India’s Industrial Inflection Point: From Missed Chances to Strategic Leverage
India’s Industrial Inflection Point: From Missed Chances to Strategic Leverage
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THIS IS AN ARTICLE WRITTEN PURELY AS AN OPINION OF CURRENT AFFAIRS BY THE AUTHOR
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1 May 2025
Last Updated: 1 May 2025 - 21:55 CET
Chaitanya Nitin Harak
The 2025 global trade realignment could be India’s last, best opportunity to industrialize. It must not be wasted.
The 2025 global trade realignment could be India’s last, best opportunity to industrialize. It must not be wasted.
Indian PM Modi and US President Trump in 2025 during PM Modi's visit to Washington, D.C.
On April 9, 2025, the United States imposed sweeping tariffs—ranging from 10% to 40%—on more than $200 billion worth of imports. While framed as a domestic economic correction, the move has had global ripple effects. Companies are reassessing supply chains, diversifying production, and moving away from geopolitical risk zones. Amid this shake-up, India faces a defining economic opportunity: to transition from a services-heavy model to a globally competitive manufacturing economy.
India’s manufacturing sector has long lagged behind. Despite three decades of economic reforms, it contributes just 16% to GDP—up only marginally from 15.2% in 2019. In comparison, manufacturing accounted for 25–30% of GDP during South Korea’s and China’s industrial takeoffs. India’s services growth has yielded global recognition, but it has not delivered the industrial jobs, export resilience, or innovation capacity needed to sustain long-term economic power.
From Missed Reforms to Strategic Urgency
From Missed Reforms to Strategic Urgency
The 1991 liberalization was India’s penultimate opening. It dismantled the License Raj and opened markets, leading to a surge in GDP and the rise of the IT sector. But it failed to catalyze an industrial transformation. Infrastructure bottlenecks, overregulation, and limited capital formation held back large-scale manufacturing. The result was modern growth without a modern industrial base.
The moment India now faces is fundamentally different. The global rise in tariffs—now averaging 12% in key sectors—has prompted multinational firms to redirect supply chains. Recent estimates suggest over $50 billion in manufacturing investment will shift locations in the next three years. India has the scale, market size, and workforce to capture a significant share—but it is not alone. Countries like Vietnam, Mexico, and Indonesia are already ahead in logistics, labor competitiveness, and regulatory coherence.
Despite a decade of reform rhetoric under the Modi government, key barriers remain. Land acquisition is cumbersome. R&D investment is stuck at 0.7% of GDP. Regulatory clearances remain opaque. ‘Make in India’ promised transformation, but manufacturing employment has barely moved. Execution has consistently lagged behind intent.
The Window Is Narrow—and Closing Fast
The Window Is Narrow—and Closing Fast
India cannot afford to treat this opportunity as just another policy cycle. It needs a comprehensive industrial strategy. This includes modern manufacturing zones linked to global value chains, export-oriented production clusters, and aggressive upskilling programs. Infrastructure spending must rise to $100 billion annually, particularly in energy and transport. Tax and regulatory reform must be systematic—not campaign-based—and guided by industry feedback.
Foreign policy also needs recalibration. India’s trade diplomacy should prioritize strategic economic agreements with the EU, ASEAN, and key African manufacturing hubs. Securing access to emerging supply chains will be critical to locking in long-term competitiveness.
If the reforms of 1991 gave India its first serious opening, 2025 offers the final, most consequential one. The realignment of global trade—driven by tariffs, protectionism, and geopolitical recalibration—has created a brief, high-leverage window to industrialize at scale. If India acts decisively, it can rewrite its economic trajectory—anchoring job creation, supply chain resilience, and global economic stature in a way that services alone never could.
But the moment is fleeting. If India defaults to incrementalism or sloganism, it risks locking in another decade of industrial underperformance. This is the inflection point. There may not be another.
But the moment is fleeting. If India defaults to incrementalism or sloganism, it risks locking in another decade of industrial underperformance. This is the inflection point. There may not be another.
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