Policy-makers and pundits in Delhi have been quick to declare the US-China trade war a golden opportunity for India. As supply chains fray and geopolitical tensions deepen, could India finally seize a slice of China’s enormous export pie?
On the surface, the logic is appealing. If tariffs and restrictions make Chinese goods less welcome in American ports, surely the world’s largest democracy—with its low labour costs and burgeoning industrial base—can fill the gap. But beneath the optimism lies a more sobering reality.
To begin with, the scale of China’s export machine is staggering. In 2024, it shipped US$439bn (billion) worth of goods directly to the US. Add indirect exports—those routed via Vietnam, Malaysia, Cambodia and Mexico—and the figure climbs even higher. Replacing this volume is no small feat. India and its peers simply do not have the industrial depth, logistical capability, or policy clarity to substitute Chinese supply at scale.
The second issue is timing. Trade between Washington and Beijing has collapsed. But the idea of a long, grinding standoff is unrealistic. Within weeks, many American store shelves would begin to empty. China-based sellers constitute more than half of Amazon’s top-performing vendors. Should imports of electronics, toys, apparel and household goods remain stalled, prices would rise sharply, fuelling higher inflation expectations in a self-reinforcing cycle and ultimately shaking confidence in US financial assets. Pressure for a resolution—any resolution—will mount quickly.
Any surge in Indian exports, therefore, is likely to be short-lived. But some commentators think they have spotted a silver lining, nevertheless. The US and China have been in a trade war for more than a decade; it is not just a Trump thing. So, even if a deal is reached, it may merely codify higher tariffs on Chinese goods. That, some argue, would leave Indian goods relatively more competitive. Perhaps.
But the issue is not whether the door is ajar—it is whether India is capable of walking through it. India’s manufacturing sector remains fragmented, largely low-tech and ill-equipped to plug even a modest gap left by China.
Its traditional exports—textiles, garments and jewellery—have not scaled with global demand. Only in the pharmaceuticals sector does India boast true heft: it supplies nearly half of America’s generic medicines. Here, additional gains are plausible.
Elsewhere, challenges abound. One of the chief obstacles is quality. Indian products often struggle to meet international standards. Scaling up production is constrained by inadequate infrastructure, policy inconsistency and a shortage of skilled labour.
Exporters face a thicket of direct impediments. Regulatory compliance is onerous. According to HDFC Bank, India’s exporters must navigate a formidable list of one-time and recurring documentation. Transport infrastructure is no less daunting. Congested and inefficient roads, railways, seaports and airports impose delays and increased costs, directly impacting exporters' ability to meet delivery terms.
Exporters in land-locked states are hamstrung by a lack of connectivity to gateway ports. It takes three to four days to move a shipment from a warehouse in Delhi to a port, three times longer than in other countries. This particularly affects agricultural produce.
The Indian Railways, one of the world’s five largest, moves over 3mn (million) tonnes of cargo across the country. Yet the system is hobbled by ageing equipment, the lack of a modern signalling system and an acute shortage of rakes, leading to higher costs and delays.
Dependence, Not Dominance
Even as India eyes export gains, it is becoming more dependent on imports—especially from China. In 2023–24, nearly 63% of India’s solar equipment imports came from its northern neighbour. China controls 97% of global polysilicon production and 80% of solar module output. Indian manufacturers of smartphones, laptops and appliances are similarly reliant on Chinese components.
More worryingly, roughly 70% of active pharmaceutical ingredients (APIs) used in Indian drug manufacturing originate in China. A disruption in this supply chain would rattle India’s healthcare system and undermine its export competitiveness. Chinese auto parts, too, remain essential to Indian assembly lines. Meanwhile, the metal sector is grappling with falling prices, declining exports and rising imports—many of them Chinese. The risk of dumping looms large.
