India is at an important point in its manufacturing journey. The policy foundations are stronger, infrastructure has improved, global supply chains are being reconfigured, and international companies are looking more seriously at India as a manufacturing location. Production-linked incentives have helped catalyse investment — by March 2026, actual investment under the PLI schemes had crossed ?2.40 lakh crore, and manufacturing GVA grew at a compounded annual rate of 10.88 per cent between 2022–23 and 2025–26 under the revised national accounts series.
Yet another number deserves equal attention: manufacturing accounted for 14.8 per cent of India’s GVA in 2025–26, not materially different from 14.7 per cent three years earlier. Together, these numbers point to where the next manufacturing conversation should move. India has demonstrated that it can create capacity and attract investment. The next challenge is more demanding: can we convert manufacturing capacity into manufacturing capability? That distinction may determine whether the present opportunity becomes a cyclical investment phase or the foundation of a durable global advantage.
Having spent nearly four decades in manufacturing and textiles, I have seen India build substantial industrial capability. But I have also seen how easily capacity creation can be mistaken for competitiveness. The distinction is not semantic. It is the difference between a factory and an industrial ecosystem.
The factory cannot be the unit of ambition
Industrial policy naturally focuses on large investments — visible, measurable and important. A new semiconductor plant, automobile facility, textile complex or electronics factory brings capital, employment and technology. But the competitiveness of that investment ultimately depends on what develops around it: component suppliers, tooling companies, testing and certification facilities, logistics networks, skilled technicians, engineers, and increasingly software and automation. This is why successful manufacturing geographies eventually become ecosystems rather than collections of factories.
India already has examples of such clustering — automotive around Chennai, Pune and the NCR, pharmaceuticals in Hyderabad, textiles in several specialised centres. But the next generation of Indian clusters must go deeper. Industrial ecosystems also develop memory: every production problem solved, supplier qualified, tool redesigned and process improved leaves knowledge behind. Over time, this accumulated learning becomes an advantage that capital alone cannot quickly reproduce elsewhere.
Textiles offers India’s sharpest lesson here. We are, on paper, the world’s second-largest textile manufacturer — yet we import machinery, specialty chemicals, dyes, certain fibres and even basic trims that a mature industrial base should be producing domestically. Low wages can win an order; it is depth, of suppliers and tooling and the unglamorous “small stuff,” that keeps the industry once the order is won. A value chain is only as competitive as the weakest input that repeatedly crosses its border. India’s cotton availability and import duty structures, its dependence on imported man-made fibre inputs, and its still-underdeveloped technical textiles base are not footnotes to competitiveness. They are competitiveness.
The Economic Survey 2025–26 makes a similar point: transforming industrial parks, SEZs and corridors into globally competitive ecosystems requires greater scale, multimodal connectivity and regulatory flexibility. Our textile parks under schemes like PM MITRA are a start. But a park is only as good as the ecosystem inside it — dense suppliers, tooling, testing and skilled labour within a few kilometres of each other, not a plotted allotment of land with a common boundary wall. We should supplement investment and capacity data with measures of industrial depth: domestic value addition, qualified suppliers, local tooling turnaround, and how rapidly a prototype moves to commercial scale.
A factory is an investment. An industrial ecosystem is a capability.
From incentives to competitiveness
Government support plays a powerful role in overcoming the initial disadvantages faced by emerging manufacturing sectors — infrastructure reduces transaction costs, incentives compensate for early scale disadvantages, trade policy provides strategic space to develop. But none of these can permanently substitute for competitiveness. Scale becomes durable only when firms can survive global competition without indefinite support.
This suggests an evolution for India’s industrial policy: from “how do we attract investment” to “how does that investment become globally competitive.” That requires attention to factors that receive less visibility than headline incentives — competitive raw materials, energy costs, logistics, cost of capital — and it requires competition. Policy can create the playing field. Capital can create capacity. But competition ultimately creates fitness.
This is the least comfortable lesson for Indian industry to hear, and I say it as an industry representative, not despite being one. Protection has a real role in the early stages of capability creation; this is not an argument for exposing infant industries prematurely. But permanent insulation weakens exactly the competitive muscle a country needs the day it tries to export. Indian industry bodies, mine included, must be honest about where support is building capability and where it has quietly become a substitute for it.
The objective should not be simply more manufacturing. It should be globally competitive manufacturing.
Speed deserves to be part of this conversation too. Modern manufacturing competitiveness depends increasingly on learning cycles — not merely faster approvals, but how quickly suppliers, tooling, certification, engineering and production respond together. Ease of doing business should evolve from measuring the time to obtain permissions towards reducing the elapsed time between an idea and commercial scale. Every unnecessary month between investment intent and commercial production is a tax on competitiveness that no incentive scheme can fully offset. Policy predictability matters for the same reason: industrial capital can price competition more easily than uncertainty. Stability is itself an industrial input.
