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Crisil has received financial assistance under the Research Scheme of NITI Aayog (RSNA) to prepare this
report. While due care has been exercised to prepare this report using data from various sources, NITI
Aayog does not confirm the authenticity of data and accuracy of the methodology to prepare the report.
NITI Aayog shall not be held responsible for findings or opinions expressed in the document.
That responsibility rests completely with Crisil.
GMH Report
Volume - I
3
Message from the Vice Chairman
Ashok Kumar Lahiri
Vice Chairman, NITI Aayog
“India stands at a defining moment in its economic and industrial journey. As the nation moves forward with the vision of
Viksit Bharat @2047, manufacturing will play a central role in shaping the country's future growth trajectory. Across the
world, the experience of every major industrial economy has demonstrated that sustained economic transformation is built
on a strong and globally competitive manufacturing base. Manufacturing not only drives investment, innovation and
exports, but also creates quality employment, raises productivity and strengthens linkages across multiple sectors of the
economy. For a country like India, with a young workforce and a median age of around 28 years, a vibrant manufacturing
sector offers the most effective pathway to harnessing its demographic dividend and translating it into broad-based and
inclusive prosperity.
At the same time, the experience of recent decades reminds us that considerable work remains ahead. India's
manufacturing sector today accounts for nearly 17 percent of Gross Value Added, a share that has remained broadly
stable over the past two decades. During the same period, several economies have significantly expanded their
manufacturing capabilities and strengthened their integration with global value chains. China's share in global
manufacturing value added increased from about 5 percent in 1995 to nearly 32 percent in 2023, while India's share
increased from about 1.5 percent to 3.2 percent. Likewise, countries such as the Republic of Korea and Vietnam have
demonstrated how sustained policy support, technological advancement, investment in industrial capabilities and deeper
integration with global production networks can transform national competitiveness. These experiences should not be
viewed as a measure of India's limitations, but rather as a reminder of the scale of opportunity before us and the importance
of pursuing long-term, coordinated and consistent reforms.
This report, prepared in collaboration with Crisil Intelligence, represents a structured endeavour to convert national
ambition into a disciplined, evidence-based roadmap. From an initial universe of 62 sectors, a transparent relative-
attractiveness methodology has identified twelve in which India can realistically aspire to global leadership: Electronics,
Telecom Equipment, Solar PV, Pharmaceuticals, Chemicals, Automobiles, Defence and Drones, Steel, Capital Goods,
Textiles, Food Processing, and Leather and Footwear. Each has been examined through the lenses of strategic alignment,
financial viability, and value-chain positioning, and benchmarked against the nations that have achieved demonstrable
excellence in the respective domain. The intent throughout has been to ground aspiration in analytical rigor, so that the
choices before us rest on evidence rather than on assertion.
The common thread running through all twelve sectors is the recognition that India's manufacturing ambitions must extend
beyond expanding production alone. The country must progressively move up the value chain, build globally competitive
enterprises, strengthen domestic capabilities in advanced manufacturing, and integrate more deeply into global production
networks. Self-reliance, export competitiveness, technological leadership and employment generation are not competing
priorities; rather, they reinforce one another and together form the foundation of a resilient, competitive and future-ready
manufacturing economy.
Realising this vision will require sustained collaboration between the Union and State Governments, industry, academia,
financial institutions and the wider innovation ecosystem. It will also require policy continuity, institutional coordination and
a shared commitment to strengthening India's manufacturing capabilities over the long term. I am confident that this study
will serve as a valuable resource for policymakers, industry leaders, investors and researchers, and will contribute
meaningfully to informed policy formulation and effective decision-making. I trust that the analysis and recommendations
presented in this report will support informed policymaking and contribute to strengthening India's manufacturing
competitiveness and enhancing its participation in global value chains.”
4
Message from the CEO
Nidhi Chhibber
CEO, NITI Aayog
“A strategic roadmap is meaningful only if it provides a basis for informed decision-making and effective implementation.
This report has therefore been prepared not merely as an assessment of India's manufacturing landscape, but as a
framework for identifying the sectors that should receive strategic attention and the interventions required to strengthen
their competitiveness. It examines each sector through the lens of India's comparative advantages, emerging global
opportunities and existing structural constraints. The objective is to support evidence-based prioritisation, so that policy
efforts, public investment and private capital are directed towards areas that offer the greatest potential for enhancing
productivity, expanding manufacturing capabilities, creating employment and increasing India's participation in global
value chains. In doing so, the report seeks to move the discussion from broad strategic intent to a more focused and
implementable sectoral roadmap.
The report is underpinned by a rigorous and evidence-based methodology. Rather than beginning with a predetermined
set of priority sectors, it adopts a systematic approach to sectoral assessment, evaluating a broad universe of
manufacturing sectors before identifying those with the greatest strategic potential. The shortlisted sectors are
subsequently examined through the lens of strategic relevance, competitiveness and value chain opportunities, with the
findings further validated through benchmarking against global best practices and extensive stakeholder consultations.
This integrated approach ensures that the recommendations are grounded in robust analysis, informed by international
experience and aligned with industry realities.
The report also recognizes that India's manufacturing ambitions will depend not only on leveraging its strengths but also
on addressing persistent structural constraints. High logistics costs, gaps in infrastructure and power reliability, the
predominance of MSMEs with limited access to technology and finance, and an export basket concentrated in relatively
low value-added products continue to affect the competitiveness of Indian manufacturing. While significant progress has
been made through initiatives such as the Goods and Services Tax (GST), Make in India, the Production Linked Incentive
(PLD Schemes, PM Gati Shakti and the India Semiconductor Mission, the next phase of reforms will require more targeted,
sector-specific interventions. This report seeks to identify those priorities and provide a roadmap for the actions needed
across different sectors.
