India’s Manufacturing Moment: What NITI Aayog’s 12-Sector Roadmap Says About Building a Global Industrial Base
India’s manufacturing ambition is entering a more demanding phase.
For years, the central question was whether India could increase manufacturing capacity, attract investment and reduce its dependence on imports. The next question is considerably harder: Can India build the depth, scale, technology and global market linkages required to become a manufacturing power rather than simply a large manufacturing destination?
A new report on Key Sectors to Position India as a Global Manufacturing Hub, prepared by CRISIL in collaboration with NITI Aayog, offers an important answer.
The report does not treat manufacturing as a single sector requiring a single policy solution. Instead, it identifies 12 areas where India has the potential to build globally competitive capabilities: electronics, telecom equipment, solar PV, pharmaceuticals, chemicals, automobiles, defence and drones, steel, capital goods, textiles, food processing, and leather and footwear. The selection emerged from an assessment of 62 sectors, considering domestic and global market size and growth, followed by deeper evaluation of strategic alignment, financial viability and value-chain positioning.
The report’s central message is not simply that India needs to manufacture more. It is that India needs to manufacture more of the right things, at greater scale, with greater domestic value addition and stronger links to global value chains.
The real problem is not the absence of manufacturing
India has already built a sizeable manufacturing base. Yet its contribution to GVA has remained broadly range-bound at around 16-18% for much of the past two decades.
At the same time, India’s share of global manufacturing value added has increased from about 1.5% in 1995 to 3.2% in 2023. China, by comparison, moved from about 5% to nearly 32% during the same period. The comparison is not intended to suggest that India must replicate China’s model, but it does underline the scale of the opportunity still available.
India therefore faces a somewhat unusual manufacturing challenge.
It has a large domestic market, a young workforce, established industrial capabilities and a growing policy ecosystem. But these strengths have not yet translated into the kind of globally integrated manufacturing scale achieved by China or the export-oriented manufacturing depth demonstrated by countries such as Vietnam.
The report identifies several structural reasons: logistics and infrastructure constraints, power reliability, limited access to technology and finance among MSMEs and an export basket that still contains a significant proportion of relatively low-value-added products. This is perhaps the most important starting point for understanding the report.
From “Make in India” to “Make the value chain in India”
The evolution of India’s manufacturing strategy can increasingly be understood through one question: How much of the value chain sits inside the country?
Assembly can create employment and exports, but it does not automatically create technological depth.
A manufacturing ecosystem becomes considerably more powerful when it includes component suppliers, raw-material producers, tooling companies, testing facilities, design capabilities, R&D, logistics providers, specialised skills and globally competitive original equipment manufacturers.
That is why the report repeatedly returns to localisation and value-chain development.
Its 12-sector framework explicitly argues that India’s manufacturing ambitions must move beyond production expansion towards moving up the value chain, developing globally competitive enterprises, strengthening advanced manufacturing capabilities and integrating more deeply into global production networks. This has major implications for policy.
The success of a manufacturing incentive should not ultimately be measured only by how much capacity it creates. It should also be measured by how much domestic capability it creates around that capacity. That is a much higher bar.
Four sectors illustrate the challenge particularly well
The first volume of the study examines four sectors: chemicals, textiles, telecom and network equipment and solar PV manufacturing. They may appear unrelated, but together they illustrate four different dimensions of India’s manufacturing opportunity industrial inputs, employment, technology and strategic future industries.
Chemicals: Chemicals are often less visible than finished consumer products, but they sit underneath a large part of the industrial economy.
The report’s analysis highlights India’s continued import dependence in several important chemical products. Methanol, for instance, had import dependency of around 85-90% in FY25, while acetic acid also had high import dependence. The implication is not that every imported chemical must be replaced domestically, but that strategic gaps in upstream and intermediate chemicals can constrain the competitiveness of downstream industries.
This is where the chemicals opportunity becomes more strategic.
