New economic realities are surfacing as India grapples with its reliance on Chinese goods, particularly concerning its ambitious energy transition goals. According to the latest Economic Survey for 2025, this dependency creates significant challenges for India, especially since it aims to make strides toward eco-friendly energy sources. The dilemma is more complicated as India positions itself among the lowest per capita emitters globally, seeking to balance its ambitions against the backdrop of substantial imported goods.
DK Srivastava, chief policy advisor at EY India, emphasizes the need to "acknowledge the elephant (and the dragon) in the room". This metaphor points to the pivotal role of China and the fundamental shifts occurring within the global economic order, driven by China's unmatched manufacturing capabilities and strategic dominance. Srivastava's insights underline the pressing concern for India's growth projections and outline the core issue at hand: how to mitigate the risks posed by this reliance on Chinese industries.
Despite India's efforts to cultivate domestic production capacities across various sectors, the gap between demand and local supply remains significant. The need for meeting energy transition goals, such as renewable energy implementation and reducing carbon emissions, is urgent and pressing. Srivastava notes, "Although India is trying to develop domestic capacities, the only way out is to attract investors to set up production capacities" within the Indian market. This approach must become the cornerstone of what the Indian government refers to as the Atmanirbhar (self-reliant) strategy.
The current geopolitical atmosphere, characterized by supply chain disruptions from the pandemic and growing tensions across the globe, only adds to the urgency for India to reduce its overdependence on Chinese manufacturing. With the global economic power shifting and countries reassessing their production dependencies, India's path forward hinges on its ability to partner with investors and innovate locally.
To bridge this gap, India must pivot from its past reliance and cultivate a business ecosystem where local industries can thrive independently of foreign goods. The proposed reforms under the Atmanirbhar strategy aim to align private sector interests with domestic production capabilities, creating jobs and enhancing economic resilience.
While the need for foreign investment remains, the government is exploring avenues to incentivize local manufacturing. Policies intended to bolster domestic production could soon translate to reduced tariffs on imported manufacturing equipment and subsidies for businesses daring to venture toward homegrown material sourcing.
Nonetheless, the task isn't without its challenges. India’s infrastructure and operational capabilities must engage with these strategies to attract the required level of investment. Policymakers are aware of this hurdle, and the responsibility lies heavily on facilitating the right environment for local entrepreneurs and international stakeholders alike.
The balance of power between India and China will inevitably influence the broader economic scenario. With China's status as the world’s factory, India's focus on self-reliance will be closely watched not only by investors and economists but by adjacent economies engaged with both nations.
Fundamental changes within the fabric of global trade dynamics could emerge depending on how India manages this economic crossroad. The survey's recognition of potential challenges will certainly prompt greater introspection among policymakers, urging them to devise practices not just for survival but for economic growth.
A brighter economic future for India relies on taking decisive actions now, especially on attracting investment and bolstering domestic capacity to meet the energy transition demands. Striking this balance between local production and necessary international partnerships is key to securing economic sovereignty and enhanced resilience.