Against the background of the accelerated restructuring of the global supply chain, India, as the world’s fifth largest economy and one of the most promising emerging markets, is relying on its huge demographic dividend, continuously improving manufacturing ecosystem and strategic geographical location. position, occupying an increasingly important strategic position in the global supply chain. Especially now that the “China + 1” strategy is prevalent, multinational companies have regarded India as an important destination for supply chain diversification, which makes India play a pivotal role in the restructuring of global manufacturing. India’s huge domestic demand market, relatively competitive labor costs and active government industrial policy support are attracting more and more global manufacturing investments.
The “Make in India” strategy has undergone significant evolution since it was proposed in 2014. The strategy initially aimed to turn India into a global manufacturing center and increase the share of manufacturing in GDP to 25%. Over the past ten years, the strategy has been continuously deepened and improved, expanding from the original 25 key industries to a wider range of industry coverage, and the policy tools have become more abundant and precise. This strategy is closely coordinated with national strategies such as “Digital India” and “Skilled India” to form a complete industrial upgrading system. In the context of the current profound changes in the global economic landscape, the “Made in India” strategy has shown important practical significance: on the one hand, it is a key starting point for India to achieve economic transformation and upgrading; on the other hand, it also provides a global manufacturing layout New options.
This report provides an in-depth analysis of the development status, challenges and future prospects of India’s manufacturing industry from multiple dimensions, which has important business reference value. For Chinese companies that have already established a presence in India or plan to enter the Indian market, this report provides comprehensive market insights and practical guidance. The report focuses on key elements such as policy environment, infrastructure, human resources, and innovation ecology, and provides reference for corporate decision-making through detailed data analysis and typical case studies. At the same time, the report also focuses on analyzing the characteristics and advantages of each key manufacturing region to help companies make precise location choices. For Chinese companies seeking global development, a deep understanding of the development trends, opportunities and challenges of India’s manufacturing industry will help formulate more effective market entry strategies and operational plans.
Current Development Status of India’s Manufacturing Industry
India’s manufacturing industry is undergoing profound transformation and upgrading, showing vigorous development momentum and huge growth potential. By analyzing its macroeconomic indicators, industrial structure distribution and overall competitiveness, we can comprehensively grasp the development status and future prospects of India’s manufacturing industry.
Macroeconomic indicator analysis
India’s manufacturing industry plays an increasingly prominent role in the national economy, and its contribution to GDP has increased from 15.3% in 2014 to 17.8% in 2024. Especially in the post-epidemic era, India’s manufacturing industry has shown strong growth momentum, with a growth rate of 7.8% in 2023, which is much higher than the average growth rate of the global manufacturing industry. It is worth noting that the growth of high-tech industries such as electronic manufacturing, automobile manufacturing and pharmaceutical manufacturing is particularly significant, with an average annual growth rate of more than 12%, showing a positive trend of industrial upgrading.
In terms of job creation, manufacturing has become an important pillar of the Indian job market. According to the latest statistics, the number of direct employees in the manufacturing industry has reached 51 million, and it indirectly creates employment for more than 120 million people. Especially in electronic manufacturing industrial parks and automobile manufacturing clusters, employment growth is obvious, with an average of about 1.8 million new jobs created every year. More importantly, manufacturing has created a large number of high-quality jobs in India, and the average salary level of skilled workers is about 25% higher than that in the service industry.
Foreign direct investment (FDI) continues to be concentrated in India’s manufacturing industry. In fiscal year 2023, the actual utilization of foreign investment in the manufacturing industry reached US$23.2 billion, a year-on-year increase of 31.5%. Electronic manufacturing, new energy vehicles, medical equipment and other fields are most favored by foreign investment. Among them, the electronic manufacturing industry attracted 28.3% of foreign investment. It is worth noting that manufacturing investment from East Asian regions such as Japan, South Korea, and Taiwan has increased significantly, showing a trend of global supply chains shifting to India.
Industrial structure distribution
India’s manufacturing industry has formed a relatively complete industrial system, and key industries show obvious regional concentration characteristics. The electronics manufacturing industry is mainly concentrated in Noida in the north, Bangalore and Chennai in the south; the automobile manufacturing industry has formed three major industrial belts with Gurgaon-Manesar, Pune-Nashik and Chennai as the core; Pharmaceutical manufacturing is based in Hyderabad and Ahmedabad. This kind of industrial layout not only takes into account the location advantages, but also makes full use of local talents and supporting resources.
The development characteristics of regional clusters are becoming increasingly obvious, and major industrial parks are forming a complete industrial ecosystem. Taking the Noida Electronic Manufacturing Industrial Park as an example, it has attracted more than 200 electronic manufacturing companies to settle in, forming a complete industrial chain from parts production to complete machine assembly, with a local matching rate of more than 65%. Similarly, the Pune automobile manufacturing cluster has formed a complete system covering vehicle manufacturing, parts production, R&D and design, driving the development of more than 1,000 supporting companies.
The supporting capabilities of the industrial chain continue to improve, and the local supplier system is gradually improved. Taking smartphone manufacturing as an example, the number of local parts suppliers in India has increased from 480 in 2018 to more than 1,200 in 2024, and the localization rate of core parts has increased to 45%. The local supporting facilities of the automobile manufacturing industry are more mature, the localization rate of first-line suppliers has exceeded 70%, and the quality level has been internationally recognized.
competitiveness assessment
India’s position has steadily improved in global manufacturing competitiveness rankings. The World Economic Forum’s latest Global Competitiveness Report shows that India’s manufacturing competitiveness ranking rose to 23rd, an increase of 8 places from five years ago. In particular, it has outstanding performance in terms of market size, labor resources, innovation capabilities, etc., but there is still room for improvement in infrastructure and business environment.
