Introduction
Global industrial value chains are undergoing a structural reset driven by geopolitical tensions, supply-chain vulnerabilities exposed by the pandemic, evolving trade policies, and corporate strategies to diversify production beyond single-source dependencies such as China. Major consultancies and global institutions point to a shift toward supply-chain resilience and diversification, with companies increasingly exploring China+1 strategies and nearshoring to mitigate risk and reduce overdependence on any single region.
India stands out as a credible alternative manufacturing destination. Its large and growing domestic market, projected to host the world’s second-largest share of global consumption by 2030 offers scale advantages for manufacturers seeking both domestic and export demand. Policy momentum has strengthened India’s competitive position: The Government’s Production-Linked Incentive (PLI) schemes have attracted significant investment across sectors including electronics, pharmaceuticals, and automobiles, and have contributed to rapid export growth in mobile phones and other products.
The expansion of global value-chain participation is also supported by improving digital infrastructure, rising foreign direct investment, and targeted sectoral incentives under initiatives such as Make in India and the National Manufacturing Mission.
At the same time, challenges remain. India’s manufacturing share of GDP, at around 17-18 %, is below its long-term target, and integration into global supply chains requires continued upgrades in logistics, skills, technology, and regulatory frameworks. Deepening value-chain linkages is increasingly recognized as essential for realizing the full potential of PLI schemes and for attracting sustained global investment.
Global supply-chain realignment, driven by geopolitical shifts and diversification away from China, is creating a manufacturing opportunity for India. Targeted policies like the Production-Linked Incentive (PLI) have boosted investment and exports in electronics, autos and pharmaceuticals, helping India deepen global value-chain links and expand its industrial base.
What Is Driving Global Industrial Realignment?
Global industrial realignment is being driven by a convergence of geopolitical, economic, regulatory, and technological forces. Together, these are reshaping how companies design supply chains, choose manufacturing locations, and assess long-term risk.
Geopolitical Fragmentation – Geopolitics has moved from a background risk to a core determinant of industrial strategy. Rising tensions between major economies, trade wars, sanctions, export controls, and national security considerations have exposed the risks of excessive dependence on a single country or region for critical manufacturing inputs.
As a result, governments and global corporations are actively pursuing de-risking strategies rather than pure decoupling. This involves diversifying production footprints, securing alternative suppliers, and building redundancy into supply chains. Increasingly, sourcing and investment decisions favour politically stable, rule-based economies with predictable regulatory systems, strong legal frameworks, and alignment with global trade norms. Trust, reliability, and geopolitical alignment are now as important as cost in manufacturing location decisions.
Supply Chain Resilience Over Cost Optimisation – For decades, global manufacturing was optimised around lowest cost and efficiency, supported by just-in-time inventory models and highly concentrated supply bases. Recent shocks, pandemics, logistics bottlenecks, energy disruptions, and geopolitical conflicts, have exposed the fragility of these models.
Companies are now shifting toward “just-in-case” supply chains, prioritising resilience, continuity, and flexibility over marginal cost savings. This has accelerated trends such as regionalisation, near-shoring, and friend-shoring, where production is located closer to end markets or within trusted geopolitical blocs. Multi-country sourcing strategies are becoming the norm, enabling firms to mitigate disruption risk, reduce lead times, and ensure business continuity even during global shocks.
Decarbonisation and Sustainability Pressures – Climate policy and sustainability requirements are fundamentally reshaping industrial competitiveness. Governments are introducing carbon pricing mechanisms, such as the EU’s Carbon Border Adjustment Mechanism (CBAM), while many countries are tightening environmental regulations across energy-intensive sectors like steel, cement, chemicals, and manufacturing.
At the same time, global OEMs and large buyers have committed to net-zero targets, pushing decarbonisation obligations down their supply chains. Suppliers are increasingly expected to provide traceable, low-carbon, and ESG-compliant inputs, backed by data transparency. This is shifting sourcing decisions toward locations that offer access to cleaner energy, decarbonisation technologies, and supportive policy frameworks, making sustainability a key determinant of future manufacturing location choices.