Given the breadth and diversity of India's manufacturing landscape, the study has been structured as a series of sectoral
volumes to allow for a more detailed examination of each priority area. The present volume marks the beginning of this
effort. I would like to place on record my appreciation for the team at NITI Aayog and our knowledge partner, Crisil
Intelligence, for the analytical rigor and commitment that have gone into the preparation of this report. I hope that the
analysis and recommendations presented here will contribute meaningfully to informed policy discussions and support
the decisions needed to strengthen India's manufacturing competitiveness in the years ahead.”
5
Message from the Programme Director
Ishtiyaque Ahmed
Programme Director – Industry and
Foreign Investment, NITI Aayog
“The global manufacturing landscape is undergoing a period of rapid transformation as firms diversify their supply chains,
reduce dependence on any single geography, and seek stable and competitive manufacturing locations to serve global
markets. These developments have created a significant opportunity for countries that are able to strengthen their
manufacturing capabilities and integrate more deeply into global value chains. For India, this opportunity coincides with a
period of strong policy momentum, a maturing industrial base, and a demographic profile well suited to expanding
manufacturing employment.
A study of this nature is therefore both timely and necessary. This report is the outcome of extensive work by NITI Aayog,
in collaboration with Crisil Intelligence, to identify the manufacturing sectors that offer the maximum potential to drive
India's manufacturing growth, strengthen its participation in global value chains, and generate employment. It seeks to
support informed policy choices by identifying sectors where focused interventions can have the significant impact.
The study followed a structured four-phase approach. Phase 1 narrowed the field from an initial 62 sectors to twelve
through a four-parameter relative attractiveness framework comprising domestic and global market size, together with
domestic and global growth projections up to FY30, mapped on a market size-growth matrix. Phase 2 involved a detailed
assessment of each shortlisted sector across three dimensions: strategic alignment, operational and financial viability, and
value chain play. The analysis examined raw material dependencies, geopolitical considerations, profitability, capital
intensity, and India's current position within global value chains. Phase 3 benchmarked each sector against two leading
manufacturing nations to identify relevant lessons on policy, technology and industrial development. Phase 4 integrated
these findings with extensive industry consultations, combining insights from secondary research, international best
practices and stakeholder feedback to develop recommendations centred on identified challenges, targeted interventions
and implementation strategies.
Twelve sectors have been identified. The analysis has been tailored to reflect the specific requirements and growth drivers
of each sector. For every sector, the objective has remained consistent: to move beyond assessing the current situation
and develop practical, evidence-based recommendations for strengthening India's manufacturing competitiveness. The
recommendations seek to address the underlying structural constraints affecting each sector while identifying the policy
measures, institutional reforms, infrastructure requirements and investment incentives necessary to unlock future growth.
The report will be released in three volumes. This volume presents a sectoral analysis along with detailed reports on the
Chemicals, Textiles, Solar PV Manufacturing, and Telecom & Networking Products sectors.
I hope that the depth of analysis presented in this report will serve as a valuable resource for policymakers, industry
leaders, researchers, and other stakeholders working towards advancing India's manufacturing ambitions.”
6
Acknowledgements
The Report on Key Sectors to Position India as a Global Manufacturing Hub represents the culmination of a
collaborative effort involving CRISIL, the knowledge partner, and the team of the Industry & Foreign Investment
Division, NITI Aayog. The report has been shaped through extensive research, stakeholder consultations and
deliberations, with the objective of identifying opportunities and addressing key constraints to strengthen India’s
manufacturing capabilities and global competitiveness.
I express my sincere gratitude to the Hon’ble Vice Chairman, NITI Aayog, for his leadership and valuable guidance,
and to Dr. Arvind Virmani, Hon’ble former Member, NITI Aayog, for his insightful suggestions. I also acknowledge the
valuable guidance and direction provided by the CEO, NITI Aayog, throughout the course of this exercise.
The report has drawn considerably from the expertise and active engagement of the concerned Ministries and
Departments of the Government of India. I gratefully acknowledge the valuable inputs received from the Ministry of
Textiles, Ministry of Steel, Ministry of New and Renewable Energy, Ministry of Heavy Industries, Ministry of Electronics
and Information Technology, Ministry of Defence, Ministry of Communications, Ministry of Chemicals and Fertilizers,
Department of Pharmaceuticals, Department for Promotion of Industry and Internal Trade (DPIIT), and Ministry of
Food Processing Industries. Their sectoral perspectives and constructive feedback have been important in
strengthening the analysis and ensuring that the recommendations remain relevant to the evolving needs of Indian
industry.
I also place on record my appreciation for the industry representatives, experts and practitioners who participated in
the consultations undertaken as part of this exercise. Their first-hand understanding of market developments, global
trends, emerging opportunities and implementation challenges has added significant depth to the report and helped
bring an industry perspective to the recommendations.
I would particularly like to acknowledge the contribution of the CRISIL team, especially Mr. Pushan Sharma, Mr. Mohit
Adnani, Mr. Jyotish Menon, and the sectoral experts associated with the study. Their analytical rigour and technical
expertise have been valuable in undertaking the sectoral assessment and developing a comprehensive understanding
of the opportunities for India to strengthen its presence across global manufacturing value chains.
