India’s efforts to strengthen its position as a global manufacturing hub have gained momentum, particularly following recent developments involving major international companies. However, a newly announced trade realignment between the United States and China could shift some of that progress.
A recent reduction in U.S. tariffs on Chinese imports—from 145% to 30%—has introduced fresh uncertainty to India’s manufacturing outlook. With India’s tariffs on U.S.-bound goods now at a similar level (27%), analysts suggest that manufacturing investments that had been moving from China to India may pause or potentially redirect.
Ajay Srivastava, from the Global Trade Research Institute, noted that while India’s low-cost assembly capabilities may remain competitive, the country’s ability to capture higher-value manufacturing could be challenged under the new global trade dynamics.
Just weeks earlier, optimism grew when Apple indicated plans to shift a significant portion of iPhone production for the U.S. market from China to India. India’s similarity in export profiles with China—40% of its U.S.-bound exports align with Chinese goods—positions it as a strong alternative manufacturing location, according to Capital Economics.
There were signs of early momentum: Indian manufacturing exports surged, reaching a 14-year high in new orders. Analysts at Nomura observed growing evidence that India is gaining from trade diversion in industries such as electronics, textiles, and toys.
Despite this, experts caution that the U.S.-China trade reset may complicate India’s path forward. Countries like Vietnam remain in consideration for global manufacturers due to their more streamlined business environments and competitive trade policies.
India’s government has made recent efforts to open its economy, including entering into trade agreements like the one signed with the UK, which reduced duties on key goods. Negotiations with the U.S. are ongoing, and policymakers are optimistic about creating favorable terms that can attract further investment.
Still, structural challenges remain. India’s manufacturing sector has struggled to grow beyond 15% of GDP, and initiatives like the Production Linked Incentive (PLI) scheme have shown only modest results.
India’s continued dependence on imported components, particularly in electronics, limits the potential gains from assembling high-tech goods domestically. Experts note that while assembling products like smartphones can boost export figures, the actual economic value retained in the country remains low without deeper supply chain development.
Increased local production of high-value components is necessary for India to grow its share of manufacturing income. Experts also highlight that many recent investments may be outweighed by government subsidies, raising concerns over long-term value creation.
There is also discussion around Chinese firms potentially using India as a base to route goods to other markets, which some experts warn could hinder India’s ability to develop a robust domestic industrial ecosystem.
While major announcements from global firms generate headlines, analysts agree that India must address core business and policy issues to become a true alternative in global manufacturing. These include lowering production costs, improving logistics, and enhancing regulatory clarity.
As one trade expert summed it up: short-term policy shifts elsewhere cannot replace the need for long-term, systemic reforms at home.
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