Blitz Bureau
NEW DELHI: For decades, global manufacturing operated on a simple logic: scale, efficiency and reliability—all roads led to China. Today, that model is under strain, and it is this disruption that gives Make in India 2.0 its urgency and meaning.
Strategic rivalries, supply disruptions, pandemic lessons and rising costs are forcing companies to diversify production in ways that would have seemed improbable a decade ago.
Numerically it may not seem much, but to grow manufacturing from 17% to 25% of GDP requires ecosystem strength rather than more incentives
For India, this is more than a passing opportunity: if the first phase of Make in India was about signalling intent, the second is about execution — building supplier ecosystems, deepening value addition, scaling exports and converting a geopolitical opening into a genuine manufacturing renaissance.
India sits at the centre of this search. Armed with policy incentives, a vast labour pool and growing geopolitical goodwill, it is positioning itself as one of the most credible alternatives to China’s manufacturing dominance.
Yet the gap remains stark. China is not merely a factory; it is a complete industrial ecosystem. India, by contrast, is still assembling the pieces of such an ecosystem. That is the paradox of the present moment. India has become indispensable to the future of global supply chains, but it is not yet capable of replacing the past.
The global reset is not about abandoning China so much as managing risk. Multinational corporations are redesigning supply chains not only for lower costs but also for resilience.
As former Chief Economic Advisor to the Government, Arvind Subramanian, has argued, the world is entering an era of geoeconomic fragmentation, where political alignment increasingly shapes trade patterns. Manufacturing geography is no longer neutral.
At the same time, ex-governor of RBI Raghuram Rajan has cautioned against overestimating the speed of this shift. Supply chains are sticky — built over decades through infrastructure, trust, supplier networks and institutional predictability.
They do not move easily or entirely. What we are witnessing, therefore, is not a dramatic relocation but a gradual rebalancing.
India’s manufacturing push is not just about capturing a slice of shifting global supply chains. It is anchored in a larger national ambition: the vision of Viksit Bharat. At its core lies a long-articulated benchmark — raising manufacturing’s share of GDP from around 17 per cent today to 25 per cent.
This is more than a statistical target. It signals a structural shift in India’s growth model — from one driven predominantly by services to one anchored in industrial expansion, export competitiveness and job creation. Manufacturing remains the only sector capable of absorbing large numbers of semi-skilled workers at scale.
As India chases the Viksit Bharat vision, the real test is whether Make in India 2.0 can turn a China-plus-one opportunity into a full-fledged manufacturing transformation
As Prime Minister Narendra Modi has repeatedly emphasised, India cannot become a developed economy without a strong manufacturing base. Each incremental rise in manufacturing share carries the potential to generate millions of jobs. Yet the target has proved stubborn.
Despite years of policy focus, manufacturing’s share in GDP has remained broadly stagnant. This reflects deeper structural constraints. As Rajan has pointed out, incentives alone cannot substitute for ecosystem strength. Infrastructure quality, logistics efficiency, power reliability, skill levels and regulatory certainty ultimately determine competitiveness.
India’s response has been unusually assertive. The Production Linked Incentive (PLI) scheme represents a clear break from earlier approaches. Instead of subsidising inputs, it rewards output — linking incentives directly to production performance.
According to Finance Minister Nirmala Sitharaman, the objective is to create globally competitive manufacturing champions while embedding India more deeply into global value chains.
NITI Aayog has framed this as part of a broader strategy to reposition India within global supply chains. The message is that India is not merely seeking investment, but integration into higher-value segments of production networks.
Early results are visible. Electronics manufacturing has expanded rapidly, mobile phone exports have surged and global firms are scaling up operations. Apple’s growing presence in India is often cited as a bellwether. CEO Tim Cook has acknowledged India’s increasing role in supply-chain diversification, signalling a structural shift in corporate strategy.
But questions about depth remain. Trade expert Ajay Srivastava has warned that assembly-led growth without deeper localisation risks limiting long-term gains. Much of the high-value content in many products continues to be imported.
Sunil Mittal, Chairman of Bharti Enterprises, has echoed this concern, arguing that India must move beyond “screwdriver assembly” and build stronger domestic component ecosystems.
This distinction — between assembling products and controlling supply chains —is central to Make in India 2.0. The second phase cannot merely celebrate rising output. It must focus on building dense supplier networks, fostering domestic innovation and increasing local value addition.
As economist Richard Baldwin has argued, modern manufacturing is defined by value chains rather than standalone factories. Countries that control design, components and advanced processes capture the highest value.