Cost advantage remains an important source of competitiveness for India’s manufacturing industry. The average salary of manufacturing workers is about one-third that of China, and India has a large number of high-quality engineering and technical talents, with a significant advantage in per capita salary. At the same time, thanks to government incentive policies, land use costs and energy costs are relatively low, which gives India a cost advantage in both labor-intensive and technology-intensive manufacturing.
The improvement of industrial supporting capabilities is strengthening the comprehensive competitiveness of India’s manufacturing industry. Local R&D and innovation capabilities have been significantly enhanced. In 2023, India’s manufacturing R&D investment will increase by 23% year-on-year, and the number of patent applications will increase by 35%. The level of localization of supply chains continues to improve, and the localization rate of core components in key industries has generally increased. Especially in the fields of electronic manufacturing and auto parts, the technical level and production capabilities of local Indian companies have become globally competitive. At the same time, the pace of digital transformation has accelerated, and the application of new technologies such as smart manufacturing and the industrial Internet has continued to deepen, further enhancing industrial competitiveness.
These development trends show that India’s manufacturing industry is transforming from low-cost advantages to comprehensive competitive advantages, and has huge potential for future development. But at the same time, we must also note that there are still shortcomings in infrastructure construction, skilled talent training, and industrial chain coordination. These are areas where Indian manufacturing needs to make breakthroughs in the future.
Analysis of “Make in India” strategy
The “Make in India” strategy is the top-level design of the Indian government to promote the transformation and upgrading of the manufacturing industry. Through a systematic policy framework, precise industrial support measures and an optimized foreign investment access environment, it is reshaping the development pattern of India’s manufacturing industry.
policy framework system
The core policy content of the “Made in India” strategy mainly includes three pillars: manufacturing innovation and upgrading, investment environment optimization and talent training system construction. In terms of innovation and upgrading, the government has established a technological innovation fund of 100 billion rupees to focus on supporting technological breakthroughs in areas such as intelligent manufacturing and new material development. In terms of investment environment optimization, a “single window” approval system was launched, which shortened the company registration time from the original 30 days to 7 days, significantly improving administrative efficiency. In terms of talent training, the “Skill India Plan” has been launched, aiming to train 100 million industrial skilled workers by 2025.
The implementation roadmap adopts a phased and focused promotion strategy. The first phase (2014-2019) focuses on improving infrastructure and optimizing the business environment; the second phase (2019-2024) focuses on promoting technological innovation and industrial upgrading; the third phase (2024-2029) will focus on building global competitiveness manufacturing system. Clear task objectives and assessment indicators are set at each stage to ensure the implementation of the strategy.
The staged goal setting is scientific and reasonable, which is both challenging and achievable. By 2024, the manufacturing sector will account for 20% of GDP, creating 100 million jobs; by 2029, the manufacturing sector will account for 25% of GDP, exports will double, and R&D investment will increase to 2% of GDP. The realization of these goals will promote a qualitative leap in India’s manufacturing industry.
Key industry support
The Indian government has identified key industrial areas for priority development, including electronic manufacturing, automobiles and parts, medical equipment, new energy equipment, aerospace, etc. Among them, electronics manufacturing is regarded as the most strategic industry, and the government plans to achieve an output value target of US$400 billion by 2025. The automobile manufacturing industry is focusing on building an electric vehicle industry chain and has proposed a goal of 30% of new car sales in 2030 being electric vehicles.
Industrial incentive measures take the “Product Linkage Incentive Scheme” (PLI) as the main starting point. The total scale of the scheme reaches 2 trillion rupees and covers 13 key industries. Taking mobile phone manufacturing as an example, qualified companies are provided with 4-6% sales incentives with an incentive period of 5 years. At the same time, various state governments have also launched supporting policies such as land concessions and electricity price subsidies, forming a multi-level incentive system.
Support for technological upgrading is reflected in multiple dimensions: first, the establishment of an industrial technology upgrading fund to provide low-interest loans for technological transformation of enterprises; second, the establishment of an industry-university-research collaborative innovation platform to support joint research and development between enterprises and universities; third, the promotion of “digital India” strategy to support the digital transformation of enterprises. The government has also set up a manufacturing innovation center to provide technical consulting and innovation services to small and medium-sized enterprises.
Foreign investment access policy
India has significantly relaxed restrictions on foreign investment access in recent years, and the manufacturing sector has basically achieved 100% openness to foreign investment. The scope of industries passing the automatic approval route continues to expand and now covers most manufacturing sectors. Especially in key areas such as electronic manufacturing and medical equipment, foreign-funded enterprises enjoy the same market access treatment as local enterprises.
The intensity of preferential tax policies has been significantly increased. The new corporate tax law reduces the manufacturing corporate income tax rate to 15%, which is among the lowest levels in the world. At the same time, companies investing in specific industrial parks can also enjoy tax exemptions for 5-10 years. In addition, various state governments have introduced supporting tax incentives, such as goods and services tax refunds, export tax rebates, etc., to further reduce business operating costs.
Land use policies have become more flexible and pragmatic. Governments in various states provide foreign-funded enterprises with “ready-to-rent” standard factories by building special industrial parks. Some states have also launched a land bank system to reserve industrial land in advance and simplify the procedures for foreign-funded enterprises to acquire land. At the same time, the development of industrial parks through public-private partnership models not only ensures land supply, but also improves park operation efficiency.
The coordinated implementation of these policies and measures is creating a more open, transparent and predictable investment environment, effectively promoting the implementation of the “Made in India” strategy. However, problems such as local differences in policy implementation, lagging infrastructure construction, and slow progress in labor law reform still need to be further improved and resolved. In the future, the Indian government will continue to optimize the policy environment, improve policy implementation efficiency, and create better conditions for the development of the manufacturing industry.
