India’s Push to Manufacture 100 Critical Goods: Reducing Import Dependence on China

UPSC Current Affairs | 9 November 2026

India is strengthening its domestic manufacturing capacity to reduce dependence on imported critical goods, particularly from China. The Department for Promotion of Industry and Internal Trade (DPIIT) has completed an exercise to identify 100 products, including industrial intermediates and capital goods, for which India has significant import dependence.

The government is considering financial and policy support for domestic manufacturing of these products in the Union Budget 2027–28. The initiative aims to strengthen India’s manufacturing ecosystem, improve supply-chain resilience and reduce vulnerabilities arising from excessive dependence on foreign suppliers.

The move has gained importance amid China’s proposed export restrictions on selected industrial equipment and technologies, including machinery used in solar manufacturing and infrastructure development.

What Are Critical Goods?

Critical goods are products, components, materials or technologies that are essential for important industries and economic activities, but for which domestic production may be insufficient or import dependence may be high.

Examples include:

• Semiconductor components.
• Solar manufacturing equipment.
• Industrial machinery.
• Petrochemical products.
• Electric vehicle components.
• Specialised chemicals.
• Tunnel boring machines.

A shortage of these goods can disrupt several industries because they are often used as inputs in the production of other goods.

What Has the Government Proposed?

The DPIIT, under the Ministry of Commerce and Industry, has completed an exercise to identify 100 critical products that require greater domestic manufacturing capacity.

The exercise involved consultations with different ministries and the private sector.

According to reports published on 9 November 2026, the government is likely to recommend support measures in the Union Budget 2027–28.

Possible measures include:

• Financial incentives for domestic manufacturers.
• Research and Development (R&D) support.
• Appropriate trade and tariff measures.
• Improved testing and certification infrastructure.
• Support for technology development.
• Measures to strengthen domestic industrial capabilities.

Important: These are proposed support measures, not a fully implemented scheme. The final policy details will depend on government decisions.

Why Does India Want to Reduce Import Dependence?

Dependence on China

China is a major supplier of industrial goods, machinery, electronic components, chemicals and other intermediate products.

According to information provided by the government to Parliament, India imported goods worth approximately US$131.63 billion from China in FY 2025–26, accounting for nearly 17% of India’s total merchandise imports.

These imports include important inputs required for electronics, pharmaceuticals, clean energy, infrastructure and advanced manufacturing.

Excessive dependence on a limited number of suppliers can create economic vulnerabilities during geopolitical tensions, trade restrictions or supply-chain disruptions.

Supply Chain Resilience

A supply chain refers to the complete network involved in producing and delivering a product, from raw materials and components to final manufacturing and distribution.

Dependence on a single country for essential components can disrupt domestic production if exports are restricted or international trade is interrupted.

Domestic manufacturing and diversified sourcing can reduce such risks.

Trade Deficit

A trade deficit occurs when the value of a country’s imports exceeds the value of its exports.

Reducing unnecessary import dependence and strengthening domestic production may help improve India’s trade balance over time.

However, import substitution alone does not guarantee a reduction in the trade deficit. Export growth, productivity and competitiveness are equally important.

Strategic and Economic Security

Certain products are essential for defence, energy, telecommunications, infrastructure and public health.

Their uninterrupted availability is important for national security and economic stability.

Therefore, domestic production of strategically important goods can strengthen India’s economic resilience.

Major Sectors Covered Under the Indigenisation Push

Solar Manufacturing

Solar energy is an important component of India’s renewable energy transition.

However, domestic manufacturing capacity is uneven across different stages of the solar value chain.

The major stages include:

Polysilicon → Ingots → Wafers → Solar Cells → Solar Modules

India has developed substantial solar module assembly capacity, but remains relatively dependent on imported upstream components and specialised manufacturing equipment.

Industry estimates reported in November 2026 indicate:

This difference highlights the need to strengthen domestic manufacturing across the entire solar value chain.

China’s proposed export restrictions on selected solar manufacturing technologies and equipment have further highlighted this vulnerability.

Petrochemical Industry

Petrochemicals are chemical products derived primarily from petroleum and natural gas.

They are essential raw materials for several industries, including:

• Textiles.
• Pharmaceuticals.
• Fertilisers.
• Plastics.
• Packaging.
• Automotive components.
• Medical devices.

