhile, entry-level workers say factory wages simply aren't worth it. One 20-year-old who left a Kolhapur factory job put it bluntly; after paying for food and rent, his ₹15,000 monthly salary left him poorer than selling clay diyas back home.

And wages have barely budged. Industrial pay grew just ₹22 an hour in a decade after adjusting for inflation. Compare that to China, where manufacturing wages are nearly double India's. Worse, India's productivity gap with China has widened by over $30,000 per worker since 2000, so even where labour is cheap, it isn't necessarily efficient.

There's also a quieter story here. Agriculture. Instead of migrating to cities for factory jobs, many workers are staying on farms or drifting back to them, especially post-pandemic. Why take the risk of migration when the wage premium barely exists anymore?

Automation is the fix. For one, companies like BL Agro have already cut their dependence on unskilled labour significantly. Experts also suggest skill-linked wage structures and tax incentives for smaller manufacturers to train workers directly. But can India really industrialize while its young workforce keeps choosing bikes over machines, and farms over factories? Read the full article by Megha Mandavia.

On to the best of Mint’s journalism from this week:

India gets a monthly pulse check on its services economy

For a sector that drives over half of India's economy, we've been surprisingly in the dark, month to month. That changes now. MoSPI has launched the Index of Services Production (ISP) on 14 July 2026, a monthly gauge for services, the long-missing counterpart to the Index of Industrial Production. Until now, we've relied on proxies like GST collections and PMI data to guess how services were performing. The ISP fixes that by using GST turnover data, adjusted for inflation, to measure real output across banking, IT, transport, retail and more. GST digitisation finally made monthly measurement possible. For policymakers and investors, this means an early read on India's biggest growth engine, without waiting for quarterly GDP numbers.

Why HCLTech's data-centre move isn't quite like TCS'

HCLTech placed a bet on AI's future, but investors aren't cheering yet. The company is entering the data-centre business with a ₹3,500 crore investment, becoming only the second Indian IT major after TCS to do so. The twist is that while TCS is playing infrastructure landlord for hyperscalers like Google and OpenAI, HCLTech wants the entire AI stack, data centres, compute, models and applications, all under one roof, backed by its stake in Sarvam AI, which is pretty ambitious. Except shares fell 4.42% the very next day, as the company simultaneously flagged its weakest growth guidance in four years, with AI already causing up to 3% pricing deflation in parts of its business. Brokerages call it smart positioning "ahead of the curve."

E20 backlash: The government's case, and its gaps

Notice your car drinking more fuel lately? You're not imagining it, but the government insists it's not backing down. As talk grows of pushing ethanol blending past 20%, consumer anger over E20 fuel is boiling over again. A LocalCircles survey found 66% of pre-2023 car owners reported mileage drops of over 10%, way beyond the government's claimed 3-5%. The auto industry wanted a "protection fuel" option, keeping E10 available alongside E20, like Brazil did over three decades, but the government shot that down, citing logistical chaos. Its defence? E20 means smoother performance, lower crude imports and better farmer incomes, benefits it says outweigh the mileage hit. So where does that leave your ageing car? And your wallet?

The big four are leaving the metros behind

Delhi, Mumbai and Bengaluru have long been the Big Four's playground, but that's changing. EY, KPMG, PwC and Deloitte are now setting up shop in Jaipur, Coimbatore, Bhubaneswar and Kochi, chasing ambitious promoter-led businesses hungry to scale. Deloitte's Bhubaneswar office already employs 1,000 people, aiming for 5,000. Small and mid-sized firms worth ₹200-500 crore now want the same tax, M&A and ERP expertise that once only metro clients could access. Global capability centres are fuelling demand too, with 2,117 GCCs now generating $98.4 billion in revenue. Interestingly, agentic AI is enabling this expansion, letting firms serve smaller cities without flying teams in constantly. Even talent isn't relocating anymore, accountants in Jaipur and techies in Mysore would rather stay put.