Progress in Infrastructure Construction
The Indian government is comprehensively improving the hardware support capabilities for manufacturing development through large-scale infrastructure investment. From transportation and logistics networks to industrial park construction, from energy supply to public supporting facilities, a modern manufacturing infrastructure system is accelerating.
transportation logistics system
India is implementing the largest transportation infrastructure construction program in its history. In terms of highway network, 85% of the “Golden Quadrilateral” highway network project has been completed, and the average daily highway construction speed has reached 37 kilometers. The newly built and renovated highways adopt international standards, significantly improving freight efficiency. The railway system is also accelerating modernization, and the construction of the Dedicated Freight Corridor (DFC) project is accelerating. The two major east-west and north-south freight corridors are expected to be fully connected by 2025, by which time an efficient freight network connecting major manufacturing clusters will be formed.
Major breakthroughs have been made in the construction of port facilities, and the “Seaport Development Plan” is promoting the modernization of 12 major ports. Container handling capacity has grown by an average of 15% annually, and the application of automated terminals and intelligent logistics systems has significantly improved port operation efficiency. In terms of aviation infrastructure, India has built more than 140 operational airports, including 25 dedicated cargo terminals. It is planned to build 50 new airports by 2025 to further improve the air cargo network.
The construction of logistics parks shows a trend of accelerated development. There are 35 multimodal logistics parks planned and constructed across the country, 15 of which are already in operation. These modern logistics parks are equipped with intelligent warehousing systems, cold chain facilities and cross-border e-commerce functions, which have significantly reduced the logistics costs of manufacturing companies. Especially in the logistics parks surrounding major manufacturing clusters, the integrated operation of “production, storage and transportation” has been achieved, and logistics efficiency has increased by more than 40%.
Industrial park development
The spatial layout of key industrial parks shows obvious specialization characteristics. At present, India has more than 200 national-level manufacturing industrial parks built or under construction, including 85 parks above designated size. These parks have formed a differentiated development pattern based on their location advantages and industrial characteristics. For example, the electronic manufacturing industrial park in the north mainly serves the domestic market, the export processing zone in the west mainly faces the international market, and the IT industrial park in the south focuses on developing R&D and innovation functions.
The level of supporting facilities in the industrial park has been continuously improved. Newly built parks generally adopt the “seven connections and one leveling” standard (electricity, water, ventilation, communications, access, sewage, steam and site leveling). Some key parks are also equipped with environmental protection facilities such as sewage treatment plants and solid waste treatment centers. The park has industrial supporting facilities such as standard factories, R&D centers, and testing centers, as well as supporting living facilities such as living service areas and talent apartments.
The park operation and management model is increasingly market-oriented. More and more industrial parks operate under the public-private partnership (PPP) model, introducing professional park operators to provide one-stop services. Some parks have innovatively adopted the “park + fund” model and established industrial development funds to support the development of park enterprises. At the same time, the construction of smart parks has been accelerated, and the digital management platform has enabled online and intelligent park services.
Energy supply security
The power supply capacity has been significantly enhanced, and the national installed power generation capacity has exceeded 400 million kilowatts, basically meeting the electricity demand of the manufacturing industry. The power grid transformation and upgrading project continues to advance, and the transmission and distribution loss rate has dropped from 22% in 2014 to the current 17%. Key industrial parks have achieved dual-circuit power supply, with power supply reliability reaching 99.9%. However, some areas still face power supply shortages during peak power consumption periods and need to further strengthen power infrastructure construction.
The development momentum of new energy is strong, and the installed capacity of renewable energy has exceeded 150 million kilowatts, accounting for 38% of the total installed capacity. The cost of solar power generation has dropped to 2.5 rupees per kilowatt hour, which is highly economical. The government plans to increase the proportion of renewable energy to 50% by 2030, which will provide a cleaner and more sustainable energy supply for the manufacturing industry. Especially in newly built industrial parks, rooftop photovoltaics and distributed energy systems are widely used.
Energy price policies have become more market-oriented, and the industrial electricity price formation mechanism has been continuously improved. Governments of various states have launched differentiated electricity price policies for manufacturing enterprises, and implemented preferential electricity prices for key industries and large users. At the same time, a peak-valley electricity price system is implemented to guide enterprises to use electricity off-peak. The implementation of the new energy use subsidy policy has further reduced the energy costs of enterprises.
Although infrastructure construction has made significant progress, there is still a big gap compared with the development needs of the manufacturing industry. Problems such as high transportation and logistics costs, unbalanced development of industrial parks, and the need to improve the quality of energy supply still require continued investment and improvement. In the next five years, India plans to invest US$1.5 trillion in infrastructure construction, which will create a better hardware environment for the development of manufacturing industry.
Talent and skills training
As one of the world’s most populous countries, India’s human resource development has a decisive impact on the transformation and upgrading of the manufacturing industry. In recent years, the Indian government has worked hard to transform demographic advantages into talent dividends through a systematic talent training strategy to provide intellectual support for the development of the manufacturing industry.
labor market analysis
India is in the golden stage of the demographic dividend period. The working-age population (15-64 years old) accounts for 67% of the total population, and about 12 million new labor force are added every year. It is expected that by 2030, India will have more than 1 billion working-age people, providing sufficient labor supply for the development of manufacturing industry. Especially in the southern and western manufacturing cluster areas, young labor force is concentrated and innovation and entrepreneurship vitality is remarkable.
However, there is a clear imbalance in the skill structure of the labor market. According to statistics, the proportion of the labor force that has received formal skills training is only 4.7%, which is far lower than 47% in China and 75% in Germany. In the manufacturing sector, a shortage of high-skilled talent coexists with a surplus of low-skilled labor. Especially in technology-intensive industries such as electronic manufacturing and precision machinery, the gap in skilled talent is particularly prominent, which restricts the pace of industrial upgrading.
