Make in India at 12: From Assembly to Innovation

Twelve years after Make in India was launched with the ambition of turning India into a global manufacturing powerhouse, the country finds itself confronting an uncomfortable paradox. India is exporting record numbers of smartphones, attracting multinational manufacturers and expanding defence production. Yet it continues to import many of the technologies, components and intellectual property that make those products valuable. The programme has undoubtedly expanded manufacturing. Whether it has fundamentally transformed India's industrial capabilities is a far more difficult question.

The real test of industrial policy is not whether factories multiply but whether domestic firms climb global value chains. On that measure, Make in India has delivered significant progress but only partial transformation. The first decade has strengthened India's position as a manufacturing destination. The next must determine whether it can become an innovation-driven industrial power.

Its achievements deserve recognition. India has emerged as one of the world's largest mobile phone manufacturers and a major exporter of electronics. Production Linked Incentive (PLI) schemes have attracted investments in electronics, pharmaceuticals, automobiles, renewable energy and semiconductors. Defence exports have reached record highs, while initiatives such as PM Gati Shakti, dedicated freight corridors and industrial corridors have improved logistics and reduced infrastructure bottlenecks. At a time when multinational companies are diversifying supply chains under the "China+1" strategy, India has become an increasingly attractive destination for global manufacturing.

Yet the broader structural picture is less reassuring. Despite sustained policy attention, manufacturing continues to contribute only about 16-17% of GDP, well below the long-standing target of 25%, suggesting that industrial growth has largely kept pace with, rather than outperformed, the wider economy. More importantly, manufacturing has not generated employment on the scale required to absorb millions entering the labour force. Labour-intensive sectors such as garments, textiles, footwear and toys remain underdeveloped compared with East Asian competitors, while much of the new employment is concentrated in contract work with modest productivity gains.

The deeper concern is that India is still capturing only a limited share of manufacturing value. Electronics exports have surged, but the intellectual property, advanced components, semiconductor chips and product design largely remain overseas. India increasingly assembles products whose technology, patents and brands belong to others. Assembly creates jobs and exports, but the highest profits continue to accrue to firms that control innovation. Sustainable industrial success depends not merely on exporting more products, but on exporting increasingly sophisticated products, from advanced electronics to electric mobility technologies and semiconductor ecosystems.

This challenge cannot be solved through incentives alone. PLI has undoubtedly accelerated investment, but subsidies can encourage production only for a limited period. Their long-term success will depend on whether firms remain globally competitive after incentives expire. Industrial policy cannot permanently substitute for productivity, innovation and technological capability. India's manufacturing productivity continues to lag several East Asian economies, while logistics costs, fragmented supply chains and skill shortages continue to constrain competitiveness.

The investment story also requires greater scrutiny. While public capital expenditure has expanded significantly, private manufacturing investment has remained relatively cautious. Investors look beyond subsidies. They seek regulatory certainty, faster contract enforcement, stable taxation and predictable policy. Industrial competitiveness ultimately rests as much on institutional quality as on highways, ports or industrial parks.

The experience of India's MSMEs illustrates this challenge. Although they account for a substantial share of manufacturing output and employment, many remain excluded from global supply chains due to delayed payments, limited access to affordable credit, technological gaps and weak export linkages. Without integrating smaller firms into modern manufacturing ecosystems, industrial growth risks becoming concentrated among a few large corporations rather than broad-based.

The next phase of Make in India must therefore shift from production to innovation. India spends less than 1% of GDP on research and development, far below countries such as South Korea and significantly below China. Unless investments in R&D, advanced manufacturing, artificial intelligence, robotics, semiconductor design, vocational skilling and university-industry collaboration increase substantially, India will struggle to move beyond assembly-led growth.

The global environment makes this transition even more urgent. International trade is increasingly shaped by strategic tariffs, industrial subsidies, friend-shoring and technological nationalism. At the same time, green manufacturing, battery technologies, renewable energy and carbon-efficient production are becoming central to export competitiveness. India must compete not only with multinational companies but also with the industrial strategies of other governments.

The first twelve years of Make in India have proved that India can attract investment and build factories. The next twelve must prove that it can build technologies, brands and globally competitive firms. Nations become manufacturing powers not when they assemble the world's products, but when the world depends on what they invent. Until India captures the knowledge embedded within production, "Made in India" will remain only a label. The larger ambition must be to make "Designed in India" and "Invented in India" equally synonymous with global excellence.