India’s manufacturing sector stands at a strategic inflection point. While years of policy reform have laid the groundwork for expansion, the next phase will demand faster execution, deeper structural changes, and sharper policy coordination to convert potential into competitiveness. This assessment comes from Rajiv Memani, chairman of the India Region & Emerging Markets Committee at EY and president of the Confederation of Indian Industry.

In an interview with Moneycontrol, Memani acknowledged that the government has made meaningful progress on reform, particularly around land availability and policy intent. However, he cautioned that manufacturing competitiveness will remain constrained unless execution accelerates and long-standing structural frictions are addressed.

India has repeatedly articulated its ambition to raise manufacturing’s share in GDP, often pegged around the 25 percent mark. Initiatives such as production-linked incentives, infrastructure spending, and supply-chain diversification have improved India’s positioning in global manufacturing conversations. Yet, despite these efforts, manufacturing continues to underperform relative to its potential, especially when compared with East Asian peers.

One of the clearest indicators of this gap is India’s import dependence. The country still imports goods worth roughly $500–$550 billion annually, spanning electronics, capital goods, energy equipment, and advanced components. This import bill persists even as domestic demand expands and new-age sectors such as data centres and digital infrastructure attract large capital inflows.

Memani’s remarks reflect a growing consensus within industry that incremental reform is no longer sufficient. He pointed to specific areas where faster change could materially alter manufacturing economics.

Power sector reform emerged as a key issue. According to Memani, the continued cross-subsidisation within state electricity boards raises costs for industrial consumers, weakening competitiveness. He argued that subsidies should be delivered directly to beneficiaries rather than embedded in commercial tariffs, and that privatisation of state power utilities should be reconsidered to improve efficiency and pricing discipline.

Legal reform was another area of emphasis. Manufacturing firms often face prolonged litigation due to laws that lack defined limitation periods. Memani suggested that introducing clear time limits could significantly reduce uncertainty, improve capital allocation decisions, and lower the cost of doing business.

For India, manufacturing is not just about output growth; it is central to employment creation, trade balance management, and strategic autonomy. Persistent import reliance exposes the economy to external shocks, currency volatility, and geopolitical disruptions.

Memani highlighted that new sectors, including data centres and advanced digital infrastructure, could paradoxically increase imports if domestic manufacturing capabilities are not developed in parallel. Without proactive policies, India risks replicating past patterns where demand growth primarily benefits overseas suppliers.

At a time when global companies are seeking supply chains with greater predictability, India’s reform velocity could determine whether it becomes a preferred manufacturing partner or remains a secondary option.

While Memani was clear in acknowledging the government’s reform intent, his comments underline a subtle policy signal: intent must now translate into faster, outcome-oriented execution. Trade agreements, he noted, are no longer just about tariff concessions. They are platforms for deeper economic integration, trust-building, and long-term industrial partnerships.

India’s expanding trade relationships with Australia, the Middle East, and Europe were cited as positive developments, alongside growing investment interest in artificial intelligence and advanced technologies.

From an Indian market perspective, faster manufacturing reform would have broad sectoral spillovers. Industrials, capital goods, logistics, and power equipment could benefit from higher domestic investment and import substitution. Conversely, delayed reform risks keeping margins under pressure for manufacturers competing against global suppliers.

For global investors, regulatory clarity and predictable power costs remain critical decision variables. Progress on these fronts could unlock larger, longer-duration manufacturing investments.