The recent tariff wars have opened a window of opportunity, as global companies are rethinking their supply chain strategies, India must seize this moment to reclaim its manufacturing heritage. In this article, we will explore why manufacturing is crucial, examine historical lessons, and discuss how India can reposition itself for a brighter, self-reliant future.

Let’s get back to the America of the 1940s, amidst World War II, harnessing its manufacturing power to produce over half of the world’s goods, paving its way to dominate globally. However, the upcoming decades U.S. shifted its focus to a service-oriented economy with outsourced production. This transition brought short-term gains but eventually weakened its industrial backbone, leading to a fragmented global supply chain with China as the biggest beneficiary.

Today, a similar set of challenges is unfolding in India. Our manufacturing sector, once our greatest strength, is now heavily dependent on Chinese supply chains—evident from exports exceeding $120+ billion. Our prior ignorances resulted in reduced efficiency, which can be observed in various industries ranging from smartphones, drones, to IT and AI. There are a few Indian companies working in such domains. Now, as we stand at the verge of the EV revolution, there is a real risk of India being left behind again!

China’s recent advancements further underscore this threat. For example, at the 2024 Robotics Summit in Beijing, China allowed its companies to test automated flying taxis with passengers and showcased robots synchronizing with dancers—while Tesla’s humanoid prototypes were merely displayed in a box. Such moves highlight China’s relentless drive toward automation and deep-tech manufacturing.

A Historical Decline in Western Manufacturing

The Rust Belt: A Cautionary Tale for Manufacturing and Urban Revival 

The Rust Belt—a significant reminder of what happens when manufacturing is neglected. Once, cities like Detroit and Chicago were the lifeblood of American industry, with heavy manufacturing in the automotive sectors powering economies. Detroit’s growth peaked around the 1950s; however, as globalization hit, it led to outsourcing production to Asian countries with cheap labour and the manufacturing jobs dwindled. This massive loss, especially in the automotive sector, triggered population decline, forced mass migration, and gave rise to the term “Rust Belt”.

Today, Detroit stands as a grim example of urban decay. In 2013, many properties were listed for as little as $500 or less, with a property listed at 1$ with the city facing staggering challenges—

• In 2013, properties were listed for as little as $500—one even at $1.
• 56% of residents lived below the poverty line.
• Unemployment soared to 23.1%.
• Police response time averaged 58 minutes.
• Public school enrollment and performance plummeted.
• Violent crime surged, with a staggering 70% of murder cases unsolved.

Drawing Parallels: Is India Heading Toward Its Own Rust Belt Moment?

The story of the Rust Belt is not just America’s past—it’s a cautionary tale for developing countries like India, which now share a similar crossroads. While our cities have yet to face the extreme decay seen in Detroit, the early signs are impossible to ignore.

India’s heavy reliance on imports, especially from China, mirrors the outsourcing that hollowed out American industry. Our setbacks in previous technologies like smartphones, drones, and AI is a case in point—we consume what we do not produce. 

Consider China: Through strategic pricing and systematic dumping, China has flooded the Indian market where goods are sold undervalued. Leveraging their vast state subsidies and economies of scale, Chinese companies devalue their products, making it nearly impossible for domestic manufacturers to compete. This strategy has driven Chinese exports to India to skyrocket—recent data shows that exports now exceed $120 billion and are projected to rise even further. Chinese products are eroding margins and stifling local innovation. This underhanded trade practice not only disrupts the market balance but also underscores the urgent need for India to establish a robust, self-reliant manufacturing ecosystem that can withstand such unfair competition. 

Consider America: America lacks the labour economy and has capitalized on global talent to sustain its technological and economic significance. A significant aspect of this strategy involves attracting skilled professionals from countries like India. Notably, Indian nationals accounted for 72.3% of all H-1B visas issued by the U.S. between October 2022 and September 2023, underscoring the substantial role of Indian talent in the American workforce. This influx of skilled Indian professionals has been particularly prominent in the technology and innovation sectors, contributing to advancements and maintaining the U.S.’s competitive edge in the technical sectors. 

