India has certainly made strides in its manufacturing ambitions through its flagship Make in India initiative and production-linked incentives (PLIs), but the dependence on Chinese inputs is considerable. This is reflected in massive imports of $131.6 billion out of a bilateral trade of $151.1 billion in FY26. India has emerged as a global smartphone hub driven by Apple’s expanding manufacturing footprint in the country. India is set to become the world’s second-largest solar market by annual installations, reflective of a policy push on renewable energy to minimise dependence on fossil fuels. The country is assembling electric vehicles (EVs), too, at a record pace. India is also a major global player in supplying generic drugs at affordable prices. However, what is common to these strategic industries is that they remain overwhelmingly dependent on the dragon, according to a detailed four-part series of articles in FE.
It is in India’s strategic interest to reduce this dependence by bolstering domestic manufacturing capabilities even if it takes time. The ongoing boom in smartphone assembly needs a self-sustaining manufacturing ecosystem that must be put in place. Domestic value addition will then rise from the low level of 18-20%. Towards this end, Apple and its suppliers are working with 40-odd companies to develop a local component base. Although India has made progress on solar modules — reflected in a 70% fall in imports by value in FY26 — a “large upstream gap” still needs to be bridged due to the persisting dependence on China for cells, wafers, polysilicon, inverters, and other production equipment. The urgency is there for EVs as only 30-40% of the value chain has been localised. The same applies for domestically manufacturing active pharmaceutical ingredients (APIs), bulk drugs and intermediates that come mainly from China.
While decoupling from China may be a bridge too far, the policy focus must be to reduce concentration risk by building domestic manufacturing. Although there is a striking improvement in Sino-Indian ties of late, dealing with the dragon has its challenges. Apple’s growing business in India is viewed with suspicion and it has retaliated by hampering the movement of Chinese technicians and capital goods for smartphone assembly in the country. The mainland is also averse to transferring technology to India for EVs. Restrictions have been imposed on some types of EV batteries last year after Gotion High-Tech came under fire for announcing a deal with India’s Amara Raja Energy & Mobility that involved technology transfer. Chinese automaker Chery issued a statement on June 8 to deny that it would transfer any EV technology to Tata Motors following uproar in social media over this deal.
To their credit, policymakers realise the imperative of bridging the upstream gap to reduce reliance on the dragon. While the Make in India and PLI schemes have played an important role, the reality is that — besides smartphone assembly — achieving scale is possible only over the medium to long term. This is central to producing the various inputs more competitively. APIs sourced from China typically are 35-40% cheaper than those produced domestically as they are aided by large-scale production. For EVs, reducing Chinese-linked exposure below 50% is possible only by 2030-35 once domestic cell capacity and component manufacture aided by PLIs come on stream. While targeted government support is indeed critical, Indian manufacturers must also step up their investments in research and development.