Does India have the ability to catch up with China’s manufacturing industry?

Theoretically, it’s possible, but in practice, whether they can catch up is uncertain—it’s far from a guaranteed outcome.

After 2000, China’s manufacturing sector grew rapidly. As someone who experienced that phase firsthand, I’ve summarized some of the key contributing factors:

1. Policies: Local governments implemented all sorts of tax exemptions and rent-free policies to attract foreign investment. Officials who failed to bring in investment were held accountable, and their promotions were affected. At the same time, administrative procedures and legal formalities for setting up businesses were simplified. There were also formal directives to learn from advanced foreign management practices and to exchange market access for technology.

2. Talent and Workforce: The wave of layoffs before 2000 released a large number of idle laborers and skilled technicians who had been stuck in state-owned enterprises.

3. Infrastructure: Roads and electricity were built at both the local and national levels. Even if it meant taking on debt or causing public controversy, investment was pushed forward in a wild and aggressive way.

4. Private Enterprises: They didn’t wait to die. They were highly flexible, attracting technical talent, working as suppliers to foreign firms, and gradually developing their own brands.

5. Labor Relations: These were mostly settled by the government. I witnessed foreign companies go too far, provoking worker protests. Even though the protest was approved, it was forced into a silent demonstration: no banners, no slogans—just quietly walking together under heavy police escort.

6. Foreign Investors’ Privileged Treatment: This was a real phenomenon. Law enforcement was lenient toward them, and the policies they received were far better than those given to domestic companies.

With its own policies, massive investment, foreign guidance, domestic entrepreneurial efforts, and some brute-force administrative actions, China achieved terrifying development speed during that period.

India, of course, doesn’t need to copy everything, but several key aspects still must be met:

1. Policy Implementation: While Modi’s overarching policies are quite similar to those China had 25 years ago, India’s states enjoy a high degree of independence. Modi cannot enforce or oversee policy execution across states the way the Chinese central government can.

2. Administrative Efficiency: There are still tax barriers between Indian states, and goods transported across states can be subjected to different taxes. In a country where goods can’t flow freely, economic efficiency suffers dramatically. Modi has tried to unify tax systems across states, but there’s still little visible progress.

3. Legal System: Compared to China’s extremely streamlined legal enforcement, India is known for its overregulation. Beyond common licenses, in my industry alone, 3 to 4 additional certificates are needed to legally sell products. Processing times for these certificates range from 1 to 6 months. There’s a lot of regulation, but most of it is “infinite regulation”—departments take money to issue a certificate, but oversight is both redundant and ineffective.

4. Infrastructure: The Indian government is short on funds. Plus, land ownership is private, so the unit cost of infrastructure is actually higher than in China. The same amount of investment yields less infrastructure output. Add in complex legal procedures, constant financial shortages, and frequent legal disputes, and construction is often stop-start. It’s normal for a single road to take ten years to complete.

5. Talent: India suffers from brain drain far more than China ever did. Twenty years ago, I worked at a large Indian IT company. Of the five or six engineers I knew, within three years they had all left for Singapore or the U.S.—not one stayed. Part of it was the wage gap; the other part was social discrimination against self-made talents from lower social strata. Even though India has a steady stream of young people, emigration remains the top choice for most. Laborers are willing to work, but high-end talent doesn’t stay.

6. Private Enterprises: There are a few conglomerates like Reliance, but most have questionable financial reputations and histories of default and broken contracts. While there are countless small factories, their technical capabilities are questionable. Right now, they’re starting to compete with Chinese firms on price in electromechanical sectors. In my industry, their technical capacity is basically zero—it’s all assembly work. Nowadays, companies in the U.S., Europe, and China are very cautious about exchanging technology for market access, so India lacks that early advantage. These private firms are both technologically weak and burdened by suppression from various levels of government, making their operating environment worse than that of Chinese companies back in the day.

India might soon catch up with China in low-end manufacturing, but whether it can gradually upgrade its industries the way China did is much harder to predict. The higher up you go, the more dependent you are on accumulated technology, infrastructure, and talent. India’s deeply complex social structure is also a huge barrier. Even with Modi’s strong leadership, he still cannot sweep away the various entrenched interest groups within the country.

As for things like garment exports—those are relics of 20 years ago. By around 2006, the profit margins on garment manufacturing in China were already razor-thin, and its share of export value was steadily declining. Now, China’s export pillars are electromechanical products, digital devices, new energy, heavy industrial materials, and medical equipment. Only those who left China a decade ago or are still reading textbooks from 20 years ago are still talking about shirts and socks.