I sincerely appreciate the dedicated efforts of the Industry & Foreign Investment Division, NITI Aayog. The team led
by Shri Upendra Kumar Gupta, Deputy Adviser, comprising Shri Abhishek Mukherjee, Research Officer, and Ms.
Pragya Bajpai, Young Professional, has contributed through sustained research, analysis, stakeholder coordination
and consultations throughout the project.
For Volume I, covering the Chemicals, Textiles, Solar PV and Telecom sectors, I would also like to acknowledge the
valuable contributions of Ms. Vamakshi, Shri Bhadraksh Bhargava and Ms. Vrushali Lokhande, young professionals
of the Division. Their sector-specific research, analytical inputs and sustained efforts have played an important role in
shaping this volume and bringing together the insights and recommendations presented herein.
I hope that this Report will serve as a useful reference for policymakers, industry and other stakeholders in
strengthening India’s manufacturing ecosystem, enhancing competitiveness and enabling greater integration with
global value chains.
Ishtiyaque Ahmed
Programme Director (Industry & Foreign Investment)
NITI Aayog
List of abbreviations
ADD Anti-Dumping Duty
API Active Pharmaceutical Ingredient
ASEAN Association of Southeast Asian Nations
BCD Basic Customs Duty
BIS Bureau of Indian Standards
BOM Bill of Materials
CAGR Compound Annual Growth Rate
CEPA Comprehensive Economic Partnership Agreement
CPDS Chemical Promotion Development Scheme
CPVC Chlorinated Polyvinyl Chloride
DGFT Directorate General of Foreign Trade
DoT Department of Telecommunications
EBITDA Earnings Before Interest, Tax, Depreciation and Amortisation
EPZ Export Processing Zone
FDI Foreign Direct Investment
FTA Free Trade Agreement
GDP Gross Domestic Product
GPON Gigabit Passive Optical Network
GVA Gross Value Added
GVC Global Value Chain
HJT Heterojunction Technology
HSN Harmonised System of Nomenclature
IC Integrated Circuit
IoT Internet of Things
KTPA Kilo Tonnes Per Annum
MEG Mono Ethylene Glycol
MMF Man-Made Fibre
MMTA Million Metric Tonnes Per Annum
MSME Micro, Small and Medium Enterprise
OEM Original Equipment Manufacturer
OFC Optical Fibre Cable
PCPIR Petroleum, Chemicals and Petrochemicals Investment Region
PE Polyethylene
PET Polyethylene Terephthalate
PLI Production Linked Incentive
PP Polypropylene
8
PTA Purified Terephthalic Acid
PVC Polyvinyl Chloride
PV Photovoltaic
QCO Quality Control Order
R&D Research and Development
RAN Radio Access Network
RCEP Regional Comprehensive Economic Partnership
RMG Ready-Made Garments
ROCE Return on Capital Employed
SEZ Special Economic Zone
SME Small and Medium Enterprise
SPV Special Purpose Vehicle
T&A Textile and Apparel
TANE Telecom and Network Equipment
TOPCon Tunnel Oxide Passivated Contact
VGF Viability Gap Funding
WTO World Trade Organization
9
List of tables
Table 1: Key components of chemicals segments .................................................................................................. 44
Table 2: Chemical sector exports target by 2030: ................................................................................................... 49
Table 3: Key raw materials used in specialty chemicals manufacturing and leading producer countries ............... 52
Table 4: Geopolitical relation with major raw material supplier countries ................................................................ 53
Table 5: Key government initiatives supporting the chemicals sector ..................................................................... 61
Table 6: Selection of top chemical manufacturing countries ................................................................................... 62
Table 7: Priority chemicals for enhancing domestic manufacturing capabilities ...................................................... 83
Table 8: Key RMG raw materials and major producing countries .......................................................................... 100
Table 9: Countries from where India procures raw materials ................................................................................. 101
Table 10: Top raw material sources for global textile industry ............................................................................... 102
Table 11: Countries from where India procures raw materials ............................................................................... 102
Table 12: Share of key exporting countries in the global RMG trade .................................................................... 116
Table 13: India’s key FTAs and country-wise RMG export growth rate ................................................................. 133
Table 14: Share of key FTA countries in India’s RMG export basket (volume-wise) ............................................. 133
Table 15: Duty-free access for RMG ...................................................................................................................... 134
Table 16: India's trade position in telecom and network equipment manufacturing .............................................. 154
Table 17: Network Infrastructure equipment and their functions ........................................................................... 155
Table 18: Key service offerings by TANE companies ............................................................................................ 156
Table 19: Increasing uptake of digital services indicates a strong demand for TANE growth ............................... 158
Table 20: Raw material availability for TANE sector .............................................................................................. 162
Table 21: Major suppliers of telecom equipment and degree of India’s import dependence ................................. 162
Table 22: Champion countries and their share in global exports ........................................................................... 167
Table 23: Underdeveloped ecosystem limiting localization across TANE products ............................................... 175
Table 24: Factors that lead to cost reduction in Telecom and Network Equipment manufacturing ....................... 179
Table 25: Effective PTFE pricing after price-gap support ...................................................................................... 184
Table 26: Current key target markets ..................................................................................................................... 188
Table 27: Tariffs relevant to Telecom and Network Equipment Manufacturing ...................................................... 191
Table 28: Malaysia and Vietnam emerging countries in PV value chain ............................................................... 212
Table 29: India's presence in upstream value chain limited ................................................................................... 212
Table 30: China's push to PV manufacturing industry ........................................................................................... 221
Table 31: Vietnam's push to PV manufacturing industry ....................................................................................... 225
Table 32:Motivations for applying various trade protection measures .................................................................. 229
Table 33:Directorate general of trade remedies' recommendations on safeguard duties ..................................... 230
Table 34:Application of basic customs duty due to change in law......................................................................... 231
Table 35:Anti-dumping duty on solar panel frames from China ............................................................................. 234
Table 36:Anti-dumping duty recommended on solar cells and modules ............................................................... 235
Table 37: India shares positive relations with most countries that possess capital goods .................................... 250
Table 38: PV technologies - Complexities and efficiency ...................................................................................... 255
Chemicals
Textiles
Telecom & network
Solar PV
10
Contents
01 Introduction 11
02 Chemicals 35
03 Textiles 84
04 Telecom and Network Equipment 146
05 Solar Photovoltaic 192
06 Conclusion 263
11
Objective of the study
India's journey towards becoming a USD 30 trillion economy by 2047 will require the manufacturing sector to
play a critical role in this transformation. Currently, manufacturing accounts for 17.5% of the country's gross value
added (GVA), with the Indian government having set out a target to increase this share. As a major employment
generator, the sector supported 1.85 crore jobs in fiscal 2022, making it crucial for a youthful India where the
average age is currently ~28 years. To translate this demographic profile into broad-based prosperity, the share
of manufacturing in gross domestic product (GDP) needs to rise. Manufacturing can absorb labour at scale
across diverse skill levels, create stable and formal jobs, and lift productivity through better processes and
technologies.