Important petrochemical products include PVC, polyethylene, polypropylene, polystyrene and ABS.

Greater domestic production can reduce dependence on imported industrial inputs and improve the availability of raw materials for downstream industries.

Tunnel Boring Machines

Tunnel boring machines (TBMs) are specialised machines used to excavate tunnels through soil and rock.

They are important for:

• Metro rail projects.
• Railway tunnels.
• Road tunnels.
• Underground infrastructure.
• Water supply and drainage projects.

India has significant infrastructure development requirements, but specialised machinery dependence can create vulnerabilities.

The government is exploring domestic production of tunnel boring machines, with a manufacturing facility established in Tamil Nadu and production expected to begin soon.

Important Concept: Import Substitution

Import substitution refers to a policy approach in which a country encourages domestic production of goods that were previously imported.

The main objectives are:

• Reducing excessive import dependence.
• Strengthening domestic industries.
• Creating employment.
• Improving technological capabilities.
• Supporting industrial development.
• Increasing economic resilience.

However, import substitution should not result in permanent protection of inefficient industries.

Domestic producers must gradually improve productivity, quality and cost competitiveness.

Government Initiatives Supporting Domestic Manufacturing

India has introduced several initiatives to strengthen domestic manufacturing and reduce import dependence.

Make in India

Launched in 2014, Make in India aims to promote manufacturing, investment, innovation and employment generation.

Production Linked Incentive (PLI) Scheme

The PLI scheme provides incentives to eligible manufacturers based on incremental production or sales, subject to sector-specific conditions.

It covers 14 sectors, including electronics, pharmaceuticals, automobiles, solar photovoltaic modules and telecommunications.

National Manufacturing Mission

Announced in Union Budget 2025–26, the National Manufacturing Mission aims to strengthen manufacturing across small, medium and large industries.

It focuses on improving the manufacturing ecosystem, competitiveness and domestic industrial capacity.

PM GatiShakti National Master Plan

PM GatiShakti promotes integrated infrastructure planning and coordinated development of transport and logistics networks.

Better infrastructure can reduce logistics costs and improve the competitiveness of domestic manufacturers.

Atmanirbhar Bharat Abhiyan

Atmanirbhar Bharat promotes domestic capabilities, self-reliance, innovation and stronger participation in global value chains.

Self-reliance does not necessarily mean ending international trade. It means reducing critical vulnerabilities while remaining globally competitive.

Challenges in Reducing Import Dependence

Despite policy support, India faces several challenges in building domestic manufacturing capabilities.

Technology Gap: Some advanced industrial technologies are not yet sufficiently developed within India.

High Production Costs: Domestic manufacturing may initially be more expensive than importing from established global producers.

Research and Development: Insufficient R&D investment can restrict innovation and technological advancement.

Infrastructure Constraints: High logistics costs, power reliability issues and inadequate industrial infrastructure can affect competitiveness.

Skill Shortages: Advanced manufacturing requires specialised technical skills and trained workers.

Global Competition: Domestic industries must compete with established international manufacturers that benefit from economies of scale.

Way Forward

India should adopt a balanced approach to strengthen domestic manufacturing.

• Increase investment in research, development and innovation.
• Improve access to advanced manufacturing technologies.
• Strengthen MSMEs and domestic component manufacturers.
• Develop skilled human resources.
• Improve logistics and industrial infrastructure.
• Promote competition and productivity.
• Diversify import sources for strategically important goods.
• Link government support with measurable improvements in quality, cost and export competitiveness.

Domestic manufacturing should focus not only on replacing imports but also on making Indian products competitive in international markets.

Conclusion

India’s initiative to promote domestic manufacturing of 100 critical goods is an important step towards strengthening industrial capabilities and reducing excessive import dependence.

The initiative highlights the importance of supply-chain resilience, technological self-reliance and manufacturing competitiveness.

However, self-reliance should not mean isolation from global markets. India needs a manufacturing ecosystem that combines domestic production capabilities with international trade, technological cooperation and export competitiveness.

The ultimate objective should be to make India a reliable global manufacturing hub rather than merely replacing imported products with expensive domestic alternatives.