India is growing fast. The latest numbers have been strong enough to make the usual concerns about a slowing global economy look less urgent. But some of the warnings coming from senior policymakers suggest that the harder part may lie ahead.

External Affairs Minister S Jaishankar has been talking about the pressure on food, fuel and fertiliser supplies in a world where wars are disrupting trade and supply chains. Chief Economic Adviser V Anantha Nageswaran has raised concerns about energy prices, trade tensions and the disruption artificial intelligence could bring to India's services-led economy.

Put together, they point to a vulnerability that India's strong growth numbers can easily hide. India is still deeply dependent on the outside world for many of the things it needs to produce and consume.

That matters more when the outside world itself is becoming less predictable.

FUEL, FERTILISER AND FOOD

Oil is the obvious example.

India imported 88.2% of its crude oil requirements in 2024-25, according to the Reserve Bank of India. That dependence has risen from 77.6% in 2013-14. The RBI has also warned that this leaves India vulnerable to global crude price shocks, with implications for growth and inflation.

The number matters not just because expensive crude means expensive fuel. Oil runs through the economy in ways that are less visible to consumers. It moves goods, powers industry and affects agriculture. When prices rise sharply, India's import bill rises with them, putting pressure on inflation, the rupee and the current account.

The problem becomes bigger when there is a disruption to the physical movement of commodities.

Fertiliser is a good example.

India makes a substantial amount of fertiliser at home, but much of what goes into that production still comes from abroad. An ICRIER study estimates that India's effective external dependence on fertiliser is around 68-70% when imported feedstocks and intermediate materials are taken into account. Around 85% of the natural gas used in domestic urea production is imported, while India also depends heavily on imported raw materials for phosphatic fertilisers.

So the vulnerability does not end when the fertiliser factory is located in India. A disruption in energy markets or shipping can still raise the cost of getting that fertiliser to the farm.

And agriculture has its own problems to deal with.

Climate change has made that vulnerability harder to manage, as any disruption to global supplies could add to the pressure on agriculture, which is already exposed to poor monsoons, extreme heat and El Nio-related shocks.

This is where the manufacturing question becomes harder to ignore.

MISSING MANUFACTURING PUZZLE

India has spent years trying to make manufacturing a bigger part of the economy. Make in India, the Production Linked Incentive scheme, infrastructure investment and logistics reforms have all been aimed at building that capacity.

There has been visible progress in sectors such as electronics and pharmaceuticals.

But the broader transformation has been slower.

A September report by Infomerics Ratings shows that manufacturing's share of the economy has remained broadly stuck in the 15-18% range for more than three decades. It stood at 17.2% of GVA in 2013-14, rose to 18.5% in 2021-22, but fell to 17.3% in 2023-24 and 15.2% in 2024-25.

The point is not that manufacturing has stopped growing. It is that it has not grown fast enough to become a much larger part of the economy.

The report points to some familiar problems, including high power and logistics costs, fragmented supply chains, small-scale manufacturing units and limited integration with global manufacturing networks.

An economist I spoke to put the concern more directly, saying that despite repeated policy announcements and operational changes, manufacturing's inability to take off remains a serious concern if India wants to surge.

That is an important distinction because India's manufacturing push has not been without results.

The PLI scheme covers 14 sectors, with an approved outlay of around Rs 1.91 lakh crore, according to the Infomerics report.

The issue is whether these interventions can produce something much broader than pockets of rapid growth.

A factory making the final product is useful. A factory that also has Indian suppliers for components, local engineering capabilities, skilled workers, logistics providers and eventually research and design around it is far more valuable.

That is the manufacturing ecosystem India has been trying to build.

It is also the part that could make the economy less vulnerable to global disruptions.

WINDOW OF OPPORTUNITY

There is an opportunity here because companies are themselves reconsidering where they make things.

The pandemic, trade tensions and the growing rivalry between the US and China have pushed companies to diversify supply chains. India has been trying to position itself as one of the alternatives.

But the opportunity is not India's alone.

Vietnam, Indonesia, Mexico and several other countries are competing for the same investment. Companies looking to move production will consider the cost of electricity, ports, roads, logistics, skilled workers and local suppliers before deciding where to put their money.

This is where the manufacturing numbers become more important than another round of announcements.

India needs to make it easier and cheaper to manufacture here, but it also needs Indian companies to move higher up the value chain.

Otherwise, the country risks becoming an attractive location for assembly without capturing enough of the technology, components and engineering that sit behind the finished product.

There is another reason this matters now.

THE AI CHALLENGE FOR GROWTH

For decades, services have been one of India's biggest economic strengths.

IT and business services allowed India to sell skilled labour to the world without first becoming a manufacturing giant. That model created millions of jobs and brought in valuable foreign exchange.

AI is now beginning to change the equation.

It does not mean India's services industry is about to disappear. But it could change the amount and type of work that companies need people to do.

Nageswaran has flagged India's lack of a significant AI play as one of the near-term headwinds facing the economy. He has also spoken about the way AI could change employment, particularly as companies automate some lower-level tasks.

For India, that creates an uncomfortable overlap.

The country needs its services industry to become more productive and move higher up the AI value chain. At the same time, it needs another source of jobs and exports that is less exposed to the changes taking place in white-collar services.

That is where manufacturing comes back into the picture.

A stronger manufacturing sector does not simply mean factory jobs. It creates demand for engineers, designers, logistics workers, technicians, software developers and a large network of smaller businesses.

The manufacturing and services economies are increasingly connected anyway.

A modern factory needs software, data and automation. An AI company needs computers, chips, data centres and electricity. The distinction between the two is becoming less useful.

And perhaps that is the point. India may not have to choose between manufacturing and services. But as the global economy becomes more uncertain and AI reshapes services, it may have to make both of them stronger — and manufacturing has some catching up to do.

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