Manufacturing expands employment by establishing large, formal operations and deep supplier networks that
create roles across production, quality, maintenance, logistics, and business services; capacity additions bring
structured hiring and skilling pathways that move workers into higher‑productivity positions. By standardizing
processes, investing in equipment and automation, and achieving scale efficiencies, firms raise value added per
worker—broadening income through export participation and stronger domestic linkages, and thereby supporting
gains in per capita GDP. Continuous product and process development on the shop floor—underpinned by
advances in design, tooling, and digital and advanced manufacturing technologies—and supplier development
within clusters foster R&D and innovation, accelerating technology diffusion and capability building across the
ecosystem. In India, a robust manufacturing sector is essential for enhancing the country’s competitiveness in
global markets. It plays a vital role in increasing exports and reducing reliance on imports, thereby contributing
to a favorable trade balance. The Indian government has recognized the importance of manufacturing and aimed
to improve India’s manufacturing competitiveness with a host of measures outlined in the later section, with the
aim to transform the country into a global manufacturing hub. By strengthening manufacturing capabilities, India
can achieve sustainable economic growth and improve its position in the global supply chain.
This study aimed to identify key sectors that can elevate India to the status of a global manufacturing hub by
2047, focusing on domestic and global market opportunities, future growth outlook, as well as competitiveness
and employment intensity, all in alignment with national growth priorities. The objective of the analysis was to
provide a strategic roadmap, offering actionable recommendations to position India at the forefront of global
manufacturing in the identified sectors. Before delving into the shortlisted 12 manufacturing sectors, it is essential
to understand the evolution of manufacturing through the ages. The first industrial revolution marked a significant
shift with the introduction of mechanization and steam power, fundamentally changing production processes.
This was followed by the second industrial revolution, characterized by mass production and the advent of
electricity, which further transformed manufacturing capabilities. While the third and fourth industrial revolutions
have introduced digital technologies and automation, respectively, it is crucial to analyze how these historical
developments have shaped contemporary manufacturing landscapes. Additionally, we will examine case studies
of manufacturing booms in countries like Vietnam, China, and Japan, which provide valuable insights into
successful strategies and practices that can inform India’s potential as a global manufacturing hub.
12
Manufacturing through the ages – a global perspective
The First Industrial Revolution
The First Industrial Revolution, which began in Great Britain around 1760, marked a fundamental turning point
in the history of manufacturing. It represented the shift from small-scale, manual craftsmanship to mechanized,
factory-based production. For the first time, goods could be produced on a mass scale, drastically reducing costs
and increasing availability. This also led to a reorganization of labor: skilled artisans gave way to a growing
workforce of semi-skilled factory workers, laying the foundation for the modern factory system. Importantly, this
era established key principles—like mechanization, centralized production, and specialization of labor—that still
define manufacturing processes today. This process began in Britain in the 18th century and from there spread
to other parts of the world.
The technological advancements included the following:
• The introduction of new raw materials, primarily iron and steel
• The utilization of novel energy sources, including coal and steam power
• The development of innovative machinery, such as the spinning jenny and power loom, which enhanced
productivity while reducing manual labor
• The establishment of the factory system, marked by increased division of labor and specialization
• The growing application of scientific principles to industrial practices.
The period also witnessed significant developments in the non-industrial sphere:
• Improved agricultural techniques increased food production, supporting a larger non-agricultural population
• Industrial production overtook landownership as the primary source of wealth, leading to a broader
distribution of wealth and growth in international trade
• Shifts in economic power led to political changes and new state policies suited to an industrialized society
• Urbanization accelerated, working-class movements emerged, and new social structures and power
dynamics developed
• Workers transitioned from skilled handcraft to machine operation, adapting to the discipline and routines of
factory life
A new psychological outlook took hold, marked by growing confidence in the ability to utilize resources efficiently.
The Second Industrial Revolution
Although there was significant overlap with earlier industrial developments, the late 19th and 20th centuries
marked the emergence of a distinctly new phase of the Industrial Revolution.