Technology and Automation – Rapid advances in manufacturing technology are also driving global realignment. The adoption of Industry 4.0 tools, including automation, robotics, digital twins, AI-driven production planning, and advanced analytics, is transforming factory economics and reducing dependence on low-cost labour alone.
At the same time, new technologies such as advanced materials, electrification, hydrogen-based processes, and additive manufacturing are redefining production processes across industries. As automation increases productivity and consistency, the traditional labour arbitrage advantage of low-cost countries is diminishing. Instead, competitiveness is increasingly determined by skills availability, technology adoption, infrastructure quality, and innovation ecosystems, reshaping global manufacturing location strategies.
Why India Is Strategically Well-Placed
India is emerging as a preferred manufacturing destination amid global industrial realignment. As one of the fastest-growing large economies, India benefits from strong domestic demand across automotive, infrastructure, energy, electronics, and defence, enabling manufacturers to scale operations while serving both domestic and export markets.
This advantage is reinforced by targeted policy support such as Production Linked Incentive (PLI) schemes, sustained investments in logistics and industrial infrastructure, and a competitive cost-capability balance supported by a large engineering workforce. Strategic alignment with major global economies further positions India as a trusted, long-term partner in resilient and future -ready global value chains.
Sector-Wise Opportunity Mapping
AUTOMOTIVE & MOBILITY
Opportunity Drivers
- Global OEMs adopting China+1 and multi-country sourcing strategies
- India’s passenger vehicle wholesales at ~4.55 million units (2025)
- Total automobile exports crossed 5.3 million units (FY25)
- Rapid EV transition supported by PLI and PM E-DRIVE
- 4 million+ EV registrations in India as of 2025
- Rising global demand for cost-competitive auto components
India’s Strengths
- Strong Tier-1 and Tier-2 supplier ecosystem with deep MSME base
- Auto component industry turnover of ₹6.73 lakh crore (US$ 80.2 bn)
- Auto component exports at US$ 22.9 bn (FY25)
- Sector contributes ~2.3% to India’s GDP
- 5 million+ direct employment in auto components
- Capabilities across ICE, hybrid, and EV platforms
Strategic Focus Areas
- Power electronics, electric motors, and battery packs
- Lightweight materials and high-precision components
- EV and hybrid drivetrain sub-systems
- Software-integrated and connected vehicle systems
- Advanced manufacturing for export-oriented auto components
STEEL & GREEN MATERIALS
Opportunity Drivers
- Carbon Border Adjustment Mechanism (CBAM) implementation from 2026 is pushing Indian exporters to reduce embedded carbon in steel supplied to the EU
- Global OEMs and infrastructure developers are increasingly mandating low-carbon and green steel in procurement
- Continued infrastructure-led demand across transport, energy, and urban development is sustaining long-term steel consumption
India’s Strengths
- India is the world’s second-largest steel producer, with crude steel capacity of ~200 MTPA and strong domestic demand
- Significant renewable energy potential (solar, wind) and emerging green hydrogen ecosystem support steel decarbonisation
- Large-scale plants provide cost and efficiency advantages for process optimisation and technology adoption
Strategic Focus Areas
- Deployment of green steel pilots using hydrogen-based DRI, CCUS, and scrap-based EAF routes
- Strengthening carbon measurement, reporting, and traceability systems aligned with CBAM requirements
- Positioning India as a reliable exporter of compliant, low-carbon steel to EU and other regulated markets
RENEWABLE ENERGY & ENERGY TRANSITION
Opportunity Drivers
- Accelerating global energy transition driven by net-zero commitments across major economies
- Increasing localisation of solar, wind, and energy storage supply chains to reduce import dependence
- Heightened energy security concerns following geopolitical disruptions and fuel price volatility
India’s Strengths
- India is among the fastest-growing renewable energy markets, with over 180 GW of installed renewable capacity and aggressive expansion targets
- Strong policy support through PLI schemes, domestic content requirements, and long-term renewable targets
