By: Maulik Shah, Managing Director, Aditya Engimach Pvt. Ltd.
When India walked out of the Regional Comprehensive Economic Partnership (RCEP) in 2019—citing concerns over trade imbalances—the global reaction was mixed. Many viewed it as a protectionist stance. But over time, that decision—combined with evolving global trade dynamics—has opened new doors for Indian manufacturers, especially in export-oriented sectors.
One of the biggest catalysts in this shift has been the ongoing tariff dispute between the United States and China. The U.S. imposed steep tariffs—up to 145%—on import of certain Chinese goods. This disruption in supply chains has forced many countries to reduce dependency on China and diversify their sourcing.
And that’s where India steps in.
Countries like the U.S., Australia, and those in the EU are actively seeking reliable alternatives for strategic imports—and India is increasingly being seen as that alternative. This shift has created a tailwind for Indian exporters, especially those offering high-quality, cost-efficient products in sectors like auto components, industrial machinery, electronics, and precision engineering goods.
India’s Edge in a Rebalancing World
India isn’t new to manufacturing, but the context today is different. The world is looking not just for alternatives—but for trusted long-term partners. India brings a compelling mix: cost competitiveness, skilled labor, policy support, and now, a clear tariff advantage.
Take, for instance, the automotive components industry. According to the Indian Brand Equity Foundation (IBEF ), India is the world’s 4th largest producer of vehicles, and its components are increasingly in demand globally.
A notable example is India’s forging industry, comprising approximately 400 units , primarily located in the western and northern regions of the country. Together, these units produce around 2.2 million metric tonnes annually, accounting for 7.8% of the global forging output. The industry anticipates a 10–15% growth rate over the next seven years, driven by the global pivot away from China (the “China Plus One” strategy) and the rising energy costs in European countries, which make Indian products even more competitive.
India’s broader manufacturing sector also reflects this growth. The HSBC India Manufacturing Purchasing Managers’ Index (PMI) rose to 58.1 in March 2025, indicating a substantial improvement in the sector’s health. Merchandise exports stood at USD 437.10 billion in 2023–24, up from USD 314 billion in 2013–14.
That said, tariffs alone don’t guarantee demand. In the textile sector , for instance, even with relaxed tariffs, buyers remain cautious—prioritizing quality, consistency, and long-term reliability over mere cost.
This highlights the need for Indian manufacturers to back their cost advantage with a focus on quality and delivery. While large firms are already doing so, Tier 2 and 3 cities are increasingly playing a key role by offering competitive, reliable production across a wide range of goods.
MSMEs: India’s Biggest Untapped Export Engine
India’s MSMEs (Micro, Small, and Medium Enterprises) represent a vast untapped potential in the global manufacturing arena. While giants like Tata Motors and Bajaj Auto have already carved out global recognition, it is the small- and mid-scale players who are now poised to benefit from shifting trade winds.
A great example of this shift is India’s rise as a mobile phone manufacturing hub. With over 300 mobile manufacturing units now operational, India has become the world’s second-largest mobile phone producer. This growth is being driven by programs like ‘Make in India’ and the Production-Linked Incentive (PLI) scheme, which incentivize domestic production in high-demand sectors.
The Export Promotion Mission , backed by an INR 2,250 crore allocation, is further helping MSMEs by improving access to export credit, addressing non-tariff trade barriers, and supporting global market entry.
Sectors like pharmaceuticals and electronics are also seeing sustained export growth. In January 2025 , electronic goods exports rose 78.97% year-on-year, and drugs and pharmaceuticals saw a 21.46% rise. These numbers underline growing global confidence in Indian products.
What gives Indian manufacturers an edge is not just low cost, but agility. Particularly in Tier 2 and Tier 3 cities, businesses can respond quickly to new opportunities, producing high-quality goods at significantly lower prices compared to their Chinese counterparts.
Add to that India’s democratic governance, a strong legal framework, and robust intellectual property laws—and the country becomes an even more attractive choice for global buyers.
What Indian Manufacturers Must Do to Win Big
While the potential is clear, Indian manufacturers must still adapt to market realities. China has responded to U.S. tariffs with its own—up to 125% additional duties on American goods—deepening trade instability. Global buyers are no longer looking for just the cheapest option—they want dependable, diversified supply chains.
To capitalize on this moment, Indian manufacturers must:
● Prioritize Quality Compliance: International buyers seek consistent quality. Certifications like ISO 9001 help Indian suppliers demonstrate credibility and open doors to long-term contracts.
● Invest in Technology: Cost-effective labor is valuable, but it’s not enough. Embracing Industry 4.0—IoT, AI in supply chain management, digital tools—can help manufacturers improve speed, reduce errors, and scale efficiently.
● Build Stronger Supply Chains: A resilient supply chain is no longer optional. From reliable raw material sourcing to efficient logistics, Indian companies need systems that can handle global demands smoothly.
India’s Moment to Lead
The global manufacturing landscape is undergoing a reset—and India is at the center of it. With a combination of geopolitical shifts, tariff advantages, and internal reforms, Indian manufacturing is gaining ground.
But seizing this opportunity requires more than optimism. It demands a mindset shift—one that emphasizes quality, technology, and trust.
The time is right. For India’s Tier 2 and Tier 3 manufacturers, this could be the moment that redefines their global standing. With the right steps, India can emerge not just as an alternative—but as a preferred hub for global manufacturing in the decade ahead.