The innovations of the Second Industrial Revolution brought about profound changes in manufacturing,
transportation, communications, and ways of life and leisure. Some of the most significant inventions include:
Internal combustion engine: Developed by German engineer Nicolaus Otto in 1876, this engine utilized
gasoline fuel derived from petroleum, leading to the invention of automobiles and airplanes.
Automobile: Karl Benz incorporated the internal combustion engine into the first automobile in 1886. This
innovation was further perfected by Henry Ford with the launch of the Ford Model T in 1908, making automobiles
accessible to the masses.
Airplane: The Wright brothers achieved the first sustained flight with a powered aircraft in 1903, revolutionizing
air travel and transportation.
13
Telegraph: Although invented earlier, the telegraph became widely used for transmitting coded messages over
long distances, thanks to Samuel Morse's system, which gained popularity in the late 19th century.
Radio: The discovery of electromagnetic waves by Heinrich Hertz in 1887 led to the wireless telegraph and the
development of radio by Guillermo Marconi in the early 20th century.
Telephone: Patented by Alexander Graham Bell in 1876, the telephone revolutionized communication and
became widely used in the 20th century.
Electric light bulb: Thomas Edison invented a carbon-filament incandescent lamp in 1879, which proved
essential for public and domestic lighting, replacing kerosene lamps.
There was a significant shift in the ownership of means of production. Initially, ownership was concentrated
among a small elite in the 19th century, but later, it became more dispersed as individuals and institutions, such
as insurance companies, began to purchase common stocks. In the first half of the 20th century, many European
countries nationalized key sectors of their economies. Additionally, there was a change in political ideologies,
with governments moving away from laissez-faire policies (free market policy) and becoming more involved in
addressing the social and economic needs of their increasingly complex industrial societies. However, this trend
was reversed in the US and UK starting in the 1980s, with a shift back towards more free-
market oriented policies.
Japan’s miraculous industrial boom
Since World War II, Japan's economic growth has been characterized by the remarkable development of its
manufacturing sector, marked by significant advancements in quantity, quality, variety, and efficiency. The
country's industrial focus has shifted from light to heavy industries, with a greater emphasis on processing,
leading to a decline in the relative importance of traditional industries such as lumber and wood processing,
textiles, and food.
Japan has established itself as a leading global manufacturer, with a strong presence in shipbuilding and
automotive production, as well as the production of essential materials like crude steel, synthetic rubber,
aluminium, and plastics. The country is home to some of the world's most advanced and largest industrial
facilities and has experienced rapid growth in the production of motor vehicles, iron and steel, machinery, and
precision equipment, including cameras. In recent decades, Japan has also become renowned for its production
of advanced electronic products, including computers, microelectronics, telecommunications equipment, and
consumer goods.
The driving force behind Japan's post-war industrial success has been the high level of capital investment,
particularly during the 1960s and 1970s. A surge in equipment investment created a rapidly expanding domestic
market for the iron and steel, and machine-building industries, enabling a significant increase in productive
capacity and scale of operations. This, in turn, led to the rapid replacement of outdated machinery, resulting in
substantial improvements in productivity across the economy. Despite facing challenges such as a shortage of
skilled labor and rising wages, Japan's manufacturing sector has continued to thrive, thanks in part to the
widespread adoption of technological innovations and superior production systems. The country's exports have
experienced significant growth, and the establishment of overseas facilities in Asia, North America, and Europe
has helped to reduce trade friction and cut costs, particularly for manufacturers of automobiles and advanced
electronic products.
14
China’s manufacturing surge
China's remarkable rise as a global manufacturing leader has been swift and unprecedented. Having ranked
seventh in the world, behind Italy, as recently as 1980, China surpassed the United States in 2011 to become
the world's largest manufacturer of goods. This significant growth has had a profound impact on the country's
economy, with GDP per capita doubling over the decade from 2000-2010, a feat that took the UK 150 years to
achieve during its own industrialization process.
Between 2000 and 2007, China's export sector experienced rapid growth, with the value of exports increasing
more than fourfold. As a result, exports as a percentage of GDP rose significantly, from 20% to 35%. As China
transformed into a factory for the world, the Chinese economy was aided by its export-driven focus. This strong
focus on manufacturing driven exports is reflected in the current account surplus, which surged from less than
2% of GDP to a peak of 10%, closely mirroring the expansion of the trade surplus.
A number of policies and incentives with a focus on state-owned enterprises (SOEs) and labour specific policies
drove China’s manufacturing boom in the 2000s. The government provided subsidies to manufacturing firms,
especially for entry into new capacity, for production, and for investment. Further, governments (central +
provincial) provided indirect subsidies (e.g., cheap land, favorable financing) that reduced the cost of setting up
manufacturing capacity.
The Chinese government did not privatize all SOEs; rather, it followed a strategy of “grasping the large, letting
go of the small” — keeping big SOEs in strategic sectors but letting small uncompetitive SOEs go or be privatized.
SOEs received direct fiscal support: many loss-making SOEs continued to get budgetary transfers, particularly
during the early 2000s. There was a shift from requiring SOEs to hand over all profits (“profits remittance”) to a
more profit- and tax-based regime: SOEs started to pay income tax instead of just being forced to remit profits
to the state (“substituting taxes for profits”). On the financing side, SOEs benefited from low-cost capital via state-
owned banks, subsidized lending, and preferred access to credit. (Implicit in broader SOE-state relationship.)
SOEs were also used by the state as “national champions” in strategic industries (heavy manufacturing,
infrastructure, energy), leveraging their scale and access to finance to build capacity.