- Competitive manufacturing and project costs across solar modules, power electronics, and balance-of-system components
Strategic Focus Areas
- Manufacturing of solar modules, inverters, and BOS components for domestic and export markets
- Development of energy storage solutions, including grid-scale batteries and hybrid renewable systems
- Scaling green hydrogen electrolyser manufacturing to support industrial decarbonisation and exports
DEFENCE & AEROSPACE MANUFACTURING
Opportunity Drivers
- Rising global defence spending and re-armament, driven by geopolitical tensions and security realignments
- Growing export opportunities from friendly and partner nations seeking diversified defence supply chains
- Strong domestic push for indigenisation and self-reliance under Atmanirbhar Bharat and defence procurement reforms
India’s Strengths
- Expanding defence manufacturing ecosystem, spanning public sector units, private players, and MSMEs
- Increasing public-private collaboration in platforms, sub-systems, and technology development
- Supportive offset policies, export clearances, and government-led defence export promotion
Strategic Focus Areas
- Sub-systems, electronics, and precision machining for land, air, and naval platforms
- MRO (Maintenance, Repair & Overhaul) for aircraft, helicopters, and naval assets
- Defence-grade materials and critical components, including composites and advanced alloys
Global Benchmarking & Time to Market
Global Benchmarking Snapshot
- Competing manufacturing hubs:Countries such as Vietnam, Mexico, Indonesia, and parts of Eastern Europe have strengthened incentives, streamlined approvals, and built factory ready parks that appeal to global OEMs seeking alternatives to China. For example, Southeast Asian manufacturing PMIs remain strong and export demand continues to grow, especially in electronics and machinery segments.
- India’s advantages: India’s manufacturing PMI reached 59.2 in October 2025, indicating strong expansion and robust domestic demand relative to global peers where manufacturing is mixed. Indian capacity is supported by a large domestic market (~1.4 billion consumers), a growing skilled workforce, and strategic trade links with the US, EU, Japan, and ASEAN.
- Key gap areas:Execution speed remains a core challenge – lengthy project approvals, land acquisition delays, and fragmented compliance systems can slow investor decisions. Strengthening Tier 2 and Tier 3 supplier ecosystems is critical, as many global buyers seek consistent quality and scale beyond headline OEM capabilities.
Time to Market Imperative
- Global OEMs increasingly prioritize set up speed and ramp up timelines over marginal cost advantages. Rapid execution reduces risk and enhances supply chain resilience.
- Delays in approvals, land access, or port/logistics readiness risk shifting investments to faster moving countries. Plug and play industrial parks with ready utilities, access roads, and clearances significantly increase India’s attractiveness.
- States such as Gujarat, Tamil Nadu, and Maharashtra that promote pre approved industrial clusters and infrastructure offer compounding edge in attracting long term global capital.
MSMEs, Clusters & Digital Backbone
MSME Integration and Upgradation
- MSMEs are foundational:Over 1 crore registered MSMEs employ more than 7.5 crore people and contribute about 36-45% of manufacturing output and exports, making them central to India’s industrial competitiveness.
- Government support: Union Budget 2025 26 increased investment and turnover limits for MSME classification, empowering growth and scale. Credit guarantee cover was expanded to ₹10 crore to improve credit access.
- Challenges:Quality, productivity gaps, regulatory compliance burden, and limited digital adoption are key obstacles. However, digital trends are rising: approx. 72% of MSMEs use digital payments, improving transparency and efficiency.
- Opportunities:Government programmes such as the RAMP initiative and the National Manufacturing Mission are enhancing access to finance, mentorship, and technology adoption for MSMEs.
Cluster‑Based Manufacturing Approach
- Sector‑focused clusters (e.g., EV components, defence supplies, renewables, electronics) enable shared infrastructure, workforce pooling, and supplier co‑location, reducing transaction cost and improving quality control.
