How India's Renewed Self-Reliance Drive Reshapes the Global South's Industrial Strategy

Introduction

India is renewing its push for self-reliance, identifying products worth approximately $51 billion in annual imports for domestic manufacturing. The move, reported by Reuters, spans sectors from textiles to renewable energy and aims to reduce dependence on key suppliers, notably neighbouring China. Heightened geopolitical tensions and ongoing supply-chain disruptions have given fresh urgency to this drive, which reflects a broader strategic reorientation among Global South economies toward industrial resilience and reduced external dependencies.

Background & Context

India's manufacturing sector currently contributes only 13% of GDP, a figure that has remained stubbornly low despite past campaigns such as Make in India. Expanding domestic manufacturing is seen as essential for creating jobs for a population exceeding 1.4 billion and for narrowing a merchandise trade deficit that routinely surpasses $300 billion annually. The latest initiative targets critical imports where India is heavily reliant on foreign suppliers, including machinery, electronics, chemicals, and renewable energy components.

The renewed emphasis on import substitution comes against a backdrop of global supply-chain realignments. The COVID-19 pandemic, the war in Ukraine, and rising US-China tensions have exposed vulnerabilities in concentrated supply chains, prompting many countries to reassess their dependencies. For India, reducing reliance on China—its largest trading partner—has become a strategic priority.

Main Analysis

India's self-reliance drive is not merely a protectionist reflex but a calculated industrial policy aimed at building domestic capacity in high-value sectors. The list of products identified for indigenisation includes advanced manufacturing inputs such as specialty chemicals, electronic components, and medical devices, as well as items in textiles, steel, and renewable energy equipment. By targeting $51 billion in imports, the government signals its intent to shift from being a net importer to a competitive producer in these segments.

Previous import-substitution efforts in India have had mixed results. The earlier production-linked incentive (PLI) schemes for electronics and automobiles showed some success, but bureaucratic hurdles, infrastructure gaps, and slow technology adoption have limited broader impact. To avoid past pitfalls, the current push will require coordinated policy reforms: improving ease of doing business, upgrading logistics, investing in R&D, and fostering innovation ecosystems. Additionally, trade policy must balance domestic protection with the need to remain integrated in global value chains.

The global context is favourable in some respects. As multinational companies pursue "China plus one" strategies, India is well-positioned to attract foreign direct investment (FDI) in manufacturing. However, competition from other emerging economies—Vietnam, Indonesia, Mexico—means India must offer not only a large domestic market but also competitive production costs, reliable infrastructure, and skilled labour.

Development Impact

Successful import substitution could have significant development impacts across several dimensions:

• Industrialisation and employment: Expanding manufacturing can absorb surplus labour from agriculture and services, raising productivity and incomes. Each percentage point increase in manufacturing's GDP share could create millions of formal-sector jobs.
• Technology adoption: Indigenous production of advanced inputs spurs technology transfer, R&D, and innovation. This can strengthen innovation ecosystems, particularly in electronics, clean energy, and digital infrastructure.
• Trade balance: Reducing imports of critical goods narrows the trade deficit, improving current account stability and reducing vulnerability to external shocks.
• Capacity building: Domestic manufacturing builds institutional capacity in quality standards, supply-chain management, and industrial policy design.
• Climate resilience: Focusing on renewable energy components supports India's energy transition and climate adaptation goals, reducing dependence on imported solar panels and wind turbines.

Global South Perspective

India's self-reliance drive resonates across the Global South, where many emerging economies face similar vulnerabilities—dependence on foreign inputs, volatile commodity prices, and limited industrial diversification. If successful, India could provide a model for other developing countries seeking to combine industrial policy with sustainable development.

The initiative also has implications for South-South cooperation. As India reduces imports from China, it may deepen trade and investment ties with other Global South partners, such as ASEAN, Africa, and Latin America. For instance, India's growing demand for renewable energy equipment could boost intra-regional trade with countries like Brazil and Indonesia. Furthermore, India's experience with digital infrastructure and manufacturing incentives could be shared through knowledge-exchange platforms like IBSA (India, Brazil, South Africa) or BRICS.

However, the approach raises questions about the feasibility of decoupling from global supply chains. The Global South's development has historically benefited from integration into global trade. A purely inward-looking strategy risks missing opportunities from technology flows and scale economies. Balancing self-reliance with global engagement remains a key challenge.

Future Outlook

Over the next 5–10 years, India's import-substitution drive will test its ability to execute industrial policy at scale. Key indicators to watch include:

• Investment flows: Whether FDI in targeted sectors materialises, particularly in electronics, renewable energy, and advanced manufacturing.
• Infrastructure development: Progress in industrial corridors, logistics parks, and digital connectivity will determine cost competitiveness.
• Policy stability: Consistency in tariff, tax, and regulatory frameworks is critical for long-term private sector commitment.
• Skill development: The availability of a skilled workforce, especially in engineering and digital technologies, will underpin productivity gains.

Globally, India's strategy aligns with a broader trend: from the United States' CHIPS Act to the European Union's Critical Raw Materials Act, major economies are prioritising domestic production of strategic goods. For the Global South, the challenge is to pursue industrial resilience without sacrificing the openness that has underpinned growth. India's path—if successful—could show that import substitution, when combined with investment in technology and infrastructure, can be a viable component of a modern development strategy.

Conclusion

India's renewed self-reliance drive represents a significant attempt to reshape its industrial landscape and reduce external vulnerabilities. By targeting $51 billion in critical imports, the government aims to boost manufacturing's GDP share, create jobs, and narrow the trade deficit. The outcome will depend on execution—policy reform, infrastructure investment, and technology adoption. For the Global South, India's experience offers valuable lessons in balancing domestic capacity building with global integration. As geopolitical tensions persist and supply chains evolve, the quest for industrial self-sufficiency is likely to intensify across developing economies.