India’s Manufacturing Ambitions: Lessons from China’s MIC2025

India’s Manufacturing Ambitions: Learning from China’s State-led Revolution

The “Make in India” initiative, launched in 2014, set an ambitious agenda: to elevate manufacturing’s share in GDP to 25% and position India as a global manufacturing hub. Yet, a decade later, manufacturing’s contribution remains stagnant at 17.7%. By contrast, China’s “Made in China 2025” (MIC2025) exemplifies what India has failed to emulate—consistent, state-led, and strategic industrial policy focused on high-value sectors. The problem lies not in ambition but in execution. India’s laissez-faire approach lacks the clarity, funding, and structural reforms necessary for transformative change.

The Institutional Landscape: Frameworks and Funding

MIC2025 outlines clear objectives supported by massive state-led investment. This includes heavy funding for ten strategic sectors—such as robotics, green energy, and high-tech transportation—anchored in achievable timelines and measurable benchmarks. The policy is supplemented by China’s robust public R&D ecosystem, with national spending exceeding 2.4% of GDP. Further, fiscal mechanisms like subsidies and preferential loans foster long-term industrial development.

In contrast, Make in India has relied largely on facilitating FDI and improving ease of doing business. Budgetary allocations to incentivize domestic production remain sporadic. The Production Linked Incentive (PLI) schemes, amounting to ₹1.97 lakh crore across 14 sectors, signal progress, yet this pales against the coordinated and sector-specific focus of MIC2025. With India's R&D spending languishing at less than 0.7% of GDP, its policy direction—more market-driven than state-driven—works against ambitions of ending import dependency or moving up the global value chain.

Argument with Evidence: India’s Mixed Achievements

India has made advancements, particularly in mobile manufacturing, where it now ranks second globally, assembling 15% of Apple’s iPhones. FDI inflows have surged from $45.14 billion (2014-15) to $84.83 billion (2021-22), aided by simplified regulatory mechanisms and infrastructure development initiatives, such as industrial corridors. However, these successes don’t address deeper structural deficits.

The NSSO workforce survey (2023) highlights troubling trends: manufacturing employment has declined from 11.6% (2013-14) to 10.6% (2022-23). This dip is starkly set against MIC2025, where state-led skilling drives have pushed China’s formally skilled workforce to 24%. Similarly, India’s exports, often touted as a strength, as a percentage of GDP remain flat at 22.7% (2023-24), with products heavily concentrated in low-value, non-labor-intensive sectors. By contrast, China commands dominance in clean energy manufacturing—accounting for over 75% of global lithium-ion battery and solar module production.

India struggles with backward MSME integration. Despite MSMEs forming 30% of India's GDP, they suffer from poor credit access and inadequate policy support. The RBI’s ECLGS scheme for MSME borrowing, while beneficial, rarely aligns with broader industrial policy objectives, unlike China’s integrated manufacturing ecosystems which ensure both scale and domestic value addition.

Counter-Narrative: Is Market-Led Growth Viable?

The strongest argument defending Make in India’s approach hinges on the belief that its market-led, facilitative strategy ensures adaptability in an unpredictable global trade environment. Critics of MIC2025 note that its heavy dependence on state funding and subsidies invites accusations of monopolistic behavior and trade protectionism, exemplified by the backlash during the US-China trade disputes. India, by avoiding such controversies, may retain more diplomatic space in global forums.

Additionally, India’s mobile manufacturing success exemplifies positive outcomes of its facilitative approach. Global firms, from Foxconn to Samsung, have invested heavily, suggesting that targeted PLI schemes can complement market-led growth without the pitfalls of China's state-dominated economic model. These policies are less likely to provoke international retaliatory tariffs, as seen against China.

International Comparisons: Germany’s Strategic Precision

India could look not only to China but also to Germany’s “Industry 4.0” initiative for diversification strategies. Germany’s reliance on decentralized, high-tech innovation boosted its global competitiveness in niche sectors—such as engineering tools and robotics—without resorting to aggressive state-led subsidies. Unlike China’s centralized MIC2025, Germany achieves coherence through federal-state coordination that could inspire a more balanced roadmap for India.

Assessment: Where Does this Leave Us?

The lessons from China’s MIC2025 are not merely about funding but precision. India needs a coherent National Industrial Strategy—anchored in measurable targets, specific sectoral roadmaps, and robust fiscal support. Addressing India’s R&D deficit must be prioritized, with targeted investments focused on clean manufacturing and high-tech innovator ecosystems. Policy stability over electoral cycles should guide industrial development, reducing the compliance burden on MSMEs while fostering backward integration and large-scale skilling initiatives.

Adopting these changes will require political will and regulatory coordination—between the Centre, States, and financial regulators. Make in India’s achievements, though not insignificant, need to graduate beyond headline-grabbing data points. An industrial revolution cannot hinge on global firms alone; it must build resilient domestic infrastructure, workforce capabilities, and institutional alignment. Time is running out: India must shift gears before manufacturing’s lost decade becomes irreversible.

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