New Delhi, Sept. 8 -- For years, India has worried about the declining share of manufacturing in its economy. Two decades ago, the sector contributed nearly 18% of gross value added (GVA). Today, that number has slipped below 14%.

At first glance, this decline is both puzzling and disheartening, especially when set against the country's ambition of lifting manufacturing's share in GDP to 25%. After all, the share of manufacturing in the country's gross value of output (GVO) has held steady at around 38%-almost the same as services. So, why is the manufacturing share of GVA low?

The answer lies not so much in output, but in prices. In GVA terms-which measure a sector's 'net contribution' after subtracting inputs-manufacturing looks far s...