Manufacturing is no longer just about factories, it has become a key driver of economic growth, job creation, export competitiveness, and a country’s position in the global supply chain. At a time when companies are looking to diversify their supply chains, India is stepping up efforts to establish itself as an alternative manufacturing hub.
However, the global picture still heavily favours China. According to World Bank data, India’s share in global manufacturing value added remains significantly lower than China’s. Even so, policy initiatives such as Make in India, the Production Linked Incentive (PLI) scheme, and the China+1 strategy are creating new opportunities for the country.
Let us understand India’s current position in global manufacturing and what the road ahead looks like.
What’s Happening?
According to World Bank data, China accounts for approximately 28% of global manufacturing value added. In other words, more than one out of every four manufactured goods in the world is produced in China. In 2004, China’s share was less than 10%, but it has more than tripled over the past two decades.
China’s manufacturing value added has reached around $4.66 trillion, which is higher than the combined manufacturing value added of the United States, Japan, and Germany. In comparison, the United States’ share has declined from around 22% in 2004 to 17%, while the Eurozone accounts for about 15% and Japan around 5%.
India currently contributes approximately 3% to global manufacturing value added. While it remains far behind China in terms of scale, the world’s fifth-largest economy is working to rapidly expand its manufacturing capacity.
India’s Growing Manufacturing Capacity and New Opportunities
Over the past few years, India has taken several steps to make manufacturing a key pillar of economic growth. The government has been promoting investment through initiatives such as Make in India and the PLI scheme, with a focus on sectors including electronics, semiconductors, defence manufacturing, renewable energy, and electric vehicles.
According to ASSOCHAM, India’s average manufacturing growth was 3.44% during 2016-19, which increased to 4.15% during 2022-25. This performance is considered better than the global average. The report attributes this growth to strong domestic demand, improved infrastructure, better logistics, industrial corridors, and initiatives such as PM Gati Shakti, all of which are making India a more attractive manufacturing destination for global investors.
According to IBEF, India is now the world’s third most preferred manufacturing destination and has the potential to export goods worth $1 trillion by 2030.
How Much Can India Benefit From the China+1 Strategy?
Global companies are increasingly diversifying their supply chains instead of relying on a single country. As a result, India is emerging as an important alternative under the China+1 strategy.
The government’s objective is to make India not just a domestic manufacturing hub but also an integral part of the global supply chain. Rising investments in sectors such as electronics, semiconductors, defence, automobiles, and renewable energy reflect this ambition.
Even so, China continues to enjoy a significant lead. Its manufacturing dominance is the result of decades of investment in infrastructure, an integrated supply chain, large-scale production capabilities, and leadership in high-value industries such as electric vehicles, batteries, consumer electronics, and industrial equipment. Bridging this gap remains India’s biggest challenge.
What Does This Mean for Investors?
Although India’s share of global manufacturing currently stands at just 3%, the ongoing shift in global supply chains could create a significant long-term opportunity. Government policies aimed at boosting manufacturing are expected to benefit several industries over the coming years.
In particular, investment activity is likely to increase in sectors such as electronics, semiconductors, defence manufacturing, renewable energy, and the automobile supply chain. If India succeeds in becoming a trusted manufacturing base for global companies, it could also support exports, employment, and overall industrial growth.
However, investors should also recognise that the manufacturing gap between China and India remains substantial. As a result, this is likely to be a gradual, long-term transformation rather than a rapid shift.
What’s Next?
India’s goal is not only to increase its share of global manufacturing but also to play a more strategic role in global supply chains. Strong domestic demand, continued reforms, infrastructure investments, and manufacturing-focused policies are laying the foundation for this transition.
At the same time, China remains the world’s largest manufacturing hub, backed by decades of investment and industrial development. India’s biggest challenge will be to scale up its manufacturing capacity, strengthen global competitiveness, and attract sustained investment.
If the current pace of reforms continues and India successfully capitalises on the China+1 strategy, it could significantly increase its share in the global manufacturing value chain over the coming years.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
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