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India’s manufacturing journey, particularly in the telecom sector, has garnered both praise and skepticism. While some see the entry of global giants like Apple and Samsung as a significant milestone, others argue that the country remains trapped in low-value assembly work. This debate warrants a critical examination of whether India’s manufacturing strategy is laying the foundation for sustainable industrial growth or merely scratching the surface of its potential.

The Assembly Dilemma: A Missed Opportunity?

Critics argue that the current focus on assembly operations, with only 15-20% value addition, reflects a lack of ambition. The bulk of high-value manufacturing—such as semiconductor fabrication, advanced component production, and research and development—remains concentrated in countries like China, South Korea, and Taiwan. While India has made strides in attracting foreign investment, skeptics question whether the country is being reduced to a peripheral player in the global value chain.

The concern is valid: India risks becoming a secondary hub if its policies do not address the broader spectrum of manufacturing. For instance, the telecom industry still heavily relies on imported components like chips, batteries, and displays. Without a robust push toward developing indigenous capabilities, the value addition may stagnate, and the much-touted ecosystem may fail to materialize.

Ecosystem Building: A Work in Progress

Proponents of India’s current strategy highlight the gradual nature of industrial transformation, citing examples from China and South Korea. However, India’s trajectory lacks some of the critical ingredients that fueled these countries’ success:

1. Comprehensive Infrastructure: While initiatives like the Production-Linked Incentive (PLI) scheme are commendable, India still struggles with logistical inefficiencies, high energy costs, and inadequate port facilities.


2. R&D Investment: Unlike China, which aggressively invests in research and development, India allocates a mere 0.7% of its GDP to R&D. This limits the scope for innovation and indigenous technology development.


3. Policy Consistency: Frequent changes in tax policies, import duties, and compliance regulations create uncertainty, discouraging long-term investments in high-value manufacturing.

The question remains: Is India doing enough to ensure that the current wave of investments translates into a self-sustaining ecosystem?


The Role of Global Companies: Friend or Foe?

The entry of companies like Apple and Samsung into India’s manufacturing landscape is often celebrated as a vote of confidence in the country’s potential. However, critics argue that these companies primarily seek cost advantages rather than contributing to India’s long-term industrial growth. For instance:

Labor Arbitrage: India’s relatively low labor costs make it an attractive destination for assembly operations. But as wages rise, will these companies remain invested, or will they relocate to cheaper alternatives?

Lack of Technology Transfer: Many global firms guard their proprietary technologies, limiting opportunities for local firms to upskill and innovate. Without deliberate efforts to foster technology transfer, India may struggle to climb the value chain.

A Race Against Time

India’s late entry into the global manufacturing race poses another challenge. Countries like Vietnam and Indonesia are emerging as strong competitors, offering similar cost advantages with more streamlined policies. For India to retain its edge, it must act swiftly to address existing bottlenecks. Delays in building critical infrastructure, coupled with bureaucratic red tape, could derail the momentum gained in recent years.


The Talent Conundrum

One of the most significant barriers to India’s manufacturing aspirations is the mismatch between the skills demanded by modern industries and those supplied by the workforce. While India produces millions of graduates each year, a large proportion of them lack the technical expertise required for high-value manufacturing roles.

This skills gap raises critical questions about the effectiveness of current education and training policies. Are initiatives like Skill India adequately aligned with industry needs? Or is India producing a generation of underemployed youth, unable to capitalize on the opportunities created by global investments?

Balancing Services and Manufacturing

India’s economic growth has historically been driven by its services sector, which contributes over 50% to GDP. The country’s pivot toward manufacturing raises a broader question: Is it realistic to expect manufacturing to become the cornerstone of India’s economy, given its entrenched reliance on services?

A nuanced approach may be more effective, leveraging India’s strength in IT and software to complement manufacturing. For instance, integrating digital solutions like AI, IoT, and blockchain into manufacturing processes could give India a competitive edge.

What Needs to Change?

To ensure that the current phase of assembly-driven manufacturing evolves into a more robust industrial base, India must address the following critical areas:

1. Policy Stability: Simplify compliance processes and ensure consistency in tax and trade policies to attract long-term investments.


2. Indigenous Innovation: Increase R&D spending and incentivize local firms to develop proprietary technologies.


3. Skill Development: Align vocational training programs with industry needs, focusing on emerging technologies like robotics and automation.


4. Infrastructure Development: Invest heavily in ports, logistics, and energy to reduce operational costs and improve efficiency.


5. Strategic Partnerships: Negotiate technology transfer agreements with global firms to ensure that India’s workforce gains access to cutting-edge innovations.

A Critical but Hopeful Outlook

India’s manufacturing journey is at a crossroads. The current strategy of attracting global players through cost advantages and policy incentives is a promising start, but it cannot be the endgame. To achieve its vision of becoming a global manufacturing hub, India must adopt a more ambitious and holistic approach.

The critics are not entirely wrong in questioning the limited value addition in the current phase of manufacturing. However, dismissing these efforts as mere assembly work overlooks the complexities of industrial transformation. The challenge for India is to strike a balance between immediate gains and long-term goals, ensuring that today’s assembly lines become tomorrow’s innovation hubs.

In the race to industrialize, patience is a virtue, but complacency is a risk India cannot afford.