If India wants to expand pharmaceuticals, textiles, plastics, electronics, automobiles and other manufacturing segments, it also needs reliable and competitive access to the industrial inputs that feed those sectors.
The report therefore points towards domestic production, infrastructure development, integrated facilities, investment incentives and a balanced approach to FTAs that protects the conditions for domestic industry while maintaining global competitiveness.
The broader lesson is clear: manufacturing competitiveness cannot be built only at the final-product stage.
A country that assembles the finished product but imports much of its industrial input remains vulnerable to supply disruptions, currency movements, geopolitical shocks and global price volatility.
Textiles: India already possesses a strong raw-material base, including cotton and polyester, and the sector remains deeply connected to MSMEs, rural economies and employment. Yet the opportunity lies in moving beyond India’s traditional strengths towards higher-value apparel, man-made fibres and more sophisticated global supply-chain participation.
The report highlights an important structural issue in the man-made fibre ecosystem: India has significant polyester production capability but also relies heavily on imports of important inputs such as PTA and MEG. That matters because global apparel demand is changing.
Growth is increasingly linked to synthetic and blended fibres, performance textiles, technical textiles and faster, more integrated supply chains. India’s ability to capture this opportunity will depend not merely on producing more yarn or garments but on connecting the entire chain from fibre and fabric to processing, apparel, design and export markets. For India, textiles therefore represent something bigger than an export opportunity.
They are a test of whether the country can convert its labour advantage into manufacturing scale and globally competitive employment.
Telecom: Telecom and network equipment perhaps offers the clearest example of the difference between having a large market and having a globally competitive manufacturing industry.
India has enormous domestic telecom demand. Yet the report finds significant import dependence in critical components and limited localisation in higher-value technologies such as 4G and 5G radio access equipment. It also notes that nearly 98% of telecom equipment demand originates from private telecom operators, which often prefer established global OEMs because of technology maturity, scale and certification. This creates a classic industrial-development problem.
Domestic demand can provide an initial market, but global competitiveness requires firms that can compete outside India.
The report therefore recommends deeper component localisation, joint ventures and technology transfer, industrial clusters, export promotion in selected equipment categories, stronger testing and certification infrastructure and better skill development. The export opportunity is particularly revealing.
Global imports of antennas, remote radio heads and baseband units exceeded $219 billion in 2024, while India’s exports in these categories were below $1 billion, according to the report.
That gap demonstrates why India’s manufacturing challenge should not be framed only around import substitution.
The larger prize is export substitution replacing someone else’s market share with Indian production.
Solar PV: Solar PV demonstrates another dimension of India’s manufacturing transition. India has rapidly expanded module and cell manufacturing capacity, supported by domestic demand and policy intervention. But the report points to a fundamental weakness: the upstream value chain remains much less developed.
China accounts for more than 85% of global PV manufacturing capacity, according to the report, and has built dominance across multiple stages of the value chain. India’s challenge is therefore not simply to become a large module producer but to develop upstream capabilities in areas such as polysilicon, wafers and other critical inputs.
The capital-goods dimension is equally important. The report notes that Indian solar manufacturers face limited access to certain capital goods and high capital expenditure requirements, while skill shortages and lower productivity can also affect project timelines and competitiveness. This illustrates a recurring pattern across India’s manufacturing landscape.
The report’s most important idea may be what connects these sectors
At first glance, chemicals, textiles, telecom equipment and solar PV have little in common.
But the report reveals a common manufacturing architecture.
All four require some combination of:
- competitive infrastructure
- reliable and affordable power
- skilled workers
- access to capital
- technology and R&D
- stronger supplier ecosystems
- testing and certification
- export-oriented market access
- and deeper integration into global value chains.
The report’s methodology itself reflects this thinking. After the initial sector selection, each sector was assessed for strategic alignment, operational and financial viability, and value-chain positioning, including raw-material dependence, geopolitical considerations, profitability, capital intensity and India’s position in global value chains.
This is significant because it moves the manufacturing debate away from sector selection towards ecosystem construction.
