As I reflect on India’s manufacturing landscape in 2025, a significant concern emerges: while our nation lauds its digital advancements and service sector dominance, we face a challenging reality. Our manufacturing exports remain stagnant at around 1.7% of global trade. In stark contrast, China commands over 15%, and even Vietnam has carved out a notable share in textiles, electronics, and broader manufacturing sectors.
The era of incremental reforms has come to a close. It is imperative for India to undergo a comprehensive reevaluation of its export and entrepreneurship strategies—particularly those aligned with our foreign policy objectives. Without decisive action, we risk becoming permanently dependent on the service sector while allowing manufacturing opportunities to erode in the face of more agile competitors.
The Manufacturing Imperative
The hard facts are sobering. China achieved a staggering $4.9 trillion in manufacturing value-added in 2023, accounting for about 30% of global output. Meanwhile, Vietnam, a nation with a population less than 7% of India’s, recorded manufacturing exports reaching $370 billion, overshadowing India’s total merchandise exports of $450 billion across all sectors.
Alarmingly, India’s share of global manufacturing exports dropped from 1.8% in 2019 to 1.7% in 2024, whereas Vietnam’s share grew from 2.1% to 3.4%. This trend illustrates not just a static snapshot, but a concerning trajectory. Competing nations like Bangladesh, Mexico, and Turkey are gaining momentum in the manufacturing realm while India continues to grapple with policy discussions.
The demographic dividend we often celebrate resembles a ticking time bomb. With 12 million Indians entering the workforce each year, the service sector alone cannot sustain adequate employment. Historically, manufacturing has created 3-4 jobs for every direct job, compared to just 1.5-2 jobs in services. If we neglect a manufacturing renaissance, we willingly invite social instability and economic stagnation into our future.
The Export-Foreign Policy Nexus: Lessons from Others
Examining successful export economies reveals an essential truth: export policies cannot function in isolation from foreign policy. China’s Belt and Road Initiative showcases how infrastructure investment aligns with the creation of export markets. Similarly, Vietnam’s export achievements reflect its strategic positioning amid US-China tensions, making it a prime destination for supply chain diversification.
India must reshape its foreign policy with an export-centric viewpoint. Our current paradigm treats trade and diplomacy as disconnected, leading to missed opportunities. Take our Act East Policy, for example, which has yielded lackluster results in manufacturing exports to ASEAN nations because trade facilitation hasn’t been integrated with diplomatic priorities.
Consider this striking statistic: India’s bilateral trade with Africa hit $98 billion in 2023, yet only 25% of that comprised manufactured goods. In contrast, China’s trade with Africa reached $282 billion, with a significantly higher 45% in manufactured exports. This disparity underscores not just market accessibility but also China’s adept alignment of diplomatic engagement with export promotion.
The Compliance Raj: Navigating Regulatory Terrain
India’s current export promotion infrastructure is hindered by what I term “scheme fatigue,” but an even deeper issue looms: the “Compliance Raj.” This regulatory stranglehold makes conditions in Vietnam and China seem favorable by comparison. The numbers tell a painful story—India faced 9,420 compliance updates in 2024 alone, which averages out to 36 daily changes. By comparison, Vietnamese manufacturers encounter approximately 12 major updates annually while their Chinese counterparts function within relatively stable regulatory frameworks.
The India Business Corruption Survey 2024 reveals that 66% of businesses admitted to paying bribes, with 54% pressured into seeking permits, licenses, or approvals. This dilemma extends beyond mere corruption; it introduces a competitive disadvantage, as Indian exporters navigate regulatory quagmires while Vietnamese competitors focus on enhancing production efficiency and expanding their market reach.
The Production Linked Incentive (PLI) scheme, though well-meaning, allocated $26 billion across 14 sectors over five years—a fraction of what China expends annually on manufacturing support and export promotion. Vietnam’s foreign direct investment in manufacturing amounted to $22 billion in 2023 alone, contrasting sharply with India’s $15 billion across all sectors.
Additionally, the bureaucratic hurdles are more complex than previously understood. Indian businesses are required to manage 23 different identification numbers, including PAN, GSTIN, and CIN, leading to excessive paperwork and frequent renewals. A recent study by the Confederation of Indian Industry revealed that compliance costs for exporters in India are 23% higher than their Chinese counterparts and 31% higher than Vietnamese exporters. When you take into account time lost due to regulatory uncertainty and bribery, the real competitive disadvantage spirals to an alarming 45-50%.
