New Delhi, Oct. 19 -- As multinational companies seek alternatives to Chinese manufacturing, India has presented itself as an obvious destination: a vast market, a large workforce, a growing digital economy and an increasingly confident industrial policy.
Yet there is an awkward truth beneath this optimism. India is trying to reduce its dependence on China at precisely the moment when its ambition to become a manufacturing power makes it more dependent on Chinese supply chains. The paradox is visible in the trade figures.
In 2025-26, India imported USD 131.63 billion worth of goods from China while exporting only USD 19.47 billion, producing a merchandise trade deficit of USD 112.16 billion. China consequently accounted for roughly 16 per cent of India's total merchandise imports.
Much of it consists not of finished consumer goods but of the machinery, components, chemicals and intermediate products that keep Indian factories running.
According to the Global Trade Research Initiative, China supplied about 43 per cent of India's electronics imports, 40 per cent of machinery and computers, and 44 per cent of organic chemicals. The Chinese presence is embedded deep within India's production processes.
A study by the Koan Advisory Group and the Institute of Chinese Studies found that China supplied at least 80 per cent of India's imports in 71 electronics product lines in 2025-26, compared with 44 lines in 2018-19. These include crucial upstream components such as motors, cables and switching equipment.
India may assemble millions of electronic products, but assembly is not manufacturing sovereignty. Dependence on imported components and machinery can conceal continuing supply-chain concentration.
India's pharmaceutical industry also relies heavily on imported ingredients. In 2024-25, India imported about USD 4.35 billion of APIs, bulk drugs and drug intermediates, of which China supplied 73.7 per cent.
New Delhi has recognised the vulnerability. The Rs.6,940-crore PLI scheme for critical bulk drugs aims to build domestic capacity, but industrial ecosystems cannot be created by policy alone.
The green-energy transition exposes another layer of the same problem. India has rapidly expanded its solar-module manufacturing capacity, but remains dependent on foreign sources for much of the upstream chain. NITI Aayog estimates that India's dependence on imports is close to 100 per cent for polysilicon, above 90 per cent for wafers and above 60 per cent for solar cells. China, meanwhile, dominates global upstream capacity, accounting for roughly 93-98 per cent of polysilicon capacity, 95 per cent of wafer capacity and 91 per cent of cell capacity.
India's electric vehicle ambitions require batteries and critical minerals. Lithium remains almost entirely import-dependent, while China dominates several stages of battery manufacturing, creating fresh supply-chain vulnerabilities. None of this invalidates China Plus One. Companies are hedging risk, not necessarily abandoning China.
India should therefore resist assuming that diversification will automatically bring factories here. Manufacturing depends on dense ecosystems of suppliers, skills, technology, logistics, finance and infrastructure, strengths China has built over decades.
India's goal must go beyond assembly to capturing more of the value chain.
Importing advanced machinery that enables Indian firms to produce and export competitively can strengthen domestic industry. The problem is persistent dependence on imports where India fails to build its own capabilities.
There are already tentative signs that the relationship need not be entirely one-way. India's exports of printed circuit board assemblies to China reportedly rose more than forty-fold in 2025-26, reaching about USD 1.5 billion. The appropriate response, therefore, is neither romantic decoupling nor complacent dependence.
India should identify those Chinese dependencies that present genuine strategic risks and develop alternative sources, domestic wherever economically sensible, and otherwise through Japan, South Korea, Taiwan, Europe, the United States and Southeast Asia. At the same time, it should preserve channels with China for inputs India cannot yet produce competitively.
Strategic autonomy does not mean producing everything at home. It means ensuring that no single external supplier can hold the domestic economy hostage. India must therefore measure industrial success beyond factories, investment and installed capacity: by domestic value addition, component manufacturing, technological capability and the ability to compete without perpetual protection.
China is both India's principal manufacturing competitor and a crucial supplier to its manufacturing ambitions. India need not choose between dependence and disengagement. Its harder task is to reduce dependence while remaining engaged enough to build competitive manufacturing.
That is the real meaning of China Plus One: not replacing China overnight, but ensuring that India's industrial future does not depend on China remaining indispensable.
Views expressed are personal. The writer is a policy analyst and a columnist
Published by HT Digital Content Services with permission from Millennium Post.