Exploring how India is positioning itself as an alternative manufacturing hub amid global supply chain shifts
Over the past decade, India has made a deliberate push to strengthen its manufacturing sector. Initiatives such as “Make in India,” Production Linked Incentive (PLI) schemes, and large-scale infrastructure investments are designed to transform the country into a major manufacturing destination.
This push comes at a time when the global manufacturing landscape itself is changing. Trade tensions, geopolitical competition, pandemic disruptions, and rising costs in traditional manufacturing hubs have forced multinational companies to rethink their supply chains.
The key question now is whether India can convert this moment into a long-term opportunity.
Can India become a major global manufacturing hub — or even a supply chain powerhouse — in the coming decades?
The answer lies in understanding both the opportunities and the challenges that shape India’s manufacturing transformation.
The Global Supply Chain Shift
For nearly three decades, global manufacturing was dominated by a single country: China.
China built an unparalleled industrial ecosystem combining:
- massive factory clusters
- world-class logistics infrastructure
- skilled labor pools
- integrated supply chains
- export-oriented policies
Today, China produces roughly 28–30% of global manufacturing output, far ahead of any other country. (ET Edge Insights)
However, several developments over the past decade have started to reshape this model.
Major factors include:
- U.S.–China trade tensions and tariffs
- pandemic-related supply chain disruptions
- geopolitical competition
- companies seeking diversification and resilience
As a result, many multinational companies have adopted what analysts call a “China+1” or “China+Many” strategy — keeping production in China but diversifying part of their manufacturing base to other countries. (ET Edge Insights)
This shift has opened new opportunities for emerging manufacturing destinations such as:
- Vietnam
- Mexico
- Indonesia
- Thailand
- India
Among these, India has the potential to become one of the largest alternatives due to its scale, workforce, and domestic market.
The Origins of “Make in India”
India launched the Make in India initiative in 2014 with a clear objective:
to increase the share of manufacturing in the economy and generate large-scale employment.
At the time, policymakers hoped manufacturing would reach 25% of GDP over time. However, the sector still contributes roughly 15–17% of India’s GDP, showing both progress and remaining challenges. (Ken Research)
The strategy behind Make in India focuses on several pillars:
- encouraging domestic production
- attracting foreign investment
- improving ease of doing business
- building industrial infrastructure
- integrating India into global value chains
Over time, this strategy has evolved beyond slogans into a more detailed industrial policy framework.
Production Linked Incentives (PLI): India’s Industrial Strategy
One of the most important policy tools supporting India’s manufacturing push is the Production Linked Incentive (PLI) scheme.
Introduced in 2020, the program provides financial incentives to companies based on their production output and incremental sales.
The scheme currently covers 14 major sectors, including:
- electronics and smartphones
- semiconductors
- pharmaceuticals
- solar modules
- automobiles and EV components
- textiles
- telecom equipment
By mid-2025, investments under the PLI scheme had crossed ₹1.88 lakh crore (about $21 billion) across these sectors. (India Brand Equity Foundation)
The objective is not just to expand domestic manufacturing but also to make India part of global supply chains.
In some sectors, the results are already visible.
Electronics: The Fastest Growing Sector
The electronics sector has emerged as one of the biggest success stories of India’s manufacturing strategy.
Mobile phone production in India has expanded rapidly over the past decade, driven by government incentives and the entry of global manufacturers.
Exports of mobile phones, which were negligible a few years ago, reached $15.5 billion by FY2025, making India one of the world’s largest smartphone exporters. (ET Edge Insights)
Major global companies such as Apple’s contract manufacturers — Foxconn, Wistron, and Pegatron — have expanded production in India.
India now produces a growing share of global smartphone output.
However, much of this production still focuses on assembly rather than high-value components — highlighting the next stage of industrial development India must achieve.
Automotive and EV Supply Chains
India’s automotive industry is another important pillar of manufacturing.
The country already ranks among the world’s largest automobile markets and exporters of auto components.
The shift toward electric vehicles (EVs) is creating new opportunities in areas such as:
- EV battery components
- electric drivetrains
- power electronics
- charging infrastructure
India has begun positioning itself as a supplier of EV components for global markets.
Automotive component manufacturers already generate significant export revenue and are integrating into international supply chains.