India’s export infrastructure remains disjointed. While China boasts 34 ports handling over 10 million TEU annually, India struggles with just 12 major ports that collectively fail to match the capacity of Shanghai alone. Consequently, logistics costs consume around 13-14% of GDP, starkly contrasting with 8-9% seen in developed economies. This impacts export competitiveness directly.
The Libertarian Imperative
Mounting evidence supports that countries embracing more libertarian business practices consistently outpace India regarding manufacturing exports. This is not a matter of ideology; it’s an empirical reality rooted in data.
Singapore achieved $470 billion in total trade in 2023, all while maintaining minimal regulatory complexity. The registration process for businesses takes a mere 15 minutes online, with permits typically issued within 2-3 days. Their regulatory framework is predictable, with significant changes announced and implemented systematically each year.
Vietnam’s success can be partially attributed to its increasingly libertarian approach to manufacturing export regulations. Export processing zones operate under simplified regulations, allowing businesses to focus on operations without excessive compliance burdens. By comparison, Vietnamese exporters dedicate only 2-3% of their time to compliance activities, while their Indian counterparts spend 15-18% of their productive hours on such matters.
Even within India, states embracing libertarian approaches showcase superior manufacturing performance. Gujarat’s single-window clearance system, in place since 2009, has attracted significantly higher foreign direct investment per capita compared to states mired in complex approval processes. Similarly, Tamil Nadu’s simplified labor laws for export industries have made it a favored hub for automotive and textile manufacturing.
The Jan Vishwas Act 2023 decriminalized 180 provisions, alleviating some burdens for minor business violations. However, this is merely a small step. With 20,000 imprisonment clauses still in existence and the proposed Jan Vishwas 2.0 targeting only 100 additional provisions, it’s apparent that we require radical deregulation rather than piecemeal reforms.
Consider the contrast in regulatory demands: an Indian smartphone manufacturer faces 67 different approvals across 14 agencies, whilst counterparts in Vietnam deal with 23 approvals across 6 agencies, and those in Singapore only 12 approvals across 4 agencies. This discrepancy is not about upholding standards; it’s indicative of a system that rewards regulatory rent-seeking, stifling competitiveness.
Embracing libertarian principles doesn’t equate to dismantling all regulations. The goal should be “smart regulation” that prioritizes outcomes over cumbersome procedures. A presumptive compliance framework should be introduced, allowing businesses to operate under the assumption of compliance until proven otherwise—this single change alone could cut regulatory compliance time by a remarkable 70% and eradicate corruption opportunities in the approval process.
The Vietnam Model: Libertarian Agility Over Bureaucratic Scale
Vietnam’s journey offers valuable insights into implementing libertarian reforms aimed at enhancing manufacturing exports. From 2010 to 2023, Vietnam increased its manufacturing exports from $72 billion to $370 billion—a staggering 414% growth—compared to India’s 185% growth from $178 billion to $450 billion in total merchandise exports.
Vietnam’s success is grounded in three key libertarian principles that India must urgently adopt:
Regulatory Minimalism: Vietnamese export zones function under what economists refer to as “libertarian” conditions, with minimal regulatory interference once fundamental standards are met. While India debates sweeping labor law reforms, Vietnam has implemented sector-specific deregulation for export manufacturing. This approach permits 24/7 operations and flexible hiring without bureaucratic hurdles.
Strategic FDI Targeting with Minimal Barriers: Vietnam attracted $108 billion in manufacturing FDI from 2015 to 2023, focusing on electronics, textiles, and automotive components with streamlined approval processes. By contrast, India’s $67 billion in manufacturing FDI during the same period was spread across a diverse range of sectors, often with unwieldy approval requirements. Vietnamese authorities can greenlight major manufacturing investments within 45 days; India’s approvals average between 8-12 months.
Export Processing Zone Efficiency: Vietnam operates 16 export processing zones that collectively account for 40% of total exports, featuring average clearance times of just 8 hours. In contrast, India’s 265 special economic zones contribute only 25% of exports and face average clearance times of 72 hours coupled with ongoing compliance monitoring that disrupts operations.