Labor costs show a structural upward trend. The average monthly salary of basic manufacturing workers has increased from 15,000 rupees in 2015 to the current 25,000 rupees, with an average annual growth rate of more than 10%. Wages for skilled workers and management talents have increased more, but overall labor costs in India still have a comparative advantage compared with other emerging market countries. It is worth noting that labor costs vary significantly among regions, and the developed southern regions are close to the level of middle-income countries.
vocational education system
India is building a multi-level vocational education and training network. At present, more than 15,000 vocational training institutions (ITIs) and more than 3,000 advanced vocational training centers have been built, with an annual training capacity of 10 million people. These institutions set up majors according to the characteristics of regional industries and formed a relatively complete skills training system. Especially in areas where manufacturing is concentrated, professional settings are well aligned with industrial needs.
The curriculum system is increasingly focused on practicality and pertinence. A modular training program is adopted to closely integrate theoretical learning with practical operations. Introduce international professional qualification certification standards and implement the “dual certificate” system. The newly opened emerging majors such as intelligent manufacturing and industrial robots directly meet the needs of industrial transformation. At the same time, a large number of online course resources have been developed to support students’ flexible learning.
The integration of industry and education has become the main direction of vocational education reform. Promote in-depth cooperation between training institutions and enterprises through models such as “order-based training” and “modern apprenticeship”. Some large manufacturing companies have jointly built practical training bases with vocational schools and are directly involved in course design and teaching management. At the same time, enterprise technical personnel are encouraged to serve as practical course teachers to enhance the practicality of training.
skills improvement plan
Government support policies continue to increase. The “Skill India Plan” has invested 400 billion rupees and aims to provide vocational skills training to 400 million people by 2025. Provide tuition subsidies and living allowances to trainees to reduce training costs. A national skills certification system has been established to increase the value of vocational qualification certificates. State governments have also introduced supporting policies accordingly, forming a multi-level policy support system.
The enterprise participation mechanism is increasingly improving. The government encourages enterprises to invest in skills training through tax incentives, special subsidies, etc. It stipulates that large and medium-sized enterprises must spend 2% of their total wages on employee training and can enjoy corresponding tax exemptions. Some industry associations have taken the lead in establishing skills development funds to provide financial support for employee training in small and medium-sized enterprises. Businesses can also receive government subsidies by setting up their own training centers.
International cooperation projects have achieved remarkable results. India has established skills training cooperation mechanisms with manufacturing powers such as Germany, Japan, and South Korea. Introduce internationally advanced vocational education standards and training methods and support capacity building of local training institutions. Some multinational companies have set up skills training centers in India to provide high-quality talents for the manufacturing industry. Through the “Study Abroad-Return” program, overseas technical talents are encouraged to return to China for employment and entrepreneurship.
Although the talent training system continues to improve, it still faces many challenges. The social recognition of vocational education is not high, the quality of training is uneven, and the integration of industry and education is not deep enough. Problems such as this still need to be solved. In the future, India will further deepen the reform of vocational education, improve the skills training system, and provide more sufficient talent guarantee for the development of manufacturing industry. In particular, it is necessary to strengthen the cultivation of high-end technical talents and talents urgently needed by the industry, and support the manufacturing industry to move up the value chain. At the same time, a more flexible labor market mechanism needs to be established to promote the rational flow and optimal allocation of talents.
Industrial Innovation Ecosystem
India is accelerating the construction of a modern industrial innovation system and striving to create a globally competitive manufacturing innovation ecosystem by improving its independent innovation capabilities, promoting digital transformation and improving innovation support mechanisms. Innovation has become the core driving force for the transformation and upgrading of India’s manufacturing industry.
R&D innovation capabilities
India’s R&D investment has shown steady growth. In 2023, the whole society’s R&D investment will reach 2.1% of GDP, of which manufacturing enterprises’ R&D expenditure will account for more than 45%. Large manufacturing companies have generally established R&D centers, and their R&D investment intensity (the proportion of R&D expenditures in revenue) has reached more than 3.5%. Especially in key industries such as pharmaceuticals, automobiles, and electronics, the R&D investment of some leading companies has approached the international leading level.
The spatial distribution of innovation centers shows clustering characteristics. Cities such as Bangalore, Hyderabad, and Pune have formed distinctive innovation corridors, bringing together a large number of corporate R&D centers, university research institutes, and innovation and entrepreneurship platforms. As of 2024, 57 national-level manufacturing innovation centers have been built across the country, focusing on strategic industrial fields such as new generation information technology, high-end equipment, and new materials. These innovation centers promote the improvement of regional manufacturing innovation capabilities through open and shared innovation resources.
Patent output has increased both in quantity and quality. In 2023, the number of invention patent applications in India exceeded 75,000, of which manufacturing-related patents accounted for more than 60%. In emerging fields such as artificial intelligence, 5G communications, and new energy vehicles, patent applications are growing particularly rapidly. It is worth noting that Indian companies are increasingly strengthening their overseas patent layout, and the number of PCT international patent applications has increased by more than 25% annually on average, reflecting the continuous improvement of the international competitiveness of innovation.
Industrial digital transformation
The development of intelligent manufacturing has entered the fast lane. According to statistics, 35% of manufacturing companies have launched intelligent transformation, and the application scope of digital factories, intelligent production lines, and industrial robots continues to expand. In industries such as automobiles and electronics, smart manufacturing demonstration projects have had significant driving effects, with production efficiency increasing by more than 30%. The implementation of the “India Industry 4.0 Plan” has further accelerated the process of digitalization, networking, and intelligence in the manufacturing industry.
The construction of digital infrastructure has been accelerated across the board. The 5G network has covered major industrial parks, and the industrial Internet platform serves more than 1 million companies. The deployment of new infrastructure such as cloud computing and big data centers has been accelerated to provide strong support for the digital transformation of the manufacturing industry. Especially in the field of industrial software, smart manufacturing solutions developed by local Indian companies have achieved certain international competitiveness.
