Instead of "Make in India": More Dependence on the USA, China and Russia
India wanted to become more independent, but the industry is more dependent than ever on China, the USA and Russia. The dream of "Make in India" is in danger of failing.
When Prime Minister Narendra Modi announced the "Make in India" program in 2014, it was associated with a major economic ambition. India was to transform itself from a service-oriented market economy into an independent manufacturing economy. The share of industrial production in gross domestic product was to increase from 15 percent in 2014 to 25 percent in 2025. The aim was to establish its own industrial base in order to significantly reduce its dependence on imports, especially imports from China.
Eleven years later, however, the opposite trend is evident. The share of manufacturing in GDP has even fallen below 14 percent. India is further away from far-reaching industrialization than it was at the beginning of the initiative. This failure is particularly evident in the unresolved dilemma of "upstream" and "downstream".
India assembles, China supplies - the dependency remains
India has made visible progress in the downstream sector, i.e. in the final assembly of products. Factories for smartphones, drones and solar modules have been built, and Apple now also has 20 percent of its iPhones manufactured in India. But the "upstream" sector remains untapped. Machines, components, preliminary products and technologies continue to come almost entirely from China. India assembles more, but hardly produces independently. Value creation remains low and there is a lack of technical expertise. This pattern is even evident in the success stories, such as Apple. Although assembly takes place in Chennai, key components such as displays, circuit boards and chips continue to come from China. The local value added for iPhones is six to eight percent, for Samsung smartphones a maximum of thirty percent. The establishment of an independent electronics industry has not been successful.
Similar dependencies characterize other key industries. Drones from companies such as Adani or Hindustan Aeronautics consist of over seventy percent Chinese components. Battery production for electric vehicles also remains dependent. India wants to set up its own cell factories, supported by the Production Linked Incentive program, or PLI for short. This government funding program provides around 26 billion US dollars to promote the domestic production of critical primary products. The funds are intended to have a targeted effect where imports from China have dominated to date. However, despite PLI, there is hardly any real independence in the battery sector. Licenses, machines and processes continue to come from China, for example from Gotion or BYD. Even in planned gigafactories, the technological origin remains Chinese.
The picture is the same in the pharmaceutical sector. India exports generics worldwide, but over seventy percent of the active ingredients - known as active pharmaceutical ingredients - come from China. Here too, the PLI program was intended to support the development of local production capacities. It has not been successful. The import quota is only decreasing minimally, own capacities are being created too slowly.
This "upstream" weakness is partly of political origin. Following the border disputes with China in Doklam 2017 and Galwan 2020, New Delhi imposed strict conditions on Chinese investors and restricted the granting of work visas to Chinese skilled workers. However, this step had a boomerang effect. Many production projects slowed down due to a lack of machinery, technical advice and supplier parts. The dependency on Chinese primary products remained. Instead of establishing independent domestic supply chains, an expensive, inefficient detour via third countries or elaborately approved special imports was created. This exacerbated the upstream problem, while the downstream success was celebrated politically.
India's large corporations also bear responsibility. Companies such as Tata, Reliance and Mahindra invest significantly less in research and development than their global competitors. The gap in innovation, patents and technical know-how remains. Without its own progress, India remains dependent on foreign technology - especially from China, which specifically controls the export of key technologies.
Beijing uses this dependency strategically. With a policy of targeted denial, China is slowing down the transfer of critical equipment to its neighboring country. The case of a tunnel boring machine from the German company Herrenknecht is a good example of this. Although it was destined for an Indian infrastructure project, China refused to export it. Machines for semiconductor manufacturing or battery cell production are also subject to such controls. India remains blocked in the upstream, while China secures its technological lead.
USA, Russia, China - India's dilemma
At the same time, India's dependence on other partners is growing. Washington remains indispensable for high technology and armaments. Russia is the most important supplier of energy imports and military equipment. Vietnam and other Southeast Asian countries are gaining in importance as supplier locations. However, they are not replacing China in the crucial upstream segment. As a result, India is becoming entangled in a dangerous multiple dependency.
The country is under economic pressure on three fronts. China remains irreplaceable for machinery, materials and technical knowledge. The USA supplies software, chips and weapons technology. Russia remains an energy supplier and defense partner. India threatens to remain permanently vulnerable in this constellation. It is currently almost impossible to switch to alternative sources. The self-proclaimed strategy of multi-alignment is turning into the uncomfortable reality of multi-dependence.
Against this backdrop, New Delhi is beginning to correct its tough stance against China. In March 2025, the government relaxed the conditions for Chinese direct investment for the first time in years. Indian companies such as Dixon are once again negotiating with Chinese partners, for example in the production of display and camera modules. The once banned online retailer SHEIN is also returning to the Indian market via the Reliance Group. India is even opening up again in the sensitive battery sector. Planned plants such as the Amara Raja gigafactory rely on technology from China.
This economic rapprochement remains politically controversial. There is resistance in Modi's cabinet. But economic reality is forcing compromises. Without Chinese technology, India's own industrialization plan remains incomplete. Analysts are already warning that Beijing could strategically use this new leverage to influence India's industrial development.
Economic pressure from Washington and Beijing
Beijing is already making targeted use of this new leverage to influence India's industrial development. Other factors are exacerbating the situation and further limiting India's room for maneuver.
Donald Trump's return to the White House has further worsened the economic conditions for India. His administration has introduced flat import tariffs of ten percent, and India is even subject to rates of up to 26 percent in bilateral trade. This policy should actually have given Indian companies an advantage in competition with Chinese suppliers, who are affected by much higher tariffs. However, India's industry is dependent on Chinese primary products. The new customs policy not only makes the export of Indian goods to the USA more expensive, but also puts a strain on the already fragile production chain. Without its own "upstream" capacities, India remains dependent on imports for machinery, components and materials, especially from China. The hoped-for advantage of the US tariffs will therefore evaporate. India suffers a double disadvantage: rising costs on the one hand and unchanged import dependency on the other.
There is also a second structural obstacle: the strict foreign exchange management of the Indian government and the central bank. The import of machinery, high-tech equipment and special materials still requires foreign exchange permits, approvals and bureaucratic procedures. Medium-sized companies in the industrial sector regularly come up against limits here. International investors are also hesitant because profit transfers, license payments or technology supplies remain complicated. This policy paralyses the urgently needed modernization of the production base. Even government support programs such as the PLI come to nothing if access to foreign technology is blocked by foreign exchange restrictions.
India fails to realize its own industrial dream
As long as these two brakes remain in place - a burden of new trade tariffs and a rigid foreign exchange regime - India's emergence as an independent industrial nation will remain incomplete. The strategic dependence in the "upstream" sector is becoming more entrenched.
India is thus caught in a dangerous conflict of objectives. In terms of foreign policy, it wants to remain independent, but technologically it remains trapped. Its dependence in the upstream sector limits its room for maneuver in a world of growing geopolitical competition. The goal of a sovereign "Make in India" is receding into the distance. Without far-reaching reforms in research, education and investment, this situation will continue.
The vision of an independent manufacturing economy will remain unfulfilled for the time being. India remains a country of downstream success and upstream failure.