Manufacture and Infrastructure - Newspaper Summary

 The sources detail significant activity and strategic direction within India's Manufacturing and Infrastructure sectors in October 2025, set against a backdrop of complex global and domestic policy developments, including technological shifts, protectionism, and intensified geopolitical competition.

I. Manufacturing Sector: Policy and Performance

The Indian manufacturing sector is grappling with the necessity of increasing domestic value addition and technological sophistication while facing stiff global competition and tariff challenges.

Electronics and Component Manufacturing

India has launched ambitious schemes to transform electronics manufacturing, aiming to become a "global factory".

• Production-Linked Incentives: The Electronic Component Manufacturing Scheme, with an outlay of ₹22,919 crore for incentives, has attracted subsidy-seeking proposals totaling ₹1.15 lakh crore, which is almost double the initial investment target of ₹59,000 crore.
• Semiconductor Mission: Efforts are underway to reduce dependence on imports. The ₹76,000-crore India Semiconductor Mission provides up to 50% fiscal support for fabrication units and incentives for design, assembly, testing, and packaging. The HCL-Foxconn joint venture in Jewar, Uttar Pradesh, is planned to build a fabrication plant targeting 20,000 wafers per month by 2027. India's first homegrown chip in the 28-90-nanometre range is expected by the end of the year.
• Policy Critique: Despite the capital allocation, critics argue the government’s scheme is based on a "static view of this industry" and is "oblivious to today’s furious pace of automation" in advanced precision manufacturing. The scheme links subsidies to employment targets, which may be rigid given China's extensive deployment of industrial robots.
• Trade Liberalization Lessons: India’s past participation in the WTO's Information Technology Agreement (ITA), which eliminated tariffs on electronics by 2005, led to imports surging and domestic hardware manufacturing stagnating, deepening import dependence (e.g., over 95% of semiconductors and nearly 80% of key components like displays). Policymakers now face the challenge of deciding whether to renegotiate or withdraw from the ITA to protect strategic segments, balancing industrial goals with the social equity concern that tariffs would raise prices of essential devices for students and small businesses.

Medical Devices and Quality Standards

India's $12-billion medical devices market is set for a major overhaul of its regulatory framework to align with global benchmarks (US, Japan, EU).

• The Indian Pharmacopoeia Commission (IPC), in partnership with the Bureau of Indian Standards (BIS), is creating medical device standards for the first time. This involves auditing companies and developing monographs outlining standards and specifications.
• The goal is to strengthen India’s global reputation for manufacturing and boost exports, targeting a market size of $50 billion by 2030 and capturing 10–12% of the global market share in 25 years.
• As India imports 60–70% of its medical devices, globally accepted Indian standards would allow the country to require exporting nations to follow them.

Auto Sector and Supply Chain Risks

• Foreign Car Manufacturers’ Revival: Several struggling foreign car manufacturers like Skoda-Volkswagen, Honda Cars India, Renault, and Nissan, which collectively hold only 5% of the Indian passenger vehicle market, plan to introduce more than a dozen new models in the next two years to gain market share. This attempt at revival is occurring despite a slow-moving local market and global turbulence faced by parent companies due to competition from Chinese players.
• EV Supply Chain Crisis: The penetration of electric two-wheelers (e2W) has been significantly slowed by the scarcity of rare earth magnets, driven by China’s restrictions on supply. Registrations for electric two-wheelers saw a 75% year-on-year drop in Q2 (July–September 2025). India is completely dependent on China for the estimated annual demand of 6,000 to 7,500 tonnes of these magnets. Manufacturers are now switching to rare earth magnet alternatives to reduce this strategic dependence.

Heavy Industries and Capacity Expansion

• Steel Production: Tata Steel Ltd’s ambitious goal to reach 40 million tonnes per annum (mtpa) capacity by FY30 faces analyst skepticism, as local capacity stood at 26.6 mtpa at the close of FY25. While ramping up the Kalinganagar project (to 8 mtpa by end of 2025) and expanding Neelachal Ispat Nigam Ltd (NINL) are critical steps, further execution roadmaps are unclear, especially as European restructuring might delay funding for domestic projects.
• Aluminium Production: Vedanta Ltd plans to invest ₹13,226 crore to ramp up its aluminium capacity to 3.1 mtpa by FY28 from the current 2.4 mtpa, positioning aluminium as central to its growth strategy due to its critical role in renewable energy, electric mobility, and urban infrastructure.

II. Infrastructure and Connectivity Developments

India is investing heavily in infrastructure, supported by multilateral funding and major domestic projects, particularly in aviation and railways, while also focusing on local skill ecosystems.