Likewise, India can harness its abundant talent and foster a self-reliant ecosystem by offering conditions that not only retain our best minds but also empower them to innovate. Instead of letting our talent be siphoned abroad, we must provide an environment that matches or exceeds global standards, ensuring that our youth drive the nation’s manufacturing revolution..

The Global Economies in Manufacturing Domain

China’s Aggressive Dominance:

China has leveraged massive investments and strategic international partnerships to overcome its natural resource limitations and emerge as a global manufacturing powerhouse. Today, Chinese companies refine over 56% of the world’s raw copper, control around 75% of Indonesia’s nickel refining capacity, and dominate over 80% of cobalt production in the Democratic Republic of Congo.

Adding to these strengths, China now produces nearly 80% of the world’s batteries and 93% of neodymium magnets, with reserves of about 250-275K tons—a stark contrast to the United States’ mere 4,200 tons. This robust control over critical materials has enabled China to secure the supply chains vital for advanced manufacturing.

On the automation front, China is pushing the boundaries. An excellent example is Xiaomi’s “lights-out” factory, where smartphones are manufactured entirely via automated processes integrating robotics, AI, and autonomous systems.

In 2023, China installed 276,288 industrial robots, representing 51% of global installations. This substantial deployment underscores China’s dominance in manufacturing automation, with its operational stock nearing 1.8 million units—the largest globally.

Germany and the European Union:Manufacturing Challenges and Automation Setbacks

Germany, historically recognized as Europe’s industrial powerhouse, has experienced notable shifts in its manufacturing and automation sectors. As of 2023, Germany’s robot density stood at 429 units per 10,000 employees, positioning it fourth globally. This represents a 5% compound annual growth rate since 2018.

The European Union (EU) collectively reported a robot density of 219 units per 10,000 employees in 2023, marking a 5.2% increase from the previous year. While this indicates progress, the growth rate lags behind regions like Asia, which saw a 7.6% increase in the same period.

A significant factor contributing to these challenges is the acquisition of key European automation firms by foreign entities. A prominent example is the 2016 takeover of Germany’s KUKA by China’s Midea Group. This acquisition raised concerns about the transfer of critical automation technologies and the potential impact on Europe’s competitive edge in the robotics sector.

These factors underscore the pressing need for Germany and EU nations to reassess and modify their industrial strategies, focusing on enhancing automation capabilities, safeguarding critical industries, and creating a more conducive environment for manufacturing growth to remain competitive in the evolving global landscape.

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Robotic Arm by KUKA, now acquired by CHINA

South Korea and Japan: High-Tech Leaders Struggling with Demographic Headwinds

South Korea leads the world in robot density, with 1,012 industrial robots per 10,000 employees as of 2023—a figure that more than doubles that of China and far exceeds the global average of 151. This extraordinary level of automation reflects the country’s strong dependence on high-tech manufacturing, which accounted for 61% of South Korea’s economy in 2022. Despite these advancements, South Korea is under immense pressure from a declining workforce, driven by the world’s lowest birthrate and a rapidly aging population.

To combat labor shortages, South Korea has embraced automation not only out ofambition but necessity. The government has introduced four phases of its Basic Plan for Intelligent Robots, totaling approximately USD $1.6 billion since 2008, alongside a new USD $2.26 billion investment to further develop the sector through 2030. Industry giants are also at the forefront—Samsung pledged USD $163 billion in industrial automation and AI, Hyundai acquired Boston Dynamics in 2021, and LG has made robotics a core pillar of growth. However, nearly 60% of robot components are still imported, reflecting a strategic vulnerability in supply chain independence.

Japan, while also facing a severe birth rate decline, holds a relatively stronger position in industrial automation. With a robot density of 518 per 10,000 employees in 2023, it ranks second globally. Unlike South Korea, Japan is home to two of the “Big Four” robotics giants—Fanuc and Yaskawa—providing it with deeper domestic capabilities. Nevertheless, Japan is not immune to the labor crisis, and factory relocation to urban centers is becoming increasingly common due to rural depopulation. Even long-standing restrictions on foreign workers at sensitive manufacturing sites are now being reconsidered.