Trade Agreement Leverage: Vietnam currently benefits from 16 operational free trade agreements encompassing 58 countries, while India has 13 FTAs covering 32 countries. More crucially, Vietnam maximizes these agreements; 67% of Vietnamese exports enjoy preferential access compared to only 31% for Indian exports. The disparity largely lies in how effectively each country implements streamlined customs procedures—Vietnam makes FTA utilization cost-effective, while India’s complex processes often render preferential rates economically unviable.
The China Challenge
China’s manufacturing dominance isn’t a mere coincidence; it stems from a systematic, four-pronged strategy focused on technology acquisition, market creation, supply chain control, and financial leverage.
China’s outbound FDI in manufacturing amounted to $145 billion in 2023, frequently crafting captive markets for its exports. India, conversely, made only $8.2 billion in outbound manufacturing investments, primarily directed toward resource extraction rather than market development.
The technological dimension is particularly alarming. China allocated $444 billion on R&D in 2023, with 78% directed toward manufacturing and industrial applications. In contrast, India’s R&D expenditure totaled $66 billion, with merely 34% aimed at enhancing manufacturing capabilities. This difference is not simply about present competitiveness; it indicates indifference toward future technological leadership.
Moreover, China’s control over critical nodes in global supply chains—ranging from rare earth processing to semiconductor assembly—offers it a significant strategic advantage. India’s involvement in global supply chains remains largely peripheral, causing us to miss out on value addition and favorable positioning opportunities.
A Comprehensive Reform Blueprint
Based on a thorough analysis of successful models and India’s unique strengths, I propose a transformative five-pillar strategy:
Pillar 1: Export-Foreign Policy Integration
Every diplomatic mission should function as an export promotion hub. Our embassies in 47 countries—where bilateral trade exceeds $1 billion—must be equipped with specialized commercial sections and annual export targets. At present, only 12 such missions possess adequate commercial infrastructure.
Trade facilitation must take center stage as a diplomatic priority. We should negotiate dedicated export corridors with vital trading partners, akin to the economic corridors championed by China. The proposed India-Middle East-Europe Economic Corridor should focus primarily on manufacturing export facilitation over general connectivity.
Strategic economic partnerships also require reconstruction around export complementarity. For instance, collaborations with Japan should emphasize technology transfer for export-oriented manufacturing, rather than limited access to domestic markets.
Pillar 2: Manufacturing Infrastructure Revolution
India requires 20 world-class manufacturing clusters within the next five years, each equipped with integrated port connectivity, reliable power supply, and advanced digital infrastructure. Current industrial parks lack this integration, compelling manufacturers to create their infrastructure at soaring costs.
Port modernization demands a $45 billion investment to reach the efficiency standards established by China. Efficiency isn’t just about capacity; it’s about improving turnaround time, fostering digital integration, and ensuring multimodal connectivity. Currently, inefficient port-to-factory connectivity adds 2-3 days to export timelines when compared to their Vietnamese counterparts.
Moreover, our digital manufacturing infrastructure must progress beyond basic connectivity to meet Industry 4.0 standards. A mere 12% of Indian manufacturers utilize advanced automation, versus 34% in China and 28% in Vietnam.
Pillar 3: Financial Architecture Redesign
Export financing requires a fundamental overhaul. Currently, institutional lending covers only 23% of export credit needs, contrasting sharply with 67% in China. We need specialized export development banks with a capitalization of $100 billion over the next five years.
Additionally, currency hedging mechanisms must evolve to offer more viable options. Vietnamese exporters currently access hedging products at 40% lower costs than their Indian counterparts, placing us at a pricing disadvantage.
Investment promotion should not be generic; rather, it needs sector-specific targeting. Instead of a broad FDI promotion approach, India must establish dedicated agencies focused on electronics, textiles, automotive, and pharmaceuticals—sectors where we have the potential to genuinely compete with China and Vietnam.
Pillar 4: Libertarian Regulatory Revolution
The current regulatory complexity breeds what economists refer to as “death by a thousand cuts.” The solution lies in adopting libertarian principles that prioritize business freedom over bureaucratic control. In India, a smartphone manufacturer must navigate 67 different approvals across 14 agencies, compared to a mere 23 approvals across 6 agencies in Vietnam, and only 12 across 4 agencies in Singapore.
Presumptive Compliance Framework: Instead of requiring pre-approvals, businesses focused on exports should operate under presumptive compliance—assumed compliant unless proven otherwise. This singular shift could cut regulatory compliance time by an astonishing 70% and eliminate pathways for corruption in the approval process.