Those expecting India to emerge as the next link in global supply chains may need to temper their hopes. Building global competitiveness requires patient, unglamorous hard work, done diligently over a decade. That means investing in science and technical education, scaling up vocational training, easing conditions for doing business, lowering indirect taxes, fostering fierce competition, supporting budding export champions and creating conditions for sustained foreign direct investment (FDI) with meaningful technology transfer. These failings cannot be fixed by mere geopolitical changes.
If India had done those hard things, we would have been competitive by now. We haven’t; which is why the ‘Make in India’ initiative, launched in 2014, which aimed to raise the manufacturing share in gross domestic product (GDP) to 25% by 2022 and boost exports, has been a terrible failure.
Even if the US-China rivalry creates openings, India lacks the capacity to exploit them. Ultimately, the key question is not whether the world will offer India a chance—it is whether India’s political and bureaucratic leadership will do the hard work needed to seize it.
We can still do these hard things now, but the question to ask about any public policy wish list is: Who will do it (capable and accountable individuals) and why (what incentive do they have)?
It calls for a completely different level of dedication and seriousness among our netas and babus and, above all, a sense of national urgency, as any student of East Asia’s economic miracles (Korea, Japan, Taiwan, Singapore and China) would know.
(This article first appeared in Business Standard newspaper)
Comments
panda.laxmikant25
2 weeks ago
Very good analysis and an eye opener for the Govt and policy makers. In stead of sloganeering hard and effective decisions have to be taken for reformation of GST for making manufacturing cost competitive, improving educational system particularly technical education so that our country can produce good quality and employable technical personnel.
Why China is ahead is a different story. China as a State, not just as an agglom, eration of Corporations, is doing all uncompetitive things to its private enterprise. China bends all of its rules then and there and supports the enterprises with every infrastructure required to start and run a business. An enterprise gets everything free including labour sometimes ! If it thinks a new businessman can pay 1000 labours and earn a million $ every year, the State provides everything the businessman needs. In a democracy like India, such extreme favoritism will be questioned by the Opposition parties for their own selfish and anti-development attitude needs. No point in praising a Communist, non-democracy State ; in democracy powered nations media like yours also is a hindrance.
Additionally, we have corruption and so many laws to abide by, nobody except the well-connected with ability to grease officials are capable of doing business. It may be far cheaper and easier to set up business in China than India. GST regn and Aadhar should be automatic upon company formation and birth of child. But no, hundreds of forms and approvals make a simple task difficult. Like one twitter video showed, some 20 certificates for a chai shop. In china overnight approval and you can start the business next day.
China is not a democracy; China is not answerable to its own people or the judiciary, unlike India which is handcuffed by its own laws questioned by the Courts and the Media.
The real slogan is "the world makes for India." Every year the trade deficit rises to record levels. It touched $ 284 billion in the year ending 31/3/2025. And manufacturing as percentage of India's GDP has fallen from 33% in 2000 to over 10% by 2024
Excellent article. As headline says India won’t get any benefit from this trade war as our netas and babus are very busy in minting money and power by giving freebies to greedy and lazy people.
Forget the exports, even PM and CMs are not interested in developing manufacturing sector and agriculture sector except their personal images.
Excellent article — a truly eye-opening narrative and a powerful food for thought, all in a single page.
I especially appreciated the phrase “unglamorous hard work” — it perfectly captures the essence of reality where even things like vaccines and medicines are glamorized. A timely reminder of what truly matters.
You have identified the obstacles well. Their solution is also clear. The only problem is sincerity. How can things improve when you have roving PM, who is out of the country every fortnight or so for merry-making. His sincerity, and even understanding, is suspect. Have you ever seen the Chinese president, Xi Jinping, enjoying so many purposeless foreign tours? Throw Modi out and things will improve.