Both South Korea and Japan exemplify advanced economies racing to automate their manufacturing in response to existential demographic challenges. However, while their technological edge remains intact, supply chain dependencies and labor shortages cast a shadow on the sustainability of their automation-driven manufacturing futures

Seizing the Manufacturing Opportunity: India’s Path to Global Leadership

The global manufacturing landscape is undergoing a drastic shift, presenting India with a once-in-a-generation opportunity to assert itself as a competent player. Recent political decisions, particularly the imposition of reciprocal tariffs by the United States, have disrupted established supply chains and prompted multinational corporations to seek alternative manufacturing hubs. This realignment offers India a strategic opening to attract investment, enhance its manufacturing capabilities, and emerge as a global manufacturing powerhouse.

India’s Manufacturing Potential

India’s manufacturing sector has demonstrated resilience and growth potential. In 2023, the sector’s output was valued at $455.77 billion, reflecting a 3.57% increase from the previous year. Projections indicate that the manufacturing market could potentially reach US$1.6t in value added by 2025, with a compound annual growth rate of 3.44%.

Strategic Advantages

Several factors enhance India’s attractiveness as a manufacturing hub:

• Demographic Dividend: A youthful and expanding workforce offers a sustainable labor pool for manufacturing enterprises.
• Policy Initiatives: Programs like “Make in India” and the Production LinkedIncentive (PLI) schemes provide financial incentives and policy support to boost domestic manufacturing.
• Infrastructure Development: Ongoing investments in infrastructure, including industrial corridors and smart cities, are creating an enabling environment for manufacturing growth.
• Diversified Economy: India’s economic diversity allows for the development of various manufacturing sectors, from textiles to electronics and automobiles.

Pioneering Manufacturing: Indian initiatives to foster manufacturing

Policies have been devised to enhance the manufacturing hub in India:

• The Argentinian Alliance: India imports 70% of its Li-ion batteries from China and to mitigate the load, state owned mineral exploration agency KABIL along with HCL, NALCO and MECL have started mining with CAMYEN SE, Argentina. Lithium, due to its significance is often referred as white gold and the EV industry heavily rely on Lithium based batteries to sustain
• Pursuit of the Free Trade Agreements: India is exploring ways to strengthen its personal as well as global alliances as the Free Trade Agreements are in talks between various nations which include European nations and UK. With a free trade alliance, there will be mutual certainty between respective nations that no surplus tariff will be imposed and governmental benefits will be provided to the business.
• Special Economic Zones: Special economic zones introduce business to special economic regulations to attract foreign investments, boost exports and incentivise businesses. As of 2023, there are 272 sez with an employment hub to 2.8 million people with a revenue of $61bn.

These initiatives reflect India’s efforts to acknowledge its manufacturing capabilities and integrate more deeply into global trade networks.

Challenges and the Path Forward

Despite the favorable conditions, challenges such as infrastructural bottlenecks, regulatory complexities, and the need for skill development persist. Addressing these issues requires a concerted effort from both the government and the private sector. Enhancing ease of doing business, investing in education and vocational training, and streamlining regulations will be crucial in capitalizing on the current opportunity.

Call to Action

The current global trade realignments present an unprecedented opportunity for India to elevate its manufacturing sector and establish itself as a critical node in global supply chains. This is a clarion call for policymakers, industry leaders, and the workforce to collaborate and propel India towards manufacturing excellence. By leveraging its inherent strengths and addressing existing challenges, India can not only attract significant foreign investment but also generate employment, foster innovation, and achieve sustainable economic growth.

The moment is perfectly curated for India to step onto the global manufacturing stage with determination. Seizing this opportunity will require strategic vision, robust policy frameworks, and collective action. The world is watching, and the time for India to act is now.