India's manufacturing blind spot: Industrial success needs mature products

Building an industrial powerhouse requires thousands of mature products, not just frontier technologies

India’s industrial strategy has a costly blind spot. While policymakers have rightly poured resources into semiconductors, electric vehicles, batteries, drones, robotics, and artificial intelligence, they have largely ignored the thousands of industrial products that every successful manufacturing economy is built on.

 

These include machine tools, bearings, pumps, valves, electric motors, compressors, gears, fasteners, industrial chemicals, transformers, cables, and thousands of other engineering products. They are the foundation of advanced manufacturing.

 

India should continue investing in frontier technologies, but unless it becomes globally competitive in these industrial backbone products, it will remain an assembly economy rather than become a true manufacturing powerhouse.

 

Manufacturing can be viewed as a three-layer ecosystem. At the bottom are industrial raw materials such as steel, aluminium, chemicals, and petrochemicals. At the top are frontier industries such as semiconductors, AI, electric vehicles, batteries, aerospace and robotics. Between them lies the largest layer — industrial backbone products that connect raw materials to finished goods.

 

Every electric vehicle requires motors, bearings, gears, fasteners, wiring, moulds, dies and machine tools before it reaches a customer. Ignore this middle layer, and the entire manufacturing ecosystem becomes dependent on imports.

 

Over the past two decades, India’s industrial policy has focused overwhelmingly on frontier industries. Initiatives such as Make in India, the production-linked incentive (PLI) schemes, the India Semiconductor Mission, FAME, the National Green Hydrogen Mission and electronics and drone programmes have channelled billions of dollars into semiconductors, electronics, batteries and clean-energy technologies.

 

The strategy has produced gains. Electronics assembly has expanded, and startups are building battery systems, drones, robotics, medical devices and semiconductor packaging solutions. Yet much of this manufacturing remains assembly-based. India continues to import semiconductors, sensors, precision components, speciality materials and industrial sub-assemblies because the domestic supplier ecosystem remains weak. Frequent duty exemptions on imported components further reduce incentives to manufacture them locally, keeping domestic value addition low.

 

The policy focus on frontier industries has also shaped entrepreneurship. Most new manufacturing startups target electric vehicles, drones, satellites, and solar equipment. Few entrepreneurs aspire to build world-class companies that make bearings, industrial valves, machine tools, compressors, moulds, or precision engineering components. Yet these “boring” industries form the foundation of Germany’s Mittelstand, Japan’s precision manufacturing, and China’s status as the factory of the world. No country becomes a manufacturing leader by focusing only on high-tech products while neglecting the industrial base beneath them.

 

China understood this early. It did not become the world’s factory by starting with semiconductors or electric vehicles. It first mastered tens of thousands of industrial backbone products, creating dense supplier networks, tooling companies, component manufacturers and engineering firms. Once that foundation was in place, the consumer electronics, automotive, battery, and renewable energy industries expanded rapidly. India is attempting almost the reverse — promoting frontier sectors while leaving much of its industrial base underdeveloped.

 

India and China started from broadly similar manufacturing levels in the late 1980s, but their paths diverged after the 1990s. China steadily strengthened its manufacturing ecosystem, while India’s industrial backbone weakened.

 

Few policy choices contributed to this outcome. India protected upstream industries such as steel, aluminium and petrochemicals through tariffs and other support. While this benefitted a few large producers, it raised input costs for thousands of downstream manufacturers that made machinery, components, and engineering goods.

 

As Chinese manufacturing became cheaper and more efficient, many Indian firms found it more profitable to import than to produce locally. In many sectors, trading gradually replaced manufacturing. Even India’s pharmaceutical industry shifted from making many active pharmaceutical ingredients to importing them from China and focusing on producing finished medicines. High electricity tariffs, costly logistics, lending rates of 9-10 per cent, regulatory uncertainty and complex compliance requirements further weakened the competitiveness of Indian manufacturers.

 

China invested aggressively in emerging industries while continuing to strengthen its traditional manufacturing base. India lags in both.

 

A national strategy: India should continue investing in semiconductors, batteries and electronics. But it also needs a National Reverse Engineering Programme for Manufacturing (NREPM) to strengthen its industrial backbone. The objective is straightforward: Enable Indian firms to manufacture thousands of industrial products at world-class quality and globally competitive costs.

 

The first task is to identify over a thousand industrial products that account for most of India’s engineering imports. These include bearings, pumps, nuts, bolts,  compressors, machine tools, and fasteners. Most rely on mature technologies, where competitiveness depends on engineering, precision manufacturing, quality, reliability and cost — not scientific breakthroughs. Thousands of Indian micro, small and medium enterprises and mid-sized firms already manufacture many of these products but often fall short of global standards. NREPM should help them bridge that gap, replace imports and build export competitiveness.

 

The second task is to build technology capabilities. Unlike the PLI schemes, which assumed firms already had the necessary technology, NREPM should focus on building those capabilities. The Indian Institutes of Technology, the National Institutes of Technology, the Council of Scientific and Industrial Research laboratories, and other leading engineering institutions should become the programme’s anchor institutions. Based on their expertise, each should take responsibility for a set of industrial products, study the world’s best designs, reverse engineer them, develop improved prototypes and transfer the technology to Indian manufacturers. Success should be measured by products commercialised, imports replaced and exports generated — not by research papers. Institutions and teams that achieve these outcomes should be rewarded accordingly.

 

Funding for NREPM can come from the government’s ₹1 trillion Research, Development and Innovation Fund (RDIF) under the Anusandhan National Research Foundation. The RDIF was created to support industry-led research, technology development and commercialisation. Expanding its mandate to finance technology development for manufacturing would help India build indigenous capabilities across advanced industrial sectors.

 

The third task is to expand the programme beyond engineering products. Once established, NREPM should cover organic chemicals, pharmaceuticals, synthetic textiles and other industrial inputs where India has manufacturing capability but continues to depend heavily on imports.

 

India’s goal should not be to become the world’s assembly line for advanced products. It should be to become the world’s workshop for the industrial products that make those advanced products possible. That is the foundation on which every manufacturing superpower has been built.

 

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The writer is the founder of the Global Trade Research Initiative