India is showing progress in the production of several previously imported goods, including smartphones, solar modules, electric vehicles, and telecommunication equipment. However, gaps remain in critical components and upstream manufacturing chains, which limits domestic value addition.
It is important to understand that simply assembling a product in India does not guarantee the localization of the entire value chain; the key factor is the share of components, materials, and technologies produced domestically. This aspect is becoming central to India's efforts to develop its manufacturing industry.
According to a recent report by NITI Aayog, prepared jointly with Crisil, the country's ambitions must go beyond merely increasing production volumes and focus on deepening value addition, strengthening domestic capabilities, and participating more actively in global supply chains.
The automotive industry has the most developed ecosystem
India's automotive sector possesses one of the most developed manufacturing networks in the country, boasting an extensive base of component manufacturers that supply both domestic and global automakers.
The NITI Aayog-Crisil report indicates that localization efforts, close collaboration with Original Equipment Manufacturers (OEMs), and joint ventures with global suppliers have led to Indian auto component manufacturers increasingly integrating into global logistics. Auto component exports reached approximately $7.5 billion in the fiscal year 2025, with Indian suppliers serving markets in Europe, North America, and Asia.
With this supplier base in place, the next challenge is expanding localization to more advanced automotive technologies. The government's PLI-Auto scheme requires that relevant advanced automotive technology products have at least 50 percent value addition within the country while stimulating investment across the entire automotive chain. This scheme has attracted investments worth ₹44,326 crore and provided 67,820 jobs by March 2026, giving the automotive sector an advantage over industries that are still trying to build their internal supplier networks from scratch.
Smartphones are growing, components lag
Smartphones are perhaps the most obvious recent success story of Indian manufacturing. Government data shows that 99.2 percent of mobile phones used in India are now manufactured domestically, and India has become the second-largest mobile phone producer globally by volume, as well as a net exporter. Smartphones have also become India's leading individual export item in the fiscal year 2025-26.
However, mass production does not equate to complete self-sufficiency. Much of this activity involves assembling imported components rather than manufacturing them locally. An external assessment of the PLI scheme for mobile manufacturing found that the domestic value addition was only 23 percent in the fiscal year 2023-24, meaning that more than three-quarters of the phone's cost still comes from foreign parts.
To bridge this gap, the government is shifting the focus from simple assembly to creating core sub-components domestically. Through initiatives like the Electronic Component Manufacturing Scheme, India is encouraging local production of vital inputs such as printed circuit boards, camera modules, and display components.
Solar power is growing, but localization lags
India's solar energy manufacturing capacity has significantly increased. Solar module manufacturing capacity grew from 2.3 GW in 2014 to approximately 172 GW by March 2026, and domestic solar installations have also risen sharply.
Nevertheless, the deeper value chain remains heavily reliant on imports. The NITI Aayog-Crisil report estimates import dependency at approximately 100 percent for polysilicon, over 90 percent for wafers, over 60 percent for solar cells, and over 40 percent for modules.
The government is now promoting upstream manufacturing, including a proposed pathway under the Approved List of Models and Manufacturers for domestic production of ingots and wafers starting from June 2028.
Electric vehicles are growing, batteries lag
Electric vehicles are also moving towards greater localization, although their biggest vulnerability lies beneath the vehicle itself. EV sales grew by approximately 25 percent year-on-year in the fiscal year 2026 to 2.45 million units, according to Federation of Automobile Dealers Association (FADA) data.
However, the sector remains dependent on imported lithium-ion batteries and critical minerals, making the supply chain vulnerable to disruptions and changes in global trade policy. Government policy is aimed at addressing this gap. The ₹18,100 crore PLI scheme for advanced chemistry cells aims to create domestic battery manufacturing capacity of 50 GWh. By May 2026, 40 GWh had been allocated to four beneficiaries, and one 1.4 GWh plant was established.
Telecom scales up, but imports persist
Telecommunication equipment most clearly demonstrates the gap between production and true localization. The NITI Aayog-Crisil report states that Indian companies have expanded the production of products such as optical fiber cables, routers, switches, and premises equipment. However, domestic value addition remains limited as manufacturers still rely heavily on imported semiconductors, radio frequency modules, integrated circuits, and processors. Localization for several telecom products remains below 15 percent.
The gap is even wider for certain telecom products. Domestic localization stands at only 4 percent for 4G/LTE base stations and 5 percent for 5G base stations. It is even lower for switches, at 3 percent, while GPON optical network terminals have a localization of 12 percent. India's telecommunications equipment exports remain modest—between $0.6 and $1 billion annually, compared to imports of around $4–$5 billion, further illustrating the scope of work required to build a deeper domestic component ecosystem.
India's efforts to develop its manufacturing industry are now shifting from scale to increasing domestic value addition. Recent government initiatives are increasingly focused on creating components, sub-assemblies, and critical technologies located deeper in the supply chains.