Prime Minister Narendra Modi has ordered key ministries to identify categories of goods in which import dependence is high and can be replaced by locally made products, according to officials familiar with the matter. The government is considering subsidies and other incentives to boost domestic production, they said, asking not to be identified because the discussions are private.
Import Substitution Strategy
The Ministry of Commerce and Industry is preparing a list of more than 100 products, including electronics, chemicals, key drugs, fertilizers, semiconductors, automobiles and machinery, which could be scaled up, the people said. The discussions are taking place across several ministries and a decision has not been finalized yet.
Shaktikanta Das, a former central bank governor and now principal secretary in Modi's office, is spearheading a taskforce that is drawing up an import substitution blueprint for the economy, officials said. Members of the Prime Minister’s Economic Advisory Council are also involved in the project.
Commerce Minister Piyush Goyal this month urged states and industry to identify products that can be manufactured competitively in the country. He added that the efforts would help in cutting import dependence, saving foreign exchange while strengthening domestic supply chain to reduce vulnerabilities arising from excessive dependence on foreign suppliers.
Incentives and Policy Moves
Building domestic capacity is now a key pillar of Modi’s economic agenda, with an objective to narrow the trade deficit, preserve foreign exchange and position India as an alternative manufacturing hub to China. India’s free trade agreements with partners such as the European Union are also expected to attract fresh investment and deepen the country’s manufacturing base, economists said.
The latest move came on Wednesday, with Modi’s cabinet approving a plan to increase financial support for chip and smartphone production by another 1.9 trillion rupees ($19.7 billion). It also approved a policy to raise local fertilizer production following shortages linked to the closure of the Strait of Hormuz.
The government may consider extending manufacturing incentives to private and foreign investors to set up factories in the country or ask state-owned firms to scale up their own capacity through joint ventures, the officials said.
Product Categories Targeted
| Category | Examples | Import Dependence Rationale |
|---|---|---|
| Electronics | Semiconductors, smartphones | High dependency on foreign chip supplies |
| Chemicals | Key industrial chemicals | Critical for manufacturing |
| Pharmaceuticals | Key drugs | Essential for health security |
| Fertilizers | Urea, phosphates | Supply chain vulnerability via Strait of Hormuz |
| Automobiles | Components and complete vehicles | Growing domestic demand |
| Machinery | Industrial equipment | Support for other sectors |
"Export controls are being used to deny critical components — from rare earths to semiconductors — to countries that need them. If this is the world we have to live in, where industrial policies are weaponized, self-reliance is the need of the hour," said Gaurav Kapur, economist with IndusInd Bank.
Expert Views
Economists noted that the self-reliance push comes amid global supply chain risks and rising protectionism. Modi's office and the Ministry of Commerce and Industry did not reply to a request for further information. Dhiraj Nim, economist with ANZ Banking Group, said: "Such self-reliance is born out of necessity, not necessarily a search of economic efficiency. Bringing up domestic industries will have a positive impact on manufacturing metrics and jobs, undoubtedly. But much depends upon scale."
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