As a testament to its manufacturing prowess, China currently accounts for over 50% of global manufacturing
output in many sectors. This dominance in various sectors underscores China's critical role in global supply
chains and its status as a leading manufacturing hub.
Figure 1: China’s exports over the years
Source: World Bank
14%
18%
36%
25%
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
500
1000
1500
2000
2500
3000
3500
4000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Percentage
USD (Billion)
Exports (in USD Bn) Exports (% of GDP)
15
During the period from 2000 to 2010, China's exports as a percentage of GDP peaked at around 36%. However,
in the following years, this percentage began to decline gradually driven by the Chinese government shifting its
focus towards promoting domestic consumption and sustainable economic growth, aiming to reduce reliance on
exports. Rising per capita incomes in China also led to a consumption boom improving the share of domestic
consumption in China. Additionally, rising labor costs, increasing competition from other emerging markets, and
trade tensions with key partners led to a reevaluation of China's export-driven model. As a result, the economy
began to transition towards a more balanced approach, emphasizing domestic demand and innovation while still
maintaining a significant role in global trade.
The surge in exports was driven by the country's rapid integration into the global economy, competitive
manufacturing capabilities, and a strong focus on export-oriented growth. The increase in exports significantly
benefited China's local economy by driving job creation and increasing income levels, which, in turn, fueled
domestic consumption. Higher exports also contributed to the country's trade surplus, providing the government
with additional resources for infrastructure development and social programs.
Since its liberalization in 1978, China has experienced an extraordinary period of sustained economic growth,
with its real GDP increasing 23-fold since 1977. However, the drivers of this growth have undergone significant
changes over time. Notably, the contribution of household consumption to GDP has decreased, falling from
approximately 50% in the early 1980s to around 35% by the mid-2000s. This decline was accompanied by a
surge in investment and a growing reliance on exports. The early 2000s marked a significant acceleration of this
trend, with China's exports expanding rapidly to become the largest in the world by 2009, surpassing those of
the United States, Japan, and Germany. By 2009, China’s export growth was largely concentrated in a few key
sectors. The machinery sector was the primary driver, accounting for approximately 45% of total exports. The
textiles and apparel and furniture sectors together contributed around 7% to total exports.
Figure 2: Sector-wise contribution to China's exports, CY2009 (%)
Source: ITC Trade Map
Machinery, 45%
Apparel,
4%
Furnit
ure,
3%
Metals and articles therof,
11%
Other products, 37%
16
This section delves into the underlying factors that contributed to China's remarkable export growth over the past
decade. While an undervalued exchange rate may have played a role, the concentration of export growth in
select industries suggests that other factors were also at play. The apparel, textiles, and furniture industries
benefited significantly from China's accession to the World Trade Organization (WTO), as well as the expiration
of multilateral agreements that had previously limited China's exports. The elimination of quotas under the
Multifiber Arrangement (MFA) allowed Chinese textile products to flood international markets without restrictions,
resulting in a dramatic increase in exports. Similarly, the furniture industry benefited from enhanced market
access, enabling manufacturers to reach global consumers more effectively. The influx of foreign investment in
both sectors modernized production processes and improved product quality through the adoption of advanced
technologies. Additionally, increased production capacity allowed for economies of scale, further reducing costs
and enhancing competitiveness. Together, these developments positioned China as a leading supplier in both
the textile and furniture industries on the global stage.
Capital and energy-intensive industries such as iron and steel benefited from government subsidies and reforms
that led to increased profitability of state-owned enterprises (SOEs). The retained profits of these SOEs were
then reinvested in expanding capacity and production, which ultimately exceeded domestic demand. Key
initiatives included providing substantial energy and capital subsidies to boost production capabilities. These
reforms allowed SOEs to operate more efficiently and compete effectively in global markets. Additionally, labor
policies were introduced to ensure a steady supply of skilled workers, including vocational training programs and
incentives for companies to invest in employee development.
However, a significant portion of China's export growth can be attributed to the "machinery" categories, indicating
that a deeper assessment is required to fully understand this aspect of its economic expansion. A more detailed
analysis of Chinese trade data reveals that this growth was heavily concentrated in a few specific high-tech
products, including cell phones, laptops, liquid crystal displays, and integrated electronic circuits. China's ability
to rapidly increase exports of these products can be attributed to a combination of factors, including:
1. Strong FDI inflows from global tech majors (e.g., Intel, Motorola, HP), turning China into the world’s
electronics assembly hub and rapidly transferring technology and production know-how
2. Rising global demand for consumer electronics, fueled by technological advancements and increased
connectivity created a robust market for these products.
3. Large-scale investment in industrial parks and SEZs dedicated to electronics, telecom equipment,
semiconductors packaging/testing, and ICT manufacturing.
4. Government-led subsidies and incentives for R&D, high-tech zones, export rebates, and credit support
that lowered production costs and scaled capabilities fast.
5. Aggressive technology acquisition—both formal and informal—through JVs, licensing, MNC
partnerships, and global talent return programs (like Thousand Talents Program).
6. A decline in U.S. high-tech fixed investment, which created an opportunity for China to dominate these
new technologies.
17
Vietnam: Asia’s new manufacturing powerhouse
Vietnam’s manufacturing sector lies at the heart of its economy, serving as the primary driver of national growth.
In 2023, it accounted for 24% of the country’s GDP. Looking ahead, Vietnam aims to increase this contribution
to 30% by 2030, with high-tech products expected to make up a majority of the sector’s output.