What if the north -east section ,the seven sisters ( which is neglected in many ways) is considered as a special economic hub and connected with a export depo? utelilised , frankly it would be a win win situation
Here's a rewritten version of the comment: By GROK
Dear Sir, I believe there's a lack of unity among our country's top business leaders. They are preoccupied with vote-bank politics through CSR initiatives and boosting their market capitalization. Instead of exploiting national resources, we should focus on promoting export revenue. Significant time and resources are spent securing large deals abroad. Implementing a free import policy for contract manufacturing or assembly aimed at exports could stabilize the USD/INR exchange rate. However, political optics have overshadowed the effective strategies adopted by East Asian nations. While bureaucrats and politicians hold valuable insights, their priorities seem misaligned. Now is not the time for blame but for addressing the fallout of misguided policies. The rising gold price reflects declining currency values, underscoring that trade hinges on a strong national currency.
With the hen-pecked busband like the Congresss and Communist parties and the media and the judiciary questioning everything done by the Govt. how it is possible Sir ?
If only RSS-BJP put their energies in assisting entrepreneurship and education that would benefit all!!
They are so good and inventive at finding things that demonize the minorities and trumpet false glories of past like saying that ancient India knew plastic surgery (elephant head for Ganesh), ancient India had aircraft (citing Pushpak Viman of mythology), etc.
Indian culture is dominated by Hinduism. Even Indian Muslims have many rituals that are based on their Hindu origins. India's Muslims have a culture that is distinctly different from Muslims in the Middle East, or the Near-East countries. Why cannot RSS-BJP take pride in how Hinduism co-exists with other religions, a demonstration of its polytheism and tolerance for many gods, rather than seek to dominate the way monotheistic religions do?
But rather than celebrate Hinduism's unique abilities to co-exist with other religions, RSS-BJP want to emulate the rigid, monotheistic mindset of the religions that arose in the Middle East.
Religion's two pronged power is patriotism and ethics. Without religion these two are not possible. A Kingdom or State *needs* both of these to flourish.
{the comment box does not provide opportunity to correct one's own comment with dropped words or spelling mistakes.}
Neta- Babu exploitation of Citizens have been responsible for missing several opportunities since 1947. Next 500 years this will continue because people are drunk with stupid religious booze. Best choice is to move out.
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Forget the exports, even PM and CMs are not interested in developing manufacturing sector and agriculture sector except their personal images.
I especially appreciated the phrase “unglamorous hard work” — it perfectly captures the essence of reality where even things like vaccines and medicines are glamorized. A timely reminder of what truly matters.
Dear Sir, I believe there's a lack of unity among our country's top business leaders. They are preoccupied with vote-bank politics through CSR initiatives and boosting their market capitalization. Instead of exploiting national resources, we should focus on promoting export revenue. Significant time and resources are spent securing large deals abroad. Implementing a free import policy for contract manufacturing or assembly aimed at exports could stabilize the USD/INR exchange rate. However, political optics have overshadowed the effective strategies adopted by East Asian nations. While bureaucrats and politicians hold valuable insights, their priorities seem misaligned. Now is not the time for blame but for addressing the fallout of misguided policies. The rising gold price reflects declining currency values, underscoring that trade hinges on a strong national currency.
They are so good and inventive at finding things that demonize the minorities and trumpet false glories of past like saying that ancient India knew plastic surgery (elephant head for Ganesh), ancient India had aircraft (citing Pushpak Viman of mythology), etc.
Indian culture is dominated by Hinduism. Even Indian Muslims have many rituals that are based on their Hindu origins. India's Muslims have a culture that is distinctly different from Muslims in the Middle East, or the Near-East countries. Why cannot RSS-BJP take pride in how Hinduism co-exists with other religions, a demonstration of its polytheism and tolerance for many gods, rather than seek to dominate the way monotheistic religions do?
But rather than celebrate Hinduism's unique abilities to co-exist with other religions, RSS-BJP want to emulate the rigid, monotheistic mindset of the religions that arose in the Middle East.
{the comment box does not provide opportunity to correct one's own comment with dropped words or spelling mistakes.}