New Delhi, Sept. 21 -- India's manufacturing story has acquired impressive scale. Electronics production rose from Rs 1.9 lakh crore in 2014-15 to Rs 13.11 lakh crore in 2025-26, while exports climbed from a little over Rs 38,000 crore to Rs 4.24 lakh crore. Mobile phones, electronics, automobiles and increasingly sophisticated industrial products are rolling out of Indian factories in far greater numbers. Global companies are expanding production in the country, supply chains are taking shape around new manufacturing clusters, and India is emerging as an important alternative production base. Yet beneath these achievements lies a weakness that must now become the focus of manufacturing policy: India often assembles much more than it actually makes.
The distinction matters. A factory that imports high-value components and puts them together domestically certainly creates employment, develops logistics networks, builds manufacturing experience and allows Indian workers and companies to participate in global supply chains. Assembly can also be an important first stage in industrialisation. Countries rarely develop complex manufacturing ecosystems overnight. But assembly cannot be the final destination. The greater and more durable economic gains come when the components, machinery, materials, designs, technologies and intellectual property embedded in the finished product are progressively produced at home. This is also where manufacturing begins to create stronger multiplier effects. A domestic component supplier employs workers, purchases materials, invests in machinery and develops engineering capabilities of its own. As more such suppliers emerge, manufacturers gain access to a deeper local ecosystem, reducing lead times and improving resilience. Knowledge spreads across companies, workers acquire specialised skills and smaller firms gain opportunities to enter sophisticated supply chains. Manufacturing then becomes an ecosystem rather than a collection of assembly plants.
India remains dependent on imports for several critical inputs. In electronics alone, printed circuit boards, camera and display modules, connectors, capacitors, lithium-ion cells and rare-earth magnets remain among the areas where import dependence persists. The broader manufacturing sector also continues to rely substantially on imported technologically advanced capital equipment. Much of this dependence is linked to China, which supplied India with goods worth about $132 billion in 2025-26. As domestic production expands, imports of components and machinery can rise alongside it, exposing the limits of measuring manufacturing success primarily through the value of finished goods leaving factories. This does not mean India should attempt to manufacture everything within its borders. No successful modern industrial economy functions without global supply chains. Components cross borders repeatedly before becoming finished products, and specialisation is central to efficient manufacturing. Nor should self-reliance become a justification for expensive protectionism that leaves domestic companies insulated from competition. High tariffs may encourage local production in some areas, but permanent protection can also raise costs, weaken competitiveness and ultimately hurt exporters.
The objective must instead be strategic depth: identifying components and technologies where excessive external dependence creates economic or national-security vulnerabilities and developing competitive domestic alternatives. India needs to decide where localisation can generate technological capability and scale, rather than pursuing localisation simply for its own sake. There are encouraging signs of such a shift. The Electronics Components Manufacturing Scheme is explicitly aimed at moving deeper into the value chain, including components, sub-assemblies and capital equipment. The semiconductor push is similarly widening attention beyond fabrication and packaging towards equipment, materials, gases, chemicals and substrates. These are precisely the less visible layers on which durable manufacturing ecosystems are built. Their success will determine whether India captures a larger share of value or remains concentrated at the relatively thinner assembly end of global production networks.
But incentives alone cannot create industrial depth. India needs patient investment in tooling, precision engineering, materials science, industrial research and supplier development. Smaller manufacturers must be able to meet the quality, scale and delivery standards demanded by global companies. Affordable finance, reliable infrastructure and skilled technical workers are equally important. Universities, laboratories and industry need stronger links so that research can move more quickly towards commercial application. Government procurement can also help promising domestic technologies acquire scale, provided it does not become a mechanism for shielding inefficient producers indefinitely.
The next measure of manufacturing success should therefore not simply be how many phones, cars or machines India produces. It should increasingly be how much Indian engineering, technology, intellectual property and value they contain. Production-linked incentives helped bring factories and scale. The next generation of industrial policy must ensure that more suppliers, technologies and capabilities grow around them. Assembly gave India an entry into global manufacturing. The harder and more consequential task now is to move from assembling the world's products to making more of what goes inside them.
Published by HT Digital Content Services with permission from Millennium Post.