Can India Become the World’s Next Manufacturing Hub?

SYNOPSIS

India, with its young workforce, strategic location, and supportive policies, is poised to become a major manufacturing hub, though infrastructure, regulations, and skills gaps remain key challenges.

"Exploring India's Potential as the Next Global Manufacturing Powerhouse: A Blend of Tradition and Modern Industry."

In the post-pandemic era, international businesses are reconsidering their supply chains. The U.S.-China trade war, increasing labor costs in China, and the requirement for diversified production have prompted many companies to follow a "China Plus One" strategy. This has opened a significant opportunity for nations such as India. But the question is: Can India become the world's next big manufacturing hub?

India definitely has good fundamentals. It boasts a huge and young labor force, which is favorable for heavy industry. India is also geographically strategically located on important international shipping routes, making it an attractive location for exports. The government of India has also come to its aid with broad policy backing—programs such as Make in India and the Production Linked Incentive (PLI) scheme are aimed at luring overseas producers across industries like electronics, pharmaceuticals, and automobiles. Also, the fast-developing consumer market in India presents companies with a massive base for manufacturing as well as sales.

These figures are a true reflection of this momentum. For 2024–25, India saw its all-time best exports at $824.9 billion, 6.01% higher compared to the earlier year. Leading the way was services exports at 13.6% or $387.5 billion, driven by IT, finance, and tourism among others. And non-petroleum merchandise exports also reached a record $374.1 billion, indicating increasing value-added manufacturing in Indian trade.

Even with these strengths, India has a number of challenges. Infrastructure deficits—particularly in logistics, power availability, and port efficiency—continue to hold back large-scale industrial development. Regulatory challenges, including complicated land acquisition and tardy environmental clearances, can stall projects. Additionally, there is a mismatch between the skills of Indian workers and the needs of new industries. Vietnam and Indonesia are still providing tough competition with more business-friendly setups and faster turnaround times.

Yet, the world today is favorable to India. Numerous firms are eager to de-risk their supply chains by lessening reliance on China. India's strategic alliances with the U.S., EU, and other economies—coupled with free trade negotiations in progress—improve its global standing. Foreign direct investment is increasing steadily in areas such as electronics, semiconductors, and renewable energy, reflecting high investor confidence.

In sum, India can be a world manufacturing hub, but it will take concerted efforts at reforms, better infrastructure, and attention to skilling its human capital. It might not oust China in a single night, but India is quite evidently emerging as one of the pillars of the new global manufacturing order. The next decade can well be India's moment as a serious manufacturing giant in the world.

Foram Mehta