Aviation and Logistics Infrastructure

• Navi Mumbai International Airport (NMIA): The upcoming mega airport is expected to boost connectivity and generate over 2,00,000 direct and indirect jobs across aviation, logistics, hospitality, and related sectors. NMIA will complement Chhatrapati Shivaji International Airport, raising the overall passenger capacity of the Mumbai Metropolitan Region (MMR) to over 155 million passengers per annum (MPPA).
• Air Transport Growth and MRO: India forecasts air transport to grow by 80% over the next five years, reaching approximately 400 million passengers. Supporting this requires reducing import dependency in maintenance, repair, and overhaul (MRO), where nearly 80% of maintenance is currently outsourced to foreign MROs. Airlines are sourcing non-critical components locally and establishing in-country MRO facilities.
• Underutilized Rail Link: The Vallarpadam rail link in Kochi, spanning 4.62 km (one of the country's longest rail bridges) and designed for the International Container Transshipment Terminal (ICTT), remains underutilized 14 years after commissioning. This is mainly due to trade preference for cheaper and more flexible road transport over short distances, competitive freight rates from Concor (Container Corporation of India), and the high costs associated with last-mile delivery and shifting Inland Container Depots (ICDs).

Engineering and Heavy Construction

• Tunnel-Boring Machine (TBM) Manufacturing: Germany’s Herrenknecht, a global TBM leader, is expanding its Chennai operations with a new manufacturing plant to meet the massive domestic demand for tunnelling projects (worth over ₹3 lakh crore planned for the next decade). India currently imports virtually all its TBMs. Herrenknecht has achieved 70% localization in its Chennai assembly facility.
• Rail Infrastructure Joint Venture (JV): A joint venture between Texmaco Rail & Engineering and Rail Vikas Nigam Ltd (RVNL) is expected to be operational by December 2025. This public-private partnership aims to compete with large Chinese players for turnkey rail projects in international markets and focus on maintenance of railway projects domestically.

Policy Support and Financial Flows for Infrastructure

• Multilateral Funding: The Asian Infrastructure Investment Bank (AIIB) is planning to significantly step up its investment activities in India to mobilize greater private sector and multilateral financing for projects. AIIB has already deployed $12 billion in India and invests $2–2.5 billion annually, a figure expected to increase significantly. AIIB prioritizes co-financing with other multilateral development banks (MDBs) and the private sector to align on standards, increase transparency, and leverage capital.
• Connectivity and Trade Relations: The AIIB chief economist, Erik Berglöf, noted that closer integration within Asia, especially with China, would be mutually beneficial and could help counteract global negative pressures, such as US protectionism.
• Government Procurement and MSEs: The Central government’s procurement from Micro and Small Enterprises (MSEs) reached about 45% of total procurement in the first six months of FY26 (approximately ₹1 trillion on the GeM portal), indicating strong support for MSMEs. This trend is expected to strengthen following an amendment to the MSE definition, expanding the number of eligible businesses.

Tackling the Skill and Local Employment Gap (Infrastructure for Jobs)

The 'Blue Dot' project piloted in Hubballi-Dharwad, Karnataka, addresses the puzzle of connecting local youth (especially those trained in ITIs) with local work, focusing on manufacturing MSMEs.

• The Problem: Despite 3,100 MSMEs in Dharwad generating 8,000–10,000 fresher openings annually, placement rates for ITI students remain low (south of 25–30%) due to a lack of visibility and trust between employers and job seekers. Many workers seek jobs within a small radius (15–20 km) of home for family and convenience reasons, leading to labor shortages in local factories.
• The Solution (Digital Rails): The Blue Dot project uses digital public goods (DPGs) and an AI-powered voice bot to capture and verify student and MSME profiles in real time. This system enables companies to see "blue dots" of nearby qualified trainees and display jobs within a 15 km range, drastically reducing the time and cost for MSMEs to hire (to roughly one-tenth) and saving job seekers months of waiting. This approach helps keep work local, circulating money within the district economy.

III. Global Headwinds and Policy Responses

Manufacturing and investment decisions are heavily influenced by the volatile geopolitical climate, characterized by tariffs and uncertainty.

• US Tariffs and Trade Friction: US tariffs on Indian imports, including an additional 25% penalty for sourcing energy from Russia (deemed "unfair, unjustified and unreasonable" by the External Affairs Minister) have clouded the outlook for growth and inflation. These policy shocks have intensified uncertainty. ADB notes that high tariffs are creating challenges but only led to a modest downgrade of India's GDP forecast, as the reliance on US exports relative to GDP is low (about 1.2%).
• Trade Deal Negotiations: India is actively pursuing new trade agreements to diversify exports and counter external pressures. Talks are ongoing with the EU (14th round beginning October 6) to iron out differences in services, automobiles, alcoholic beverages, and quality standards, with a year-end deadline. Negotiations are also planned with Chile (October 27) and Peru (November 3) to expand existing preferential trade agreements (PTAs) into comprehensive economic partnership agreements (CEPAs). World Bank suggests that utilizing trade deals to address relatively high import tariffs on intermediate goods would significantly boost the domestic manufacturing sector.
• Digital Sovereignty: India is focusing on building an indigenous digital ecosystem for messaging, email, operating systems, and AI platforms to reduce reliance on foreign digital platforms, citing risks to "digital sovereignty" from fragile global supply chains and geopolitical rivalries. The Communications Minister emphasized prioritizing "Atmanirbhar innovation over imitation" in this effort. The domestic development of the 4G network stack and the planned upgrade of BSNL 4G towers to 5G within 6-8 months demonstrate progress towards this goal.