India and China are often compared as parallel economic giants. Both have massive populations, ambitious governments, and global influence. Yet when it comes to manufacturing, the gap between the two isn’t just wide—it’s structural.
India today is the world’s fastest-growing major economy and a global services powerhouse. But beneath that success lies an uncomfortable truth: much of India’s manufacturing still runs on Chinese inputs. In FY 2024–25 alone, India imported over USD 113 billion worth of goods from China. This isn’t about cheap toys or festive lights—it’s about the core building blocks of modern industry.
Our dependence is deep, not broad.
Out of thousands of products India imports from China, a few hundred account for most of the value. These include electronics, machinery, pharmaceutical inputs, telecom equipment, batteries, and solar components. In many critical categories—APIs, chips, lithium-ion batteries, and semiconductor machinery—China controls anywhere from 70% to nearly 100% of India’s supply.
So even industries we’re proud of tell a more complex story. India may be the “pharmacy of the world,” but a large part of that pharmacy cannot function without Chinese ingredients.
The electronics paradox explains this best.
India has become the world’s second-largest mobile phone manufacturer. That sounds impressive—and it is. But most of that growth comes from assembly. The high-value parts—the chips, displays, sensors, and batteries—are still imported, largely from China. As phone production rises, imports of these components rise even faster. Success in assembly is unintentionally locking us into deeper dependency.
Why can’t India replicate China’s manufacturing rise?
It’s tempting to blame labour laws or politics, but the reality is more layered.
China spent four decades building physical infrastructure—ports, power, highways, industrial parks—at an unmatched scale. India, by comparison, underinvested for years. Moving goods inside India still costs more time and money than it does in China.
Governance matters too. China’s centralized system executes industrial policy at speed. India’s democracy—rightly protective of rights—often slows land acquisition, approvals, and long-term projects. Investors price in this uncertainty.
Then there’s human capital. India is young, but China’s workforce is still more productive in manufacturing. Vocational training, shop-floor skills, and female workforce participation are far stronger in China. Lower wages don’t automatically mean lower costs if productivity is lower.
Green energy is becoming the next dependency.
India’s solar and EV push is real—but the hardware is largely Chinese. Solar module imports may be falling, but solar cell imports from China are rising. Nearly all lithium-ion batteries for EVs still come from China. For now, India’s green transition is being powered by Chinese technology.
What about “China Plus One”?
This was supposed to be India’s moment. Instead, countries like Vietnam captured more of the shift. Their advantage wasn’t just cheaper labour—it was predictability, trade integration, and seamless links to Chinese supply chains. India’s inward turn on trade and regulatory complexity diluted its edge.
So where does this leave us?
This dependence isn’t a failure—it’s how global value chains work today. But it is a strategic vulnerability.
If India wants to move from “assembler” to true manufacturer, the answer isn’t slogans. It’s sustained investment in infrastructure, serious vocational training, labour reform that enables scale, and deeper trade integration.
Until then, many products labeled “Made in India” will quietly remain “Powered by China.”
Works cited
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