Figure 3: Manufacturing as a % of Vietnam’s GDP
Figure 4: Sectoral contribution to Vietnam’s GDP, CY 2014 vs CY2024 (%)
Source: World Bank
In Vietnam, the distribution of economic contributions from industry, services, and agriculture has undergone
notable changes in the last decade (2014-2024). The share of industry, increased from 37% to 40%, reflecting
the country's ongoing industrialization and significant growth in manufacturing sectors. Similarly, the services
sector saw a rise from 46% to 48%, highlighting the expansion of service-oriented industries such as finance,
tourism, and technology. In contrast, agriculture's contribution to GDP decreased from 17% to 12%, indicating
a shift away from traditional farming practices as the economy diversifies and urbanizes. This transition
illustrates Vietnam's evolving economic landscape, with a growing emphasis on manufacturing and industrial
activities as key drivers of economic growth.
17
21
21
24
25
2010 2013 2016 2019 2022
Year
18
The manufacturing sector has significantly benefited from the global shift triggered by the China Plus One
strategy, which gained momentum following the Covid-19 pandemic. As part of its growing strategic alignment
with the United States, Vietnam recently entered into a partnership aimed at developing a strong
semiconductor supply chain to support U.S. industry needs.
Vietnam’s cost-competitive labor market has also been a key advantage. The labour cost per month in Vietnam
is approximately USD 188, compared to USD 521 in China —making it one of the most affordable
manufacturing destinations in Southeast Asia.
In addition, Vietnam’s extensive network of free trade agreements (FTAs) has played a critical role in bolstering
industrial growth. As a member of the World Trade Organization (WTO) and the Association of Southeast
Asian Nations (ASEAN), Vietnam has signed 15 FTAs with partners across multiple continents. These
agreements provide domestic and foreign enterprises operating in the country with preferential tariff access
and lower operational costs, reinforcing Vietnam’s position as a key global manufacturing hub.
Another reason for this surge in manufacturing is due to several government initiatives that have been
promulgated to boost industrial growth, digital transformation, and sustainability, namely the National Industrial
Development Policy (2030-2045), the Socio-Economic Development Plan (2021-2025), and the National
Green Growth Strategy (2021-2030, Vision 2050). Additionally, the government has implemented vocational
education and training programs aimed at upskilling the workforce.
Figure 5: Composition of Vietnam’s merchandise exports by product category, CY2024 (%)
Source: ITC Trade Map
Electrical
machinery and
equipment and
parts thereof
38%
Nuclear reactors,
boilers, machinery
and mechanical
appliances; parts
thereof
15%
Footwear, gaiters
and the like; parts
of such articles
7%
Furniture
4%
Articles of apparel
and clothing
accessories
8%
Plastics and
articles thereof
2%
Iron and steel
2%
Others
24%
19
Thriving manufacturing sectors
Some of Vietnam’s key manufacturing sectors:
a) Electrical machinery and equipment & parts thereof
This sector is the cornerstone of Vietnam’s export economy, driven by global electronics giants like
Samsung, Foxconn, and LG, who have made Vietnam their regional manufacturing base. The country is
now a critical player in assembling smartphones, components, and consumer electronics for export. Over
the years, this industry has also been gradually upgrading its capabilities from basic assembly to higher-
value activities such as chip packaging, testing, and smart device integration. The strong FDI inflows and
supply chain realignments post-China Plus One have further solidified its position
b) Nuclear reactors, boilers, machinery & mechanical appliances
This broad category reflects Vietnam’s growing capabilities in industrial equipment, engines, and
mechanical components. This category includes machinery for agriculture, manufacturing lines, and
construction. The growth of this sector ties in closely with Vietnam’s broader industrialization strategy—
enabling local businesses to scale up productivity and supporting the needs of other domestic industries.
Investment from Japan, South Korea, and Germany has brought in technology transfer and machinery
upgrades.
c) Footwear/ Gaiters
Footwear manufacturing is a long-established strength of Vietnam, employing millions and contributing
heavily to both exports and rural employment. Vietnam is a leading global supplier of shoes, particularly
for brands like Nike, Adidas, and Puma. The sector thrives due to low labor costs, skilled craftsmanship,
and robust production clusters around the southern provinces. In recent years, there’s also been a push
to integrate sustainability and move up the value chain with design and branding efforts
d) Furniture
Vietnam has emerged as one of the world’s top furniture exporters, especially for wooden indoor and
outdoor furniture. The industry benefits from abundant timber resources (both local and imported), skilled
labor, and modern processing facilities. Vietnam’s rise has been accelerated by global buyers shifting
orders from China due to tariffs and rising costs. Most of the production is based in southern provinces
like Binh Duong and Dong Nai. The sector is increasingly moving toward green certifications and eco-
friendly manufacturing to meet Western market demands.
e) Apparel and clothing articles
The textile and garment industry is one of Vietnam’s oldest and largest manufacturing employers. It caters
to global fast-fashion and sportswear brands, offering cost-efficient production and a skilled workforce.
The country has benefited significantly from free trade agreements, which allow tariff-free access to key
markets like the EU and Japan. There is also growing investment in sustainable textiles and automation,
helping factories meet global ESG standards and rising labor challenges.
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India’s manufacturing journey
The manufacturing sector in India has a few success stories and a lot of runway for improvement as its share of
GDP has been stagnant between 15-17% over the past two decades. The importance of the manufacturing
sector as explained above was recognized by the Government and a host of initiatives have been taken to
improve the share of manufacturing in India’s GDP. The sector is also a significant source of employment,
providing 11.4% of jobs in India, helping to absorb the growing workforce.