India cannot build global manufacturing through incentives alone
The report also raises a deeper question about industrial policy.
Production-linked incentives can encourage capacity creation. But incentives cannot, by themselves, create globally competitive supply chains.
China’s experience, discussed extensively in the report, shows the importance of industrial clusters, infrastructure, technology acquisition, FDI, scale and export orientation. Vietnam’s experience similarly demonstrates the power of FTAs, competitive labour costs, FDI and integration with global supply chains.
India therefore needs to think beyond attracting the factory. It needs to attract the ecosystem around the factory.
That means encouraging global companies to bring suppliers, technology and production networks into India; enabling Indian companies to scale; creating industrial clusters with shared infrastructure; strengthening testing and certification; improving access to finance for smaller suppliers; and making it easier for domestic firms to become qualified vendors for global OEMs. The recent passage of the Taxation & Other Law Amendment Bill, 2026 is the step in right direction, the bill exempts taxes relating to foreign-owned tooling and machinery supplied to Indian contract manufacturers until 31 March 2041.
The report identifies the predominance of MSMEs with limited access to technology and finance as one of the structural constraints affecting manufacturing competitiveness.
If large manufacturers become globally competitive while their domestic supplier base remains fragmented and technologically weak, the value-chain gains will remain incomplete.
The next manufacturing race will be about integration
There is another important message hidden in the report.
Global manufacturing is changing, companies are diversifying supply chains, reducing dependence on a single geography and searching for stable, competitive locations from which to serve global markets. This creates an opportunity for India, but opportunity alone does not create competitiveness.
The countries that benefit most from this reconfiguration will be those capable of offering more than low-cost production.
They will offer scale, reliability, supplier depth, infrastructure, skills, technology, trade access and policy predictability at the same time. That is a much more demanding proposition.
India’s manufacturing strategy therefore has to become increasingly outward-looking. Domestic demand can help firms achieve initial scale, but global markets are where manufacturing champions are ultimately tested.
What success should look like by 2047
The most useful way to read this report is not as a list of 12 sectors that the government should “promote”. It is as a blueprint for what a mature Indian manufacturing ecosystem should look like.
Success would mean an electronics manufacturer can source more components domestically. A telecom company can develop and export globally competitive network equipment. A textile manufacturer can move from yarn and basic apparel into higher-value products. A solar company can access a deeper domestic upstream ecosystem. A chemical manufacturer can compete on cost, quality and reliability in international markets.
And around all of them would sit stronger MSME suppliers, logistics networks, testing laboratories, skilled workers, technology companies, financial institutions and research institutions.
That is when manufacturing begins to create multiplier effects rather than isolated production capacity.
The bigger opportunity is to build the industrial architecture
India’s manufacturing debate has often been framed around one number: the share of manufacturing in GDP.
That remains important. But the NITI Aayog-CRISIL report suggests that the more meaningful question is what kind of manufacturing India is building to get there.
A larger manufacturing sector based primarily on assembly would improve capacity but leave much of the value creation elsewhere.
A manufacturing sector built around domestic components, technology, scale, exports, skilled employment and global supply-chain integration would do something much more consequential: it would strengthen India’s industrial architecture.
The report itself makes this distinction clear. Its objective is not simply to expand production but to strengthen domestic capabilities, improve competitiveness, increase value addition and support export-led manufacturing growth. That is ultimately the test for India’s global manufacturing ambition.
The goal cannot be to make India a place where the world assembles products. The goal has to be to make India a place where the world builds supply chains.
The first volume of the report offers four different windows into that transition. Chemicals show why upstream industrial inputs matter. Textiles show the scale of India’s employment opportunity. Telecom demonstrates the importance of technology and export competitiveness. Solar PV shows why upstream capability will determine whether downstream scale becomes sustainable.
Together, they point towards the same conclusion:
India’s next manufacturing phase will not be won by capacity alone. It will be won by value-chain depth, competitiveness and the ability to turn domestic industrial capability into global market power.