- Cluster development enhances supplier integration, quality consistency, and logistics efficiency, making entire ecosystems more competitive for integrated global supply chains.
- Government programmes such as electronics manufacturing clusters (EMC) and states’ cluster schemes demonstrate how targeted infrastructure can attract investment and jobs.
Digitalization & Traceability
- Digital systems for production tracking, carbon footprint reporting, and quality certification are no longer optional, they are prerequisites for access to markets with strict ESG and carbon compliance, such as the EU under CBAM.
- Early digital adoption gives firms a competitive advantage by enabling real‑time quality control, autonomous compliance data, and supply‑chain transparency. This is increasingly essential for premium export markets and global OEM sourcing.
What India Must Get Right
How can India boost industrial efficiency, competitiveness and integration into global supply chains?
Speed & Predictability
- Faster project approvals and smoother land access
- Stable policy frameworks with long-term visibility for investors
Supply Chain Depth
- Strengthening Tier-2 and Tier-3 supplier ecosystems
- Improving quality, reliability, and consistency at scale
Sustainability Integration
- Readiness for carbon measurement, reporting, and compliance
- Access to green power and affordable green financing
Skills & Technology
- Future-ready skills for advanced and high-precision manufacturing
- MSME adoption of digital tools, automation, and Industry 4.0 solutions
Call to Action & India’s 2030-2047 Manufacturing Vision
Call to Action
Industry:
- Invest in capability, technology, digital systems, automation, and workforce development.
- Forge global partnerships to access advanced technology, new markets, and co manufacturing opportunities.
Government:
- Ensure speed, predictability, and clarity in policy and compliance.
- Expand infrastructure readiness, logistics corridors, industrial parks, digital compliance frameworks.
- Support sustainability transition with incentives, standards, and carbon accounting systems.
Investors:
- Deploy long term capital aligned with multi decade industrial and green transition cycles.
- Enable sustainability linked financing models tied to measurable decarbonisation and ESG outcomes.
India’s Manufacturing Vision (2030-2047)
- Trusted global partner: Position India as a trusted, future ready manufacturing destination combining scale, quality, and sustainability.
- Sustainable growth:Embed ESG compliance, digital adoption, and low carbon manufacturing across priority sectors.
- Deep, resilient supply chains: Develop robust ecosystems with Tier 1 through Tier 3 integration, digital traceability, and cluster specialisation.
- High value segments:Capture long term opportunities in strategic technologies, EVs, renewable energy manufacturing, defence equipment, advanced materials, and green steel, ensuring India’s leadership in global industrial value chains.
Role of Industry, Government, and Investors
Industry: Build Capability and Global Linkages
- Shift focus from only expanding production capacity to building deep manufacturing capabilities that enhance quality, productivity, innovation, and resilience
- Invest systematically in automation, robotics, AI, digital twins, advanced materials, and precision engineering to meet evolving global standards
- Develop long-term partnerships with global OEMs, technology providers, and research institutions to accelerate technology transfer, co-development, and export access
- Strengthen workforce development programs focused on advanced manufacturing skills, digital tools, quality systems, and shop-floor excellence
- Align products, processes, and governance with global benchmarks on quality, reliability, sustainability, and compliance, enabling integration into high-value global supply chains
Government: Enable Infrastructure, Policy & Compliance Readiness
- Accelerate development of world-class logistics, ports, power supply, industrial parks, and corridors to reduce cost disadvantages and improve time-to-market
- Provide stable, predictable, and long-term policy frameworks across taxation, trade, and industrial regulation to support large, irreversible investments
- Simplify approvals through single-window systems, digitised compliance processes, faster land access, and coordinated inter-agency clearances
- Support early movers in green, advanced, and strategic manufacturing through PLI schemes, capex incentives, R&D support, and pilot-scale funding
- Enable carbon measurement, reporting, and verification (MRV) frameworks and compliance infrastructure to help industry meet global ESG, CBAM, and buyer requirements