{"id":84731,"date":"2026-09-12T18:23:21","date_gmt":"2026-09-12T12:53:21","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=84731"},"modified":"2026-09-12T18:23:44","modified_gmt":"2026-09-12T12:53:44","slug":"india-manufacturing-challenge","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/12-09-2026\/india-manufacturing-challenge","title":{"rendered":"India\u2019s Manufacturing Challenge and the Limits of Economic Diplomacy"},"content":{"rendered":"\n<p><strong>Syllabus: GS2\/ IR, GS3\/ Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>India\u2019s experience with Russia and China has demonstrated that a lack of indigenous manufacturing competitiveness can negate the gains from economic diplomacy.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>The Manufacturing Gap in India\u2019s External Economic Relations<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>India\u2013Russia trade imbalance:<\/strong>\n<ul class=\"wp-block-list\">\n<li>India\u2019s exports to Russia remain relatively limited compared with its imports, which are <strong>dominated by crude oil<\/strong> and other commodities.\u00a0 India\u2019s exports to Russia are still under <strong>$5 billion<\/strong>, while imports from Russia were <strong>$63.8 billion in 2024-25.<\/strong><\/li>\n\n\n\n<li>Russia is a substantial <strong>market for manufactured products, <\/strong>including automobiles, machinery, electronics and industrial equipment.<\/li>\n\n\n\n<li>However, India&#8217;s limited manufacturing capacity <strong>prevents it from fully exploiting this market, <\/strong>even when diplomatic relations provide favourable conditions for greater bilateral trade.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Dependence on China:\u00a0<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>India\u2019s trade relationship with China<\/strong> reflects the opposite problem, as Chinese exports include electronics, machinery, chemicals, pharmaceutical inputs, auto components and other intermediate goods.<\/li>\n\n\n\n<li>Bilateral trade between India and China reached about <strong>$151 billion<\/strong> in 2025-26, but India\u2019s deficit rose to around <strong>$112 billion.<\/strong><\/li>\n\n\n\n<li>Many Indian sectors rely on these imports as Chinese companies provide items at competitive costs with huge manufacturing scale and integrated supply chains.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Significance of Manufacturing for Economic Diplomacy<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Diplomacy cannot substitute industrial capacity:<\/strong> Trade agreements, diplomatic negotiations and investment partnerships can create opportunities, but they cannot by themselves generate globally competitive products.<\/li>\n\n\n\n<li><strong>Strengthens strategic autonomy: <\/strong>A strong manufacturing base reduces excessive dependence on external suppliers for critical goods, technologies and industrial inputs.<\/li>\n\n\n\n<li><strong>Export competitiveness:<\/strong> Large-scale manufacturing can help India diversify its export basket beyond traditional strengths such as petroleum products, pharmaceuticals, textiles and engineering goods.\n<ul class=\"wp-block-list\">\n<li>Deeper domestic supply chains can also increase the domestic value added in Indian exports.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Manufacturing Sector of India<\/strong><\/h2>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img data-dominant-color=\"5283a0\" data-has-transparency=\"false\" style=\"--dominant-color: #5283a0;\" loading=\"lazy\" decoding=\"async\" width=\"531\" height=\"239\" src=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/09\/image-96.png\" alt=\"manufacturing in india\" class=\"not-transparent wp-image-84732\" srcset=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/09\/image-96.png 531w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/09\/image-96-300x135.png 300w\" sizes=\"auto, (max-width: 531px) 100vw, 531px\" \/><\/figure>\n<\/div>\n\n\n<h2 class=\"wp-block-heading\"><strong>Challenge in India\u2019s Manufacturing Sector<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>High cost of doing business: <\/strong>Complex regulations, compliance requirements, logistics costs and delays in obtaining approvals can reduce the competitiveness of Indian manufacturing.<\/li>\n\n\n\n<li><strong>Shallow domestic supply chains: <\/strong>Several sectors continue to depend significantly on imported components, machinery, raw materials and intermediate goods.\n<ul class=\"wp-block-list\">\n<li>This limits the extent to which India can capture value across the manufacturing chain.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Limited scale:<\/strong> Chinese manufacturing benefits from<strong> large production volumes<\/strong>, extensive supplier networks and integrated industrial clusters.\n<ul class=\"wp-block-list\">\n<li>Indian firms often <strong>operate at smaller scales, <\/strong>which can make it difficult to compete on cost and delivery timelines in global markets.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Technology and skill gaps:<\/strong> Advanced manufacturing increasingly requires sophisticated machinery, research capabilities, digital technologies and skilled workers.\n<ul class=\"wp-block-list\">\n<li>India needs<strong> stronger industry\u2013academia linkages<\/strong> and greater private-sector investment in research and development.