Manufacturing must become an innovation system
For many developing economies, the traditional progression was straightforward: import technology, manufacture efficiently, build scale, export. That model is changing. Factories generate operating data; suppliers develop new materials; customer feedback flows rapidly into product development. Manufacturing becomes an input into innovation rather than merely its output.
A recent book by Joe Ngai and Nick Leung, The Next China Is Still China, offers a useful reminder of how difficult accumulated industrial capability is to replicate. But the more relevant question for India is not whether it can replace China. It is whether India can build an ecosystem with its own self-reinforcing advantages. India’s textile and apparel industry needs to internalise this — we compete not merely against Vietnam or Bangladesh on wage cost, but against entire ecosystems of supplier density, testing infrastructure and, increasingly, sustainability credentials that global buyers now treat as table stakes.
India has a distinctive opportunity here. Unlike most countries at this stage of manufacturing development, we already possess substantial capabilities in software, digital services and technology — AI for predictive maintenance and quality control, digital twins for faster product development, automation for consistency and scale.
Much of the innovation debate focuses on the journey from zero to one — creating the original idea. Manufacturing competitiveness also depends on mastering the journey from one to one hundred: engineering an idea for scale, improving it through repeated production cycles, reducing cost, building suppliers around it and taking it reliably to global markets. This iterative capability is less glamorous than invention, but it is often where industrial leadership is won. India needs both breakthrough innovation and the manufacturing depth to industrialise it at speed.
The next evolution should therefore be: Make in India ? Engineer in India ? Innovate in India — and eventually, own intellectual property in India and build global brands from India.
Across Indian manufacturing, the challenge is to move many more enterprises further up this ladder. Our demographic dividend and cost advantage are valuable, but they should finance the climb rather than become the destination. China’s response to its own ageing workforce has been to automate aggressively rather than concede ground. India should not assume its wage advantage is a permanent entitlement; it is a lease with an expiry date.
FTAs and China+1
India’s expanding network of free trade agreements, and the ongoing China+1 reconfiguration of global supply chains, create an important opportunity. But neither should be confused with an industrial strategy. Preferential tariffs provide access to a market; they cannot ensure success within it. Assembly can move relatively quickly; ecosystems cannot — supplier relationships, engineering knowledge and manufacturing experience accumulate over years.
The Economic Survey has highlighted India’s relatively modest integration with global value chains — an estimated 2.9 per cent of global manufacturing GVA and 1.8 per cent of global merchandise exports in 2024, suggesting considerable headroom. FTAs and supply-chain reconfiguration do not hand India market share; they open a window. Our objective should be to ensure that every major manufacturing investment leaves behind deeper capability than existed before it arrived.
From exporters to multinationals
India’s manufacturing ambition should eventually extend beyond exports. A company that sells products internationally is not the same as a genuinely global enterprise — one with global brands, R&D, local management, IP and the ability to deploy capital and talent across markets. India has demonstrated this capacity spectacularly in technology and services; manufacturing should produce many more such companies.
This is precisely why I have argued that India’s export narrative must shift from “Made in India” to “Trusted from India.” Factories produce products; capabilities create competitive advantage. In a world where price and quality increasingly converge, trust — reliability, compliance, consistency and governance — creates value and is much harder for the next low-cost entrant to replicate. As Indian manufacturers scale, professional management, governance and succession planning also become competitive issues, not merely organisational ones.
Scale gets a company into global markets. Institutions enable it to remain there.
The next phase of Make in India
India does not need to reproduce another country’s manufacturing model. Our democracy, federal structure, demographics and entrepreneurial culture are different, and we possess strengths in digital infrastructure and services that can allow us to develop a distinctive path. But industrial history offers one enduring lesson: capability compounds. Infrastructure enables scale; scale supports clusters; clusters create supplier density and skills; competition drives productivity; technology increases value addition; innovation creates intellectual property; and institutions make these gains durable.
Over the coming decade, the most useful manufacturing scorecard will not be only how many factories India builds or how much investment it attracts. It will be whether companies manufacturing in India become progressively more competitive because they manufacture in India. That is a much higher ambition — the transition from capacity to capability, from capability to competitiveness, and from competitiveness to global leadership.
If India can achieve that transition, it will not need to become the next China. It needs to build the first India.
The writer is Chairman, ASSOCHAM National Council on Textiles & Technical Textiles. The views expressed are personal
Published on September 22, 2026