Single-Window Reality, Not Fiction: Developing a genuine single-window system demands thorough backend integration across agencies, going beyond merely offering common application forms. This will necessitate a $2.8 billion investment, which would yield annual savings of $15 billion in compliance costs for exporters. The system should be grounded in risk-based assessment—low-risk activities receive automatic clearance, medium-risk activities enjoy fast-track approval, and high-risk activities face comprehensive scrutiny.
Export Zone Libertarianism: Export-oriented manufacturing must function under regulatory frameworks distinct from those governing domestic production. Singapore’s model exemplifies this effective differentiation: export manufacturers encounter minimal regulations, simplified labor laws, and attractive tax incentives, while domestic manufacturers adhere to standard frameworks. This isn’t about fostering inequality; it’s an acknowledgment that export businesses navigate fierce global competition and require advantages to remain viable.
Sunset Clauses for All Regulations: Each regulation impacting export businesses should come with automatic sunset clauses that mandate renewal every 3-5 years. This approach compels regulators to justify ongoing relevance and curtails the excessive regulatory accumulation. Presently, regulations only multiply; they seldom get reviewed or discarded, resulting in the 9,420 annual compliance updates crippling businesses.
One Nation, One Business Identity: The initiative to consolidate 23 different business identifiers into a unified system reflects a libertarian approach aimed at minimizing governmental intrusion. Yet, it should advance further—this single identity should grant access to all government services and eliminate repeated renewal requirements, utilizing blockchain technology to avert tampering and corruption.
Pillar 5: Technology and Skill Development
Strategically acquiring manufacturing technology needs dedicated focus. Current technology transfer agreements often lack systematic mechanisms for knowledge absorption. India should establish technology digestion centers in critical sectors, analogous to those employed in China during the 1990s.
Skill development initiatives must align with export requirements rather than local needs. Presently, the curricula of ITIs and polytechnics cater to domestic manufacturing but neglect global export standards. Thus, we need 500 export-oriented skill centers established within the next three years.
Research and development aimed at export competitiveness requires sustained funding. The proposed National Manufacturing R&D Foundation should receive 1% of annual manufacturing exports—which currently amounts to roughly $4.5 billion—to support applied research focused on enhancing exports.
Why Delay Is Dangerous
As global supply chains undergo profound transformations, companies are increasingly diversifying away from Chinese-centric sourcing. This creates a once-in-a-lifetime opportunity for nations like India, yet this window is rapidly closing.
Vietnam has already seized a substantial share in textiles, electronics assembly, and furniture production, while Mexico is benefiting from nearshoring trends in North American markets. Concurrently, Bangladesh continues to dominate the low-cost textile market. Each day we delay implementing necessary policies allows these competitors to strengthen their footholds.
Moreover, the demographic dividend argument comes with a time constraint. Our current advantages in the working-age population will peak around 2035-2040. If we fail to generate manufacturing jobs now, this dividend risks transforming into a demographic burden.
Furthermore, technological advancement adds urgency to our need for reform. Manufacturing is becoming increasingly automated, eroding the traditional labor cost advantages. Countries that build robust manufacturing ecosystems now will be positioned to harness technological upgrades, while latecomers will find fewer opportunities for labor-intensive production.
The Manufacturing Renaissance Imperative
India stands at a pivotal moment. We have the choice to celebrate our digital successes while watching manufacturing opportunities slip into the hands of proactive competitors or embark on the comprehensive transformation our export potential commands.
The data is unambiguous: the growth of our manufacturing exports has stagnated while rivals surge ahead. Our policy framework remains fragmented amidst a global landscape eager for reliable, efficient partners. The window of opportunity is shrinking as debates on incremental reforms continue.
This predicament isn’t an either/or dilemma between services and manufacturing; it’s about harnessing our strengths in the service sector to bolster manufacturing potential.
Our IT capabilities should fuel smart manufacturing, our financial sector should drive export growth, and our diplomatic endeavors should forge new avenues for market access.
The transformative vision I’ve outlined demands political will, financial investment, and exceptional execution.
However, the cost of inaction—permanent marginalization in manufacturing, an employment crisis, and diminished geopolitical relevance within global supply chains—far outweighs the necessary investment for transformation.
India’s manufacturing renaissance is not just an economic necessity; it’s a strategic imperative vital for sustained growth, job creation, and global relevance. The pressing issue isn’t whether we can afford this transformation but whether we can afford not to initiate it now.