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Government Measures for Strengthening the Manufacturing Sector<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>National Mission on Manufacturing (NMM):<\/strong> Announced in Budget 2025-26, it\u00a0 serves as a key catalyst for industrial growth, targeting a rise in manufacturing\u2019s <strong>GDP share to 25% by 2035<\/strong> and <strong>expansion of merchandise exports to USD 1.2 trillion<\/strong> through deeper global value chain integration.\u00a0<\/li>\n\n\n\n<li><strong>Production Linked Incentive (PLI) scheme:<\/strong> The primary aim was strengthening India\u2019s manufacturing capabilities by <strong>offering financial incentives<\/strong> to eligible companies based on their incremental sales.\n<ul class=\"wp-block-list\">\n<li>The scheme initially targeted three sectors, and, over time, it has expanded to include <strong>14 sectors,<\/strong> ranging from electronics and textiles to automobiles and food processing.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Startup India: <\/strong>The initiative aims to build a strong ecosystem for nurturing innovation and Startups in the country.<\/li>\n\n\n\n<li><strong>National Logistics Policy (NLP): <\/strong>The policy aims to lower the cost of logistics from the existing <strong>13-14%<\/strong> and lead it to par with other developed countries.<\/li>\n\n\n\n<li><strong>PM Gati Shakti: <\/strong>It was launched in 2021 to enhance the country&#8217;s <strong>infrastructure and promote seamless connectivity<\/strong> across various sectors.\n<ul class=\"wp-block-list\">\n<li>It will<strong> incorporate the infrastructure schemes <\/strong>of various Ministries and State Governments like Bharatmala, Sagarmala, inland waterways, dry\/land ports, UDAN etc.\u00a0<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Innovation financing: <\/strong>\u00a0The government announced a <strong>Research, Development and Innovation (RDI) Fund<\/strong> with a <strong>\u20b91 lakh crore outlay over six years,<\/strong> including <strong>\u20b920,000 crore for FY26<\/strong>, aimed at boosting private investment in high-tech R&amp;D and operationalising a Deep-Tech Fund of Funds.\u00a0\u00a0<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What India Needs to Do?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Move from incentives to competitiveness: <\/strong>Production incentives can catalyse investment, but long-term manufacturing success requires firms to become competitive even without perpetual fiscal support.<\/li>\n\n\n\n<li><strong>Build complete supply chains: <\/strong>India should develop domestic capabilities across the entire production ecosystem, including components, machinery, raw materials, logistics and specialised services.<\/li>\n\n\n\n<li><strong>Export-orientated manufacturing: <\/strong>India needs to identify sectors where it can develop a durable comparative advantage and integrate them into global value chains.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Way Ahead<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>India\u2019s economic diplomacy can create doors, but manufacturing competitiveness determines whether India can walk through them.\u00a0<\/li>\n\n\n\n<li>The experience with Russia and China demonstrates that diplomatic influence cannot compensate for weak productive capacity.\u00a0<\/li>\n\n\n\n<li>Therefore, India\u2019s long-term economic and strategic autonomy requires a manufacturing ecosystem based on scale, productivity, technology, competitive supply chains and an investment-friendly regulatory environment.\u00a0<\/li>\n<\/ul>\n\n\n\n<p><strong>Source: <\/strong><a href=\"https:\/\/indianexpress.com\/article\/explained\/elephant-in-the-room-in-meetings-with-xi-jinping-vladimir-putin-indias-manufacturing-challenges-10872670\/\" target=\"_blank\" rel=\"noopener\"><strong>IE<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong> Context <\/strong><\/p>\n<li class=\"ms-5\"> India\u2019s experience with Russia and China has demonstrated that a lack of indigenous manufacturing competitiveness can negate the gains from economic diplomacy. <\/li>\n<p><\/p>\n<p><strong> The Manufacturing Gap in India\u2019s External Economic Relations <\/strong><\/p>\n<li class=\"ms-5\"> India\u2013Russia trade imbalance: <\/li>\n<li class=\"ms-5\"> India\u2019s exports to Russia remain relatively limited compared with its imports, which are dominated by crude oil and other commodities.\u00a0 India\u2019s exports to Russia are still under $5 billion, while imports from Russia were $63.8 billion in 2024-25. <\/li>\n<p><a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/12-09-2026\/india-manufacturing-challenge\" class=\"btn btn-primary btn-sm float-end\">Read More<\/a><\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-84731","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/84731","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=84731"}],"version-history":[{"count":3,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/84731\/revisions"}],"predecessor-version":[{"id":84735,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/84731\/revisions\/84735"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=84731"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=84731"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=84731"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}