India’s manufacturing ambitions are running into a new global headwind: rising tariffs and higher input costs. Speaking on the sidelines of the World Economic Forum in Davos, Bharat Forge chairman and managing director Amit Kalyani laid out a candid assessment of how tariff escalation—particularly in developed markets is undermining competitiveness for exporters and distorting global supply chains.

In an interaction with Moneycontrol, Kalyani argued that tariffs, often positioned as tools to protect domestic industry, are having the opposite effect for manufacturers operating in integrated global markets. According to him, higher tariffs directly raise the cost base for critical raw materials, compress margins, and eventually feed into inflation and weaker end demand. His remarks come at a time when multiple economies, including the US, are reassessing trade barriers amid geopolitical and supply chain considerations.

A key concern highlighted was the structural disadvantage faced by manufacturers in the United States. Kalyani pointed out that the US lacks adequate primary aluminium smelting capacity and relies heavily on secondary processing. This, combined with elevated steel and aluminium prices relative to global benchmarks, has created a significant competitiveness gap. For Indian exporters supplying to US-based manufacturing ecosystems, this translates into higher landed costs and pricing pressure, irrespective of efficiency at the factory level.

While acknowledging that localisation of manufacturing is becoming unavoidable in the US particularly in passenger vehicles under the United States Mexico Canada Agreement and broader “Make in the US” norms Kalyani cautioned that sustained high input costs could hurt long-term competitiveness. He specifically flagged aerospace and automotive as sectors where cost inflation could dilute the strategic benefits of localisation over time.

Against this backdrop, Kalyani’s comments on India’s upcoming Union Budget take on added significance. He stressed that policy support must extend beyond headline incentives and directly address exporters impacted by tariff-related disruptions. According to him, India risks falling behind global peers if it does not meaningfully step up incentives for research and development. In a blunt comparison, he noted that India remains well behind China and several other manufacturing hubs in terms of R&D intensity, particularly in advanced engineering and industrial technologies.

Beyond R&D, Kalyani flagged the broader issue of India’s cost of doing business. Energy costs, manpower efficiency, infrastructure quality, and logistics remain persistent friction points. While incremental improvements have been made over the past decade, he argued that the next phase of growth demands a sharper focus on execution quality rather than policy intent alone. Without addressing these cost structures, India’s exporters may struggle to convert global supply chain shifts into sustained market share gains.

Kalyani’s longer-term outlook on India, however, remains constructive. He described the current phase as the start of a multi-decade growth cycle, drawing parallels with China’s expansion from the mid-1990s to 2020. In his view, India’s economy could scale from roughly $5 trillion to $20–25 trillion over the next two decades. Crucially, he highlighted the absence of mega-scale manufacturing champions as both a gap and an opportunity particularly for companies that can combine technology depth, capital discipline, and execution capability.

For Bharat Forge, growth is expected to be broad-based rather than concentrated in a single segment. Kalyani outlined opportunities across automotive, industrials, defence, rail, and marine, while also pointing to emerging areas such as unmanned systems. This diversification reflects a strategic response to cyclical risks in traditional auto components and a hedge against policy or tariff shocks in any one geography.

Technology, particularly artificial intelligence, featured prominently in his assessment of future competitiveness. Kalyani described industrial AI as a force multiplier that can help Indian manufacturers bridge knowledge gaps, reduce non–value-added work, and improve productivity. Notably, he claimed that AI adoption among Indian companies is already ahead of much of Europe, opening doors for global partnerships in digital transformation. This, he suggested, could partially offset structural disadvantages in cost and scale if executed well.

Kalyani’s remarks reinforce concerns around export-facing manufacturers, especially those exposed to the US and Europe. Tariff-related cost pressures could weigh on margins in the near term, even as order visibility improves in defence and infrastructure-linked segments.

Automotive and aerospace face the highest risk from elevated metal prices and localisation mandates, while industrial and defence manufacturing may see relatively better insulation due to domestic demand and policy support.