Retail bought big in June, then bailed in July

Just when retail investors seemed to be falling out of love with Indian markets, they came roaring back. After selling ₹12,000 crore in February, retail buyers poured in ₹39,287 crore in the June quarter, their biggest bet since December 2024. But they turned sellers again in July, offloading ₹2,532 crore even as foreign investors made their comeback with ₹15,793 crore in fresh buying, reversing three straight quarters of FPI withdrawals. Retail money chased beaten-down mid- and small-caps rather than the broader market, which actually fell 8.6% on the Nifty. Experts call the July exit "tactical, not structural," more profit-booking than panic, especially with SIP flows holding steady near ₹30,000 crore a month. Meanwhile, domestic institutions kept buying steadily, pumping in ₹2.2 trillion in the June quarter alone to anchor the market.

Grasim's next act: The Aditya Birla Group's business builder

Grasim Industries has quietly transformed from a maker of viscose fibre and chemicals into the Aditya Birla Group's growth engine. Its $1.8 billion acquisition of Sprng Energy through Aditya Birla Renewables highlights how Grasim now incubates and backs businesses across cement, financial services, paints, renewables and B2B commerce. The company has effectively taken over the role once played by Aditya Birla Nuvo, acting as the group's capital allocator, much like Adani Enterprises or Reliance Industries. Analysts say the model gives Grasim the financial muscle to fund new ventures, but it also raises the bar for capital allocation and governance.

RBI nudges banks as FCNR inflows lag

The RBI is pressing banks to explain why its foreign currency deposit scheme has yet to gather momentum, with FCNR(B) inflows of around $7 billion falling well short of the $30-40 billion initially expected. At a pre-policy meeting, lenders told the central bank that the scheme is still in its early stages and needs time for product rollouts, leverage arrangements and customer outreach. They also pointed to rising global dollar funding costs and NRI concerns over the rupee and broader macroeconomic uncertainty. The RBI, which has begun monitoring daily deposit data, expects banks to intensify their efforts as it looks to boost foreign currency inflows and support the rupee ahead of its August monetary policy review.

India shifts obesity focus beyond BMI

India is preparing to make waist-to-hip ratio (WHR) screening a routine part of care in government hospitals, moving beyond Body Mass Index (BMI) to better identify people at risk of diabetes and heart disease. The health ministry also plans to deploy nearly 1 million ASHA workers to conduct community-level screening, track high-risk households and promote healthier lifestyles. The shift follows evidence that BMI often underestimates obesity risks in South Asians, who are more prone to harmful abdominal fat. While experts welcome the move, some say waist-to-height ratio may be an even simpler and more practical tool for large-scale screening.

The AI startup founders who walked away

Mad Street Den was building AI long before ChatGPT made it mainstream. But after rejecting a $50 million funding deal that would have diluted early backers and weakened the founders' control, co-founders Ashwini Asokan and Anand Chandrasekaran chose to walk away instead. Founded in 2013, the Chennai startup pioneered enterprise AI infrastructure, developed technologies similar to today's retrieval-augmented generation (RAG) years before the term existed, and won global clients despite operating from India. Along the way, it trained hundreds of AI engineers, many of whom went on to companies like OpenAI and Apple, leaving behind a legacy that outlasted the company itself.

Global investing is booming, but so is the hype

Indian investors are flocking to global equity funds, with assets under management soaring from ₹15,955 crore in 2020 to ₹98,182 crore by May 2026, fuelled by the AI boom, strong US markets and the appeal of diversification. But wealth managers warn against chasing returns driven by FOMO. They caution that diversification works only if it adds genuinely different exposures, not more of the same sectors already held in India. Investors also need to account for currency swings, lofty valuations, geopolitical risks and tax compliance, as today's hottest global investing theme could quickly turn into tomorrow's bubble.

That’s all from us this week. Subscribe to our newsletters and the website for what’s in the news and beyond it. Write to us at newsletters@livemint.com.