The level of informatization application continues to improve. Large and medium-sized manufacturing enterprises generally adopt information systems such as ERP and MES, and digital R&D and design tools are widely used. The promotion and use of supply chain collaboration platforms has significantly improved the operational efficiency of the industrial chain. The innovative applications of emerging technologies such as artificial intelligence and blockchain in the manufacturing field are accelerating, driving the accelerated upgrading of traditional industries.
Innovation support system
The technology incubation platform system is increasingly improving. There are more than 400 technology business incubators across the country, of which manufacturing professional incubators account for more than 40%. These incubation platforms not only provide office space and infrastructure, but also integrate innovative resources such as technology, talents, and funds to provide all-round services for the growth of start-ups. Some leading incubators have explored the “incubation + venture capital” model to improve the success rate of innovative projects.
The industry-university-research cooperation mechanism continues to deepen. 100 industrial technology innovation alliances have been established to promote collaborative innovation among enterprises, universities, and scientific research institutes. Implement the “Industrial Professor” program to support university researchers to carry out applied research in enterprises. Establish a demonstration base for industry-university-research cooperation to carry out joint technological research and achievement transformation. Especially in some strategic emerging industries, collaborative innovation between industry, academia and research institutes has achieved remarkable results.
Funding support for innovation continues to increase. A manufacturing innovation development fund with a total scale of 200 billion rupees will be established to provide low-cost financial support for corporate innovation activities. Improve the innovation subsidy policy and implement super deductions for corporate R&D investment. Innovation and venture capital funds are developing rapidly, and venture capital investment in the manufacturing sector will exceed US$10 billion in 2023. The establishment of government guidance funds further drives social capital investment in manufacturing innovation.
Although the innovation ecosystem continues to improve, there is still a gap compared with the innovation and development needs of the manufacturing industry. Original innovation capabilities need to be improved, industrial digital transformation is unbalanced, and the efficiency of innovation resource allocation needs to be optimized. In the future, India will further increase investment in innovation, improve innovation policies, optimize the innovation environment, and promote the transformation of the manufacturing industry into innovation-driven development. The focus is to strengthen research on key core technologies, accelerate the pace of digital transformation, deepen innovation and open cooperation, and build a more dynamic industrial innovation ecosystem.
The implementation of this series of measures will effectively enhance the innovation capabilities and international competitiveness of India’s manufacturing industry and promote India to become an important global manufacturing innovation center. Especially in the context of a new round of technological revolution and industrial transformation, innovation will become a key driving force for the leapfrog development of India’s manufacturing industry.
Implementation results and challenges
Since the implementation of India’s manufacturing development strategy, it has achieved remarkable results in industrial upgrading, job creation and international competitiveness, but it also faces a series of deep-seated challenges. By analyzing implementation effects and problems, we can provide important reference for policy optimization in the next stage.
Phased results
Substantial progress has been made in industrial upgrading. The proportion of manufacturing added value in GDP has increased from 15% in 2014 to 18% in 2024, and the industrial structure continues to be optimized. The proportion of high-tech manufacturing has exceeded 30%, and emerging industries are rising rapidly. Especially in the fields of electronic manufacturing, new energy vehicles, and high-end equipment, industrial clusters are beginning to take shape. Technological innovation capabilities have been significantly enhanced, R&D investment intensity has increased, and some areas have achieved global competitive advantages.
The employment creation effect is obvious. The manufacturing industry directly employs 80 million people and indirectly creates employment for more than 200 million people. New jobs are mainly concentrated in labor-intensive industries such as electronic manufacturing, textiles and clothing, and food processing. It is worth noting that high-skilled jobs are growing rapidly and the overall employment quality in the manufacturing industry continues to improve. The construction of industrial parks has boosted regional employment and effectively alleviated employment pressure.
Export competitiveness has been improved by leaps and bounds. Manufacturing exports will grow from US$230 billion in 2014 to US$450 billion in 2024. Its share of global manufacturing exports has exceeded 3%, and some products have become the main supply source for the global market. Especially in the fields of medicine, auto parts, electronic products and other fields, the status of Indian companies in the global value chain has significantly improved. The brand influence continues to increase, and the international image of “Made in India” continues to improve.
face challenges
There are obvious constraints from infrastructure shortcomings. Although infrastructure construction has accelerated in recent years, there is still a large gap compared with the development needs of the manufacturing industry. Issues such as unstable power supply, high logistics costs, and difficulties in acquiring land have affected the enthusiasm for investment in the manufacturing industry. Especially in some emerging industrial cluster areas, the construction of supporting facilities lags behind the needs of industrial development. The coverage and service quality of digital infrastructure still need to be improved.
The skill talent gap is becoming increasingly prominent. The contradiction between the insufficient supply of highly skilled talents and the demand for industrial upgrading is prominent. It is estimated that there is a gap of more than 5 million highly skilled talents in the manufacturing industry. The training quality and scale of the vocational education system cannot meet the needs of industrial development. Enterprises report that recruitment and training costs continue to rise, affecting production efficiency and innovation capabilities. The technology R&D activities of multinational companies in India are also subject to talent constraints.
The problem of industrial chain coordination needs to be solved urgently. Local supporting capabilities are insufficient, and key components and raw materials are highly dependent on imports. Collaborative innovation among upstream and downstream enterprises in the industrial chain is insufficient, and the effect of industrial clusters has not been fully exerted. Especially in the field of high-end manufacturing, there are shortcomings in core technologies and key links, and the level of independent control of the industrial chain needs to be improved. The ability of small and medium-sized enterprises to integrate into the industrial chain is weak, and the level of modernization of the industrial chain needs to be improved.
Enterprise feedback
Local enterprises are developing well. Large manufacturing enterprises have significantly enhanced their market competitiveness through technological innovation and management upgrading. Some companies have grown into global leaders in their niche areas. Small and medium-sized enterprises have taken advantage of the opportunities of industrial upgrading to achieve transformation, but they still face problems such as financing difficulties and weak technology. Enterprises generally report that the business environment continues to improve, but they look forward to further reducing institutional transaction costs.
