India’s Path To Becoming A Global Manufacturing Hub: A Long Journey Ahead – Analysis
The setting up of Tata-Airbus plant in Vadodara (Gujarat), is the first private project in India for the manufacture of aircraft in India. The aircraft manufacturing facility set up by Tata Advance Systems Limited in collaboration with Airbus Defence and Space, Spain is part of India’s attempt to become self–reliant in the manufacture and assembly of C-295 medium-lift tactical transport aircraft and to reduce foreign dependence. While inaugurating the plant, Indian Prime Minister Narendra Modi said, “We are already working to make India an aviation hub. This ecosystem will pave the way for Made-in-India civil aircraft in the future.”
India’s quest to become a global manufacturing hub continues to face hurdles because of inadequate physical infrastructure, land acquisition challenges, complex regulatory procedures and supply chain bottlenecks. India continues to assemble products like mobile phones, as it has not created a manufacturing ecosystem like China. India continues to rely on China in many core sectors like electronics, solar and mobile manufacturing and its imports from China constitutes over 60 per cent of its requirements.
India’s Manufacturing Landscape: Achievements and Challenges
Although India’s manufacturing sector has made significant strides in recent years, however, it most of the plants set up in India in collaboration with Japan, South Korea and China stays heavily reliant on assembling components imported from countries like China, Taiwan, and the USA. This dependence on foreign components poses a challenge, particularly as international companies are often reluctant to share the technical know-how needed to produce high-end, sensitive equipment within India. As a result, India’s efforts to close the gap with China are complicated. Estimates suggest it may take India 15 to 20 years to catch up with China, influenced by factors like economic policies, infrastructure, workforce skills, and geopolitical dynamics.
For instance, in mobile phone production, India struggles with high defect rates with estimates suggesting a defect rate of around 50%, far higher compared to Chinese factories. India can become world’s smartphone making hub, only when it starts manufacturing the parts in India. Unfortunately, India continues to rely on imported parts from China for the assembly because as it lacks an ecosystem of component manufacturers in the country.
China remains the world’s largest manufacturing nation, accounting for 28.7% of global manufacturing output.
Even in the field of solar manufacturing, where India continues to make great strides, India depends on China for around 60% of its solar equipment. This reliance is largely due to China’s dominance in the global solar supply chain, controlling 97% of polysilicon production and 80% of solar module manufacturing
China’s manufacturing process is built on decades of investment in infrastructure, skilled labour, and technological innovation. The country boasts a well-established supply chain, efficient coordination, and competitive costs, making it an attractive destination for global manufacturers. In contrast, India is still working on strengthening its logistics network, which remains less efficient than China’s.
Technological Gaps and Innovation
While India has made progress in manufacturing, its role remains largely limited to assembly rather than the development of technologies. This is partly due to reluctance from international companies like Samsung and Apple, which have raised concerns about the quality of India’s skilled workforce.
Today, China leads in advanced technologies such as avionics, semiconductors, and high-end electronics. Significant investments in research and development (R&D) have fostered a thriving innovation ecosystem, with companies like Huawei and DJI leading the way. In contrast, India’s focus has largely been on assembly, and a strategic shift toward R&D and innovation is crucial if India aims to catch up.
Policy and Infrastructure Challenges
China has received help from business-friendly policies, including tax incentives, subsidies, and relaxed regulations that encourage both domestic and foreign investment. India has introduced initiatives likeMake in India and the Production-Linked Incentive (PLI) scheme, but the implementation of these programs often faces challenges such as inadequate infrastructure, slow execution, and complex bureaucratic processes.
China’s infrastructure is a key driver of its manufacturing success. The country has invested heavily in its transportation network—roads, ports, and airports—ensuring smooth coordination and the efficient movement of goods. In contrast, India continues to grapple with significant infrastructural bottlenecks, including inadequate transportation networks, unreliable power supply, and inefficient ports. Addressing these issues will require substantial time and investment.
Labor Force and Skill Development
China’s labor force is highly skilled, thanks to decades of investment in education and vocational training. The country has transitioned from being a low-cost labour market to one that supports sophisticated manufacturing processes. India must follow suit by investing significantly in upskilling its workforce to compete in high-tech sectors.
In terms of R&D investment, China distributes a large part of its GDP to foster technological innovation. In 2022, China’s R&D expenditure as a percentage of GDP was 2.41%, compared to India’s just 0.64%. This disparity reflects a wider gap in innovation ability. Additionally, India’s private sector contributes only 36.4% of the country’s gross expenditure on R&D (GERD), compared to 77% in China and the US.
Geopolitical and Trade Considerations
China’s geopolitical strategies have bolstered its global trade relationships, positioning it as a dominant player in the global supply chain. While India’s geopolitical position is improving, particularly through its growing trade partnerships and strategic alliances, it must navigate complex international relations and trade agreements to enhance its manufacturing prospects.
As global manufacturing increasingly shifts toward sustainability, China has integrated green technologies into its processes. India must prioritize sustainable manufacturing practices to meet international environmental standards and improve its competitiveness in the global market.
Defense Sector Disparities
The defence sector gives another example of the gap between India and China. According to the Global Firepower Index, China spends $229 billion on defence, compared to India’s $74 billion. China’s naval fleet is also significantly larger, with 49 destroyers and 730 vessels, including 61 submarines and 3 aircraft carriers, while India’s fleet consists of just 12 destroyers and 294 vessels, including only 18 submarines. This defence disparity underscores the broader difference in strategic development between the two countries, including in areas like research, innovation, and industrial capacity.
India’s air defence capabilities are also a concern, particularly with the growing threat of Chinese military advances. The Indian Air Force has struggled to meet its target of 42 squadrons, with delays in the supply of critical components like F-404 engines for its Tejas planes. This issue mirrors the challenges faced by China in securing advanced military technology from foreign suppliers, although China has responded by developing domestically produced jet engines, such as the WS-15, which now power its fifth-generation fighter aircraft.
The Way Forward for India
India must adopt a long-term vision supported by strategic investments and actionable plans to catch up with China and become a global manufacturing hub. This includes improving infrastructure, enhancing workforce skills, fostering technological innovation, and strengthening policy implementation. Addressing these issues systematically and sustainably will be essential for India to establish itself as a major player in global manufacturing over the next 15 to 20 years.
Conclusion
In conclusion, while India is making progress toward becoming a global manufacturing hub, it has a long way to go before matching the scale, sophistication, and technological capabilities of China. To close this gap, India needs to invest in infrastructure, R&D, labour development, and efficient policy implementation. Only with sustained efforts and strategic reforms will India be able to realize its vision of becoming a global manufacturing leader in the decades to come.