NITI Aayog has similarly stressed the need for ecosystem-led manufacturing, where logistics, skills, finance and policy converge to support industry.
India’s federal structure adds both dynamism and complexity to the manufacturing story. States have emerged as active industrial competitors, offering land, infrastructure and incentives to attract investment.
Tamil Nadu has positioned itself as an electronics and auto hub. Uttar Pradesh is pushing aggressively into mobile manufacturing. Gujarat continues to leverage its industrial base, while Karnataka focuses on high-tech sectors.
G-20 Sherpa and former CEO of NITI Aayog Amitabh Kant has described this competitive federalism as one of India’s major strengths, enabling experimentation and innovation.
But Bibek Debroy had, some years back, pointed to fragmentation and uneven policy implementation as potential deterrents for investors. Mukesh Ambani has similarly emphasised that scale manufacturing requires stable policies, world-class infrastructure and seamless logistics across states.
Electronics has emerged as India’s flagship success story. Mobile production has grown sharply, and exports are rising. Yet value addition remains uneven. Semiconductors represent the next frontier—and the steepest challenge.
As Chris Miller has argued, chip ecosystems require enormous capital, technological depth and long-term policy commitment.
In sectors such as automobiles, renewables and speciality chemicals, India is making gains. But it does not yet dominate complete value chains in any major sector. This is where China’s advantage becomes clear.
Its strength lies not just in scale, but in ecosystem depth — integrated supplier bases, efficient logistics and skilled labour. As Justin Yifu Lin, a prominent Chinese economist and former World Bank’s Chief Economist has noted, successful industrialisation requires sustained alignment between state policy and comparative advantage over long periods. India is attempting to compress that process into a much shorter timeframe.
The question of whether India can replace China is, in many ways, the wrong one. The emerging global model is not about replacement, but redistribution. Supply chains are becoming multi-polar, with countries like Vietnam, Mexico and Indonesia also attracting investment. WTO Director-General Ngozi Okonjo-Iweala has observed that globalisation is not retreating — it is being reconfigured.
For India, this creates both opportunity and constraint. Even a modest share of diverted supply chains can significantly boost manufacturing output. But competition is intense, and gains are likely to be fragmented.
Ultimately, the journey to a 25 per cent manufacturing share is about depth, not just scale. It requires stronger domestic supply chains, investment in skills and technology, lower logistics costs and policy stability. As NITI Aayog has stressed, the next phase of industrialisation must be driven by productivity and innovation, not just incentives.
India is unlikely to replace China in the foreseeable future. The gap in scale and ecosystem depth is too large. But replacement is not the real benchmark. The real question is whether India can use this geopolitical opening to transform itself —from a services-led economy into a more balanced industrial power aligned with the vision of Viksit Bharat.
That is why the 25 per cent manufacturing target matters. It is not just an economic goal. It is a test of whether policy ambition, global opportunity and domestic capability can finally converge. Make in India 2.0 reflects India’s belief that its economic future will depend increasingly on manufacturing strength.
Rewarding output over input
India’s Production Linked Incentive (PLI) schemes have become the centrepiece of its industrial strategy, marking a decisive shift from older, more passive policy approaches.
Instead of merely offering tax breaks or tariff protection, PLI rewards firms for incremental production. In effect, the Government is paying for performance, not promises.
This approach has begun to reshape India’s manufacturing landscape. The most visible gains have come in electronics, especially mobile phones, where global giants and their suppliers have expanded production for both the domestic and export markets.
India’s rise as a major smartphone assembly base would have been difficult to imagine a few years ago. Similar momentum is visible in pharmaceuticals, medical devices, telecom equipment, food processing, solar modules and auto components.
The broader significance of PLI lies in the signal it sends. India is no longer content to remain a large consumption market; it wants to emerge as a serious production base. That shift in intent matters. It has prompted companies to view India not just as a destination for sales, but as a location for manufacturing investment and supply-chain diversification.
At the same time, the scheme has injected a new urgency into the wider policy ecosystem. It has pushed both the Centre and the states to improve logistics, approvals and industrial infrastructure to support large-scale production.
Yet the ultimate test of PLI lies beyond rising output numbers. Its success will depend on whether it can deepen local value addition rather than simply expand final-stage assembly.
The real prize is the creation of supplier networks, technological capability and stronger domestic linkages. Only then will PLI move from being an incentive programme to a genuine instrument of industrial transformation, helping India claim a larger and more durable place in global value chains.