The evaluation of foreign-invested enterprises is generally positive. In recent years, foreign direct investment in the manufacturing sector has maintained rapid growth, with the number of new projects and investment scale reaching record highs. Multinational companies are optimistic about the Indian market potential and policy environment, and have increased their production capacity layout and R&D investment in India. However, it also reflects some problems, such as complex approval procedures, inconsistent policy implementation, and intellectual property protection that needs to be strengthened.
Typical case analysis shows diverse development paths. Local companies, represented by the Tata Group, have achieved industrial upgrading through independent innovation and international mergers and acquisitions. The rapid expansion of the Apple industry chain in India demonstrates a successful model for undertaking industry transfer. The rise of electric vehicle start-ups reflects the vitality of the development of emerging industries. These cases provide useful reference for the transformation of manufacturing industry.
Faced with these achievements and challenges, India needs to further improve its policy system and optimize its development environment. The focus is to speed up infrastructure construction, strengthen talent training, and improve the modernization level of the industrial chain. At the same time, it is necessary to better leverage the role of market mechanisms, stimulate the innovation vitality of enterprises, and promote high-quality development of the manufacturing industry. In particular, it is necessary to implement more targeted support policies based on the demands of different types of enterprises and build a more competitive manufacturing development ecosystem.
The next five years are a critical period for the transformation and upgrading of India’s manufacturing industry. Whether it can effectively respond to these challenges will directly affect the realization of India’s strategic goal of building a global manufacturing center. Governments, enterprises and all parties in society need to work together to jointly promote higher-quality development of the manufacturing industry. At the same time, we must be good at summarizing experiences and lessons, continue to optimize policy measures, and create better conditions for the development of the manufacturing industry.
Regional Development Characteristics
India’s manufacturing industry presents distinct regional characteristics. Different states have formed unique manufacturing development models based on their respective resource endowments and industrial foundations. The leading role of key manufacturing states and the agglomeration effect of characteristic industrial clusters have become important supports for the development of India’s manufacturing industry.
Analysis of key manufacturing states
Maharashtra is India’s most important manufacturing base. The state’s manufacturing added value accounts for 16% of the country’s total, forming an advanced manufacturing corridor with Pune and Mumbai as its core. The manufacturing of automobiles and parts is distinctive, and local automobile giants such as Tata and Mahindra have set up headquarters and R&D centers here. At the same time, the state has obvious advantages in high-tech manufacturing fields such as pharmaceuticals, precision machinery, and aerospace. In 2023, foreign direct investment in manufacturing in Maharashtra will reach US$12 billion, ranking first in India. The state focuses on industrial innovation and has established a complete industry-university-research cooperation system, with high-tech industrial parks dotted around the country.
With its excellent port conditions and complete infrastructure, Gujarat has created a highly competitive manufacturing ecosystem. The state focuses on developing advantageous industries such as petrochemicals, textiles, and diamond processing, and has built multiple world-class industrial clusters. Especially in the Ahmedabad-Surat Industrial Corridor, a complete manufacturing industry chain has been formed. In recent years, the state has vigorously developed the new energy and electric vehicle industries. In 2024, the scale of the new energy vehicle industry will exceed 100 billion rupees. Thanks to efficient administrative services and preferential industrial policies, Gujarat has become one of the first choices for multinational companies to set up operations in India.
Relying on developed port facilities and rich human resources, Tamil Nadu has formed a manufacturing cluster centered on Chennai. The state has significant advantages in electronic manufacturing, auto parts, textiles and clothing and other fields. In 2023, the state’s manufacturing exports will reach US$45 billion, accounting for 10% of the country’s manufacturing exports. The state pays special attention to the development of electronics manufacturing and has successfully attracted many global electronics manufacturing giants to set up factories, forming a complete electronics industry ecosystem. In addition, the state has also developed unique advantages in fields such as construction machinery and renewable energy equipment.
Characteristics of industrial clusters
Automobile manufacturing clusters have demonstrated strong competitive advantages. The automobile manufacturing corridor with Pune-Chennai-Gurgaon as its core gathers major global automobile brands and core parts companies. This cluster not only has a complete supply chain system, but also has strong R&D and innovation capabilities. In 2024, the output value of India’s automobile industry cluster will exceed US$100 billion, and the annual production capacity of complete vehicles will reach 5 million units. Especially in the field of electric vehicles, the development of the entire industry chain of new energy vehicles has been driven by the industrial cluster effect. Collaborative innovation and resource sharing among enterprises within the cluster have significantly improved overall competitiveness.
Electronic manufacturing clusters have risen rapidly. The electronic manufacturing cluster with Noida-Bangalore-Chennai as its axis has become an important electronic product manufacturing base in the world. These clusters have not only attracted the industrial transfer of international brands such as Apple and Samsung, but also cultivated a number of local electronics manufacturing companies. Through professional division of labor and collaborative support, industrial clusters have formed manufacturing capabilities for all categories such as mobile phones, computers, and consumer electronics. In 2024, the output value of the electronic manufacturing cluster will reach US$80 billion, creating employment for more than 3 million people. The continuously improved supporting facilities and industrial services within the cluster provide strong support for the development of the electronics manufacturing industry.
Textile manufacturing clusters reflect the upgrading of traditional advantageous industries. The textile manufacturing cluster represented by Surat-Tiruppur-Lucknow has maintained a strong momentum of development through technological transformation and model innovation. These clusters completely cover the entire industrial chain from spinning, weaving to clothing manufacturing, and have important influence in the global textile and clothing market. Especially in the areas of technical textiles and smart manufacturing, the Indian textile cluster is moving up the value chain. In 2024, the export volume of major textile manufacturing clusters will exceed US$40 billion, becoming an important global textile supply base.
Some problems have also emerged in the development process of industrial clusters, such as homogeneous competition in industries, scattered innovation resources, and imperfect supporting systems. In the future, it is necessary to further optimize the industrial layout, strengthen cluster characteristics, and enhance collaborative innovation capabilities. The focus is to strengthen the division of labor and collaboration among clusters, avoid duplication of construction, and achieve misaligned development. At the same time, we should give full play to the leading role of industrial clusters and promote coordinated development of regional economies.
The development experience of various states and industrial clusters shows that development strategies adapted to local conditions, complete industrial supporting facilities, and efficient government services are key elements for improving the competitiveness of the manufacturing industry. In the future, India will further leverage its regional comparative advantages, optimize its industrial spatial layout, and promote the formation of a more distinctive regional manufacturing development pattern. In particular, it is necessary to strengthen inter-regional industrial collaboration, build a more complete industrial system, and enhance the overall competitiveness of the manufacturing industry.
Enterprise layout suggestions
Opportunities and challenges coexist in the Indian manufacturing market. Companies investing in India need to formulate careful market entry strategies, carefully select appropriate investment locations, and establish and improve risk prevention and control systems. Based on the practical experience of enterprises investing in India in recent years, the following specific suggestions are put forward.
Market entry strategy
The choice of investment model requires comprehensive consideration of multiple factors. Enterprises can choose different models such as sole proprietorship, joint venture or merger and acquisition based on their own scale, financial strength and development strategy. For companies entering the Indian market for the first time, it is recommended to enter through joint ventures first and use the resources and experience of local partners to lower entry barriers. Enterprises with strong financial strength and strong market control capabilities may consider the sole proprietorship model to maintain operational autonomy. By entering the market through mergers and acquisitions of local companies, you can quickly gain existing market share and business network, but you need to pay attention to M&A risk control and cultural integration.
Key aspects of the registration process need to be grasped. The first step is to determine the appropriate type of company, such as a private limited company or a public limited company. Prepare relevant documents and materials, including company articles of association, director’s identity certificate, registered address certificate, etc. Submit an application through the online platform to obtain a Company Identification Number (CIN). After that, you need to go through relevant procedures such as business license, tax registration, and environmental protection license. The entire process usually takes 2-3 months, and it is recommended to hire a professional service agency to assist with the process to improve efficiency and compliance.
Parsing compliance requirements requires special attention. India’s legal and regulatory system is relatively complex, and companies need to fully understand and strictly abide by various regulations. Focus on core regulations such as company law, labor law, and environmental law. In particular, compliance requirements in areas such as land use, environmental protection, and labor rights are relatively high. Enterprises must establish and improve a compliance management system, conduct regular compliance reviews, and discover and correct problems in a timely manner. At the same time, we must pay close attention to policy changes and adjust business strategies in a timely manner.
Suggestions for location selection
Location screening requires weighing multiple factors. The first consideration is the accessibility of the target market, including the supply of raw materials and the logistics convenience of product sales. Secondly, there is the degree of agglomeration of supporting industries and the distribution of upstream and downstream enterprises in the industrial chain. Labor supply is also an important consideration, including the number of workers, skill levels and labor costs. Infrastructure conditions such as power supply, accessibility, communication facilities, etc. also need to be carefully assessed. In addition, the local government’s industrial policy support and administrative efficiency must also be considered.
Park evaluation standards must be comprehensive and systematic. Focus on examining whether the industrial positioning of the park meets the development needs of enterprises and the composition of existing enterprises settled there. The park’s infrastructure is complete, including roads, water supply, power supply, sewage treatment and other supporting facilities. Park management service level, including administrative approval efficiency, corporate service quality, etc. Land prices and usage conditions are also important reference factors. It is recommended to visit multiple parks on site and make a selection after comprehensive comparison.
Supporting considerations require careful evaluation. Including the distribution of upstream and downstream supporting enterprises, the stability of the raw material supply chain, logistics and transportation conditions, etc. The talent supply system is also critical, and the situation of local educational resources and training institutions must be examined. Living supporting facilities such as housing, medical care, education, etc. also need to be taken into consideration. It is recommended to choose an area with a relatively complete supporting system, which can reduce operating costs and improve operating efficiency.
Risk prevention and control measures
To respond to policy risks, an early warning mechanism needs to be established. Pay close attention to the changing trends in India’s macroeconomic policies, industrial policies, and foreign investment policies. Establish communication channels with government departments to keep abreast of policy trends. Develop contingency plans and prepare in advance for possible policy changes. Appropriately diversify investments and avoid over-reliance on a single region or industry. At the same time, it is necessary to strengthen ties with industry associations and safeguard corporate rights and interests through collective strength.
Operational risk management should focus on systemic aspects. Establish and improve the internal control system and strengthen risk management and control in key links such as finance, procurement, and production. Pay special attention to supply chain risks and establish a diversified supplier system. Strengthen quality management to ensure that products meet Indian market standards. Pay attention to intellectual property protection and prevent the risk of technology leakage. Establish a sound production safety system to prevent the risk of production accidents. At the same time, attention should be paid to exchange rate risk management and appropriate financial instruments should be used for hedging.
Localization strategy is an important means to reduce risks. In terms of talent strategy, we will gradually increase the proportion of local employees and strengthen the cultivation of local talents. The management team must pay attention to multicultural integration and respect local customs and cultural traditions. Actively participate in community building, fulfill social responsibilities, and establish a good corporate image. Establish long-term cooperative relationships with local suppliers and take root in the local industrial ecology. Through localized operations, enterprises can enhance their market adaptability and risk resistance.
Enterprises also need to pay special attention to establishing a crisis management mechanism, conduct regular risk assessments, and promptly discover and resolve various risks. It is necessary to strengthen communication and coordination with domestic headquarters to ensure that overseas operations receive strong support. At the same time, we must be good at summarizing experiences and lessons, constantly improve the risk prevention and control system, and create good conditions for the sustainable development of enterprises in India.
