India's Manufacturing Ascent Rattles Beijing: A Geoeconomic Power Shift Underway

India's manufacturing sector is undergoing a transformative period, steadily positioning the nation as a global production hub and reshaping the international geoeconomic landscape. This ascent, fueled by ambitious government policies and increasing foreign investment, is notably causing apprehension in China, which has long dominated the global manufacturing arena.

Government Initiatives Fueling Growth At the heart of India's manufacturing renaissance are flagship government initiatives such as the 'Make in India' campaign, launched in 2014, and the comprehensive Production Linked Incentive (PLI) Schemes, introduced in phases starting 2020. The PLI schemes, with an overall incentive outlay of ₹1.97 lakh crore (approximately US$26 billion), span 14 critical sectors, including electronics, pharmaceuticals, and automobiles. These schemes are designed to boost domestic production, encourage technological advancements, attract both foreign and local investments, and reduce import dependency while promoting exports.

As of June 2024, the PLI Schemes had attracted investments totaling ₹1.32 lakh crore and significantly boosted manufacturing output by ₹10.9 lakh crore. These initiatives have also played a crucial role in job creation, directly and indirectly generating 8.5 lakh employment opportunities. Foreign Direct Investment (FDI) in India's manufacturing sector has seen a remarkable increase, rising by 69% to USD 165.1 billion between 2014 and 2024, compared to the preceding decade. India permits up to 100% FDI in most manufacturing sectors through the automatic route, simplifying market entry for foreign entities.

Key Sectors Leading the Charge Several sectors are showcasing India's growing manufacturing prowess:

• Electronics Manufacturing: This sector has witnessed stellar growth, with India transitioning from a net importer to a net exporter of mobile phones. Production surged from 5.8 crore units in 2014-15 to 33 crore units in 2023-24, with exports reaching nearly 5 crore units. India's share in global iPhone production is projected to double in 2025. Overall electronics exports reached $29.12 billion in FY 2023-24, and projections indicate they could hit $61 billion by 2030.
• Pharmaceuticals and Medical Devices: The PLI schemes have significantly benefited these sectors, leading to a reduction in raw material imports and fostering local manufacturing of intermediate materials and 39 types of medical devices.
• Automotive: Incentives are boosting the production of electric vehicles and hydrogen fuel vehicles, aiming to create 750,000 direct jobs.

India's cost advantages, a growing domestic market, and existing PLI schemes make it a natural candidate to capture a larger share of global manufacturing shifts. The country also benefits from lower labor costs compared to China and a strategic location for trade.

The 'China Plus One' Strategy and Beijing's Unease The global shift towards diversifying supply chains, often termed the 'China Plus One' strategy, has positioned India as an attractive alternative for major electronics firms like Apple, Samsung, and Foxconn. This diversification is driven by rising labor costs in China, ongoing supply chain disruptions, and trade policies. A recent survey indicated that U.S. C-suite executives are now three times more likely to choose India over China for their future supply chain needs.

However, India's growing manufacturing might has not gone unnoticed in Beijing. China is reportedly attempting to impede India's industrial ascent through various covert tactics. These include strategic export denials, such as restricting access to rare earth magnets and critical minerals essential for electronics and EVs, and solar equipment. There have also been reports of regulatory pressure, delays in the shipment of specialized manufacturing equipment from Chinese ports, and the recall of Chinese engineers and workers from Indian plants, including those operated by Foxconn. These actions are seen as an attempt to derail India's rise as a global manufacturing alternative and preserve China's long-held dominance.

Challenges and the Road Ahead Despite the significant progress, India faces challenges on its path to becoming a manufacturing superpower. Infrastructure gaps persist, and the country still heavily relies on China for critical intermediate goods in various sectors, including electronics and chemicals. Additionally, while there has been a surge in apprenticeships, addressing skill deficits and enhancing technological capabilities remains crucial for long-term sustainability. The domestic value addition in electronics, currently at 15-20%, needs to increase to 35-40% by FY30 to truly foster self-reliance.

While official reports highlight the success of PLI schemes, some economists have expressed skepticism, with a Reuters report in March 2025 suggesting the scheme might lapse due to not meeting expectations, having disbursed only $1.7 billion of allocated funds by then. However, other government data points to much higher investment and output figures as of late 2024, indicating mixed results depending on the sector and specific metrics.

Nevertheless, China's obstructive measures may inadvertently accelerate India's drive for self-reliance, pushing the nation to build domestic capabilities and diversify partnerships. With its vast domestic market, competitive labor costs, and a strategic focus on enhancing its manufacturing ecosystem, India is poised to continue its upward trajectory, challenging existing global supply chain paradigms and solidifying its position as a critical player in the evolving world economy.