Renewable Energy Manufacturing
India’s push toward renewable energy is also reshaping the manufacturing landscape.
Government programs have encouraged domestic production of:
- solar photovoltaic modules
- battery storage systems
- green hydrogen technologies
For example, PLI incentives for solar manufacturing have supported large new factories and thousands of jobs in the sector. (The Times of India)
India hopes to become a major exporter of renewable energy components in the coming decade as the global energy transition accelerates.
The Role of MSMEs in Manufacturing
One often overlooked aspect of India’s manufacturing ecosystem is the importance of micro, small, and medium enterprises (MSMEs).
These businesses form the backbone of India’s industrial supply chains.
According to government data, MSMEs contribute:
- 35.4% of manufacturing output
- 48.6% of exports
- over 30% of GDP
They also employ hundreds of millions of workers across the country. (The Economic Times)
For India to become a global manufacturing power, these smaller enterprises must be integrated into modern supply chains and supported through technology upgrades and access to finance.
Infrastructure: A Critical Enabler
Manufacturing competitiveness depends heavily on logistics and infrastructure.
Over the past decade, India has made large investments in:
- highways and expressways
- dedicated freight corridors
- port modernization
- industrial corridors
- logistics parks
Projects such as the Delhi–Mumbai Industrial Corridor and new manufacturing clusters are designed to reduce logistics costs and attract global investors.
Improved infrastructure is essential for making Indian factories competitive in global markets.
Why Global Companies Are Looking at India
Several structural advantages make India attractive as a manufacturing destination.
1. Large Domestic Market
India’s population of more than 1.4 billion provides a massive consumer market, encouraging companies to produce locally.
2. Demographic Advantage
India has one of the youngest workforces in the world, offering a large labor pool for industrial expansion.
3. Engineering Talent
The country produces millions of engineers and technical graduates every year, supporting high-technology manufacturing.
4. Geopolitical Alignment
Many Western companies view India as a strategically aligned partner compared with some other manufacturing locations.
Together, these factors create a strong case for India as a long-term manufacturing base.
Challenges India Must Overcome
Despite progress, several challenges still limit India’s manufacturing potential.
1. Supply Chain Depth
China’s manufacturing dominance comes from deeply integrated supply chains. India still relies heavily on imported components in many sectors.
2. Regulatory Complexity
Bureaucratic processes, land acquisition challenges, and inconsistent regulations can discourage investors.
3. Logistics Costs
While improving, logistics costs in India remain higher than in several competing manufacturing countries.
4. Competition from Southeast Asia
Countries such as Vietnam and Thailand have successfully attracted large manufacturing investments due to faster approvals and export-focused policies.
India must continue improving its business environment to remain competitive.
The Manufacturing Opportunity of the Decade
Despite these challenges, the global economic environment is creating a rare opportunity for India.
Companies no longer want to depend on a single manufacturing location.
Supply chain diversification has become a strategic priority.
This shift may not completely replace China’s dominance, but it could redistribute parts of global manufacturing across multiple countries.
India’s potential role may therefore be complementary rather than identical to China’s manufacturing model.
Rather than becoming the “factory of the world” overnight, India could become a major hub for:
- electronics assembly and components
- pharmaceuticals
- automotive and EV supply chains
- renewable energy manufacturing
- engineering goods
Looking Ahead: The Next Phase
If India continues implementing structural reforms, the next decade could see significant expansion of its manufacturing sector.
Key priorities include:
- building deeper domestic supply chains
- investing in skills and workforce training
- improving logistics infrastructure
- simplifying regulatory frameworks
- strengthening export competitiveness
If these steps succeed, India could substantially increase its share in global manufacturing exports — currently around 1.8% — and become a much larger player in international supply chains. (China Briefing)
Conclusion
India’s manufacturing push represents one of the most important economic strategies of the 21st century.
The country’s combination of demographic strength, digital capabilities, infrastructure investment, and industrial policy gives it a unique opportunity to expand its role in global production networks.
However, becoming a global manufacturing powerhouse will require sustained effort, policy consistency, and private-sector innovation.
The coming decade will reveal whether India can convert its manufacturing ambitions into lasting industrial leadership.
If successful, the Make in India vision could reshape not only India’s economy but also the global supply chains that connect industries across continents.
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