Overall, the investment layout of enterprises in India is a systematic project that requires adequate preparation and comprehensive planning. It is necessary to seize market opportunities and guard against various risks. The key is to establish a strategic thinking for long-term development and gradually integrate into the Indian market through localized operations. At the same time, we must maintain strategic focus, respond calmly when encountering difficulties and challenges, adhere to the established development strategy, and ultimately achieve a successful layout in the Indian market.
Future development trends
With the rapid development of India’s manufacturing industry and the profound changes in the global industrial structure, India’s manufacturing industry is facing new development opportunities. By analyzing policy trends, industrial upgrading paths and market opportunities, we can better grasp the future development trends of India’s manufacturing industry.
India’s manufacturing policy adjustments are moving in a more open and precise direction. In the next five years, the Indian government is likely to further optimize the industrial policy system and focus on supporting the development of high-tech manufacturing, new energy industries and intelligent manufacturing. The Production Linkage Initiative (PLI) will be expanded to more areas, and the subsidy scale is expected to reach US$30 billion by 2025. At the same time, the government will increase its support for R&D and innovation, and it is expected that R&D investment will increase to 2.5% of GDP.
Key areas will focus on strategic emerging industries. Electric vehicles, renewable energy equipment, semiconductors, aerospace and other fields will receive more policy support. Especially in the semiconductor industry, India plans to invest US$10 billion to build a complete industrial chain. The new energy industry will also receive key support, and it is expected that the installed capacity of renewable energy will reach 500GW by 2026.
The degree of openness is expected to further increase. India is revising its foreign investment policy and plans to relax restrictions on foreign investment access in more areas. It is expected to streamline the approval process and improve administrative efficiency. At the same time, measures such as improving intellectual property protection and optimizing the business environment will be adopted to enhance the attraction of foreign investment. By 2025, the average annual foreign direct investment in manufacturing is expected to reach US$50 billion.
Technological progress will become the core driving force for industrial upgrading. India’s manufacturing industry is accelerating its transformation towards digitalization and intelligence. New technologies such as artificial intelligence, the Internet of Things, and 5G will be more widely used in the manufacturing industry. It is expected that by 2026, the size of India’s smart manufacturing market will exceed US$50 billion. Enterprises will increase investment in technological transformation and improve the level of automation and intelligence. At the same time, local R&D and innovation capabilities will be significantly enhanced, and the proportion of high-tech industries will continue to increase.
The extension of the industrial chain shows a two-way development trend. On the one hand, it extends upstream to strengthen the independent supply capability of key components and core materials; on the other hand, it extends downstream to enhance product added value and brand influence. Especially in the fields of electronic manufacturing and automobile industry, the local supply chain system will be more complete. It is expected that by 2025, the local matching rate of the manufacturing industry will increase to more than 70%.
The focus of innovation and development will be clearer. India will focus on building a number of innovative industrial clusters and promote in-depth integration of industry, academia and research. It is expected that by 2026, the number of R&D innovation centers will increase by 50%. The government will increase investment in basic research and cultivate a number of internationally competitive innovative enterprises. Digital technology innovation will become the focus and promote the transformation and upgrading of traditional manufacturing industries.
Chinese overseas companies are facing rare development opportunities. India’s huge market demand, complete industrial supporting facilities, and low production costs provide Chinese companies with good development space. Especially in the fields of electronic manufacturing, new energy, machinery and equipment, Chinese companies have obvious technological and cost advantages. Through localized operations, we can better integrate into the Indian market.
The timing of layout requires a good grasp of the rhythm. It is recommended that companies speed up their layout in 2024-2025 to seize market opportunities. Especially in some emerging industries, the market competition pattern has not yet been fully formed, which is conducive for enterprises to quickly occupy a favorable position. At the same time, we should pay attention to the policy trend and choose the appropriate entry opportunity.
Development path recommendations should be tailored to enterprise conditions. Large enterprises can consider entering quickly through mergers and acquisitions or building new factories; small and medium-sized enterprises can adopt a gradual strategy and first enter the market through trade or technical cooperation. The key is to find the correct market positioning and choose a suitable business model. At the same time, we must pay attention to risk control and adopt a steady expansion strategy.
India’s manufacturing industry has broad prospects for development. With the continuous optimization of industrial policies, the continuous improvement of innovation capabilities, and the gradual improvement of the industrial chain, India’s manufacturing industry will usher in a new round of rapid development. It is estimated that by 2030, the added value of India’s manufacturing industry is expected to reach US$1 trillion, becoming an important global manufacturing base. Digital transformation, green development, and innovation-driven development will become the main features of future development.
The inspiration for Chinese enterprises is mainly reflected in three aspects: first, they must fully understand the importance and particularity of the Indian market and formulate long-term development strategies; second, they must focus on localized operations and deeply integrate into the local industrial ecology; finally, they must strengthen innovation Capacity building and enhancing international competitiveness. Chinese companies should participate in the Indian market competition with a more open and inclusive attitude.
China-India industrial cooperation has broad prospects. The two countries are highly complementary in the manufacturing field and have huge room for cooperation. By deepening industrial cooperation, complementary advantages and mutual benefits can be achieved. Especially in the fields of high-tech manufacturing and green development, enterprises of the two countries can carry out more in-depth cooperation. In the future, China and India are expected to form a closer industrial cooperation relationship and jointly promote the development of Asia’s manufacturing industry.
Looking to the future, the development of India’s manufacturing industry will be more open, innovative and inclusive. Chinese companies should seize this historical opportunity, actively participate in the development of India’s manufacturing industry, and achieve their own sustainable development while serving India’s economic and social development. This will not only help deepen the economic relations between the two countries, but also make a positive contribution to the reconstruction of the global industrial chain.