In contrast, agriculture, while employing the largest share of the population at 46.1%, contributes only about
14.7% to GVA, highlighting a disparity in productivity. This situation underscores the need to transition workers
from agriculture to more productive avenues in manufacturing and services, thereby enhancing overall economic
output and improving living standards. By focusing on increasing the share of manufacturing in GDP, India can
create more sustainable employment opportunities and drive inclusive growth.
A robust manufacturing base is essential for promoting self-reliance, reducing import dependence, and
increasing value addition, particularly in critical sectors such as electronics, defense, and renewable energy. As
India strives to become a USD 30 trillion economy by 2047, the manufacturing sector is expected to play a pivotal
role in achieving this vision, driving both industrial growth and social progress .
As the Indian manufacturing sector continues to evolve, it is increasingly adopting automated and process-driven
manufacturing practices, which are expected to yield significant improvements in efficiency and productivity. The
shift towards Industry 4.0 has the potential to enhance the sector by allowing manufacturers to optimize their
operations, manage costs more effectively, and improve product quality, which could contribute to their
competitiveness in the global market.
Figure 6: An overview of manufacturing in India
Source: DPIIT, RBI, MoSPI, Crisil Intelligence
21
Peer benchmarking
Among Asian economies, China boasts the highest share of manufacturing in its GDP, standing at 26.7% as of
2019. The country's manufacturing sector has experienced robust growth, driven by strategic policy initiatives
such as trade liberalization and the establishment of Special Economic Zones (SEZs). These measures have
not only improved the incomes of the Chinese population but also propelled the country to become a dominant
global exporter, significantly contributing to its GDP growth. Additionally, China's status as a dominant economic
force globally provides it with substantial leverage in trade negotiations and enhances its geopolitical influence.
In recent years, Vietnam has made notable strides in its manufacturing sector, with government-led policy
initiatives playing a pivotal role in driving this growth. In contrast, India's manufacturing sector, although growing,
lags behind its Asian peers (Japan, South Korea, China and Vietnam), in terms of its contribution to GDP.
The chart below outlines the top 20 countries by percentage share of global manufacturing value added. Of the
top 20 countries contributing to manufacturing as of 1995, only 4, China, India, South Korea and Indonesia have
managed to gain share as of 2023 while 3 have dropped off the top 20 list. The USA that accounted for nearly a
quarter of the world manufacturing GVA in 1995 is down to about one sixth as of 2023 with a shift away from
manufacturing to a service and technology driven economy. This is in contrast with China which accounted for
only 5% of the manufacturing GVA share in 1995 accounted for ~32% in 2023 while India has improved from
1.5% to 3.2%.
Figure 7: Top 20 countries by share of global manufacturing value added, 1995 vs 2023 (%)
Note: Green text denotes the new entrants to the list and the red text represents countries that no longer appear in the list
Source: Deutsche Bank, UNIDO
22
Trends in India's manufacturing GDP contribution
Figure 8: Manufacturing as a share of India’s GVA, fiscals 2005–2024 (%)
Source: MoSPI
India’s Manufacturing as a % of GVA has been rangebound over the past two decades. India’s manufacturing
sector has long been seen as a potential engine for job creation and economic growth, yet its share in GVA has
remained stubbornly stagnant, hovering around 16-18% over the two decades. Few of the factors that are
contributing to this stagnation are as follows:
Structural focus on services over manufacturing
India leapfrogged from an agrarian economy to a service-dominated economy, skipping the typical
industrialization phase that countries like China followed.
• IT, finance, and telecom grew rapidly and attracted talent, capital, and policy focus.
• This shift meant that manufacturing didn’t receive the optimal amount of attention and investment it
needed.
Complex regulatory environment (before reforms)
Prior to the economic reforms, India operated within a regulatory framework that was often perceived as complex
and challenging for businesses. This environment, characterized by stringent regulations and approvals,
sometimes hindered the growth and dynamism of the manufacturing sector.
Underdeveloped supply chains and infrastructure
India’s manufacturing potential remained under-realised largely due to persistent infrastructure bottlenecks—
both in logistics and in power supply—that raise operating costs and limit competitiveness. India’s logistics costs
estimated at around 8% of GDP – continue to weigh on supply chain efficiency and constrain manufacturing
competitiveness. Freight movement is still dominated by slower, costlier road transport, while gaps in multimodal
connectivity, warehousing quality and port efficiency increase transit times and inventory costs for manufacturers.
Equally important, India’s power infrastructure continues to face reliability issues: firms and households
17.4
18.9
18.4
17.1
16.2
12
13
14
15
16
17
18
19
20
2005200620072008200920102011201220132014201520162017201820192020202120222023202420252026
Mnaufacturing as % of GVA
23
experience far more frequent outages and voltage fluctuations compared to developed manufacturing
economies, where annual interruptions are typically limited to just a few hours. This forces Indian factories to
invest in costly backup power systems and build higher contingency buffers, pushing up production costs.
Together, these transport and power constraints weaken India’s ability to support large-scale, time-sensitive, and
globally competitive manufacturing, preventing the country from fully realising its industrial potential.
Lack of global scale in exports
India has not built globally dominant manufacturing clusters the way China has with electronics or Vietnam with
garments. Export baskets are still dominated by low-value added products (e.g., textiles, gems & jewelry), India
has only recently made headway in electronics, defense manufacturing, and semiconductors—and scale is still
emerging.
Fragmented MSME sector
A significant portion of the Indian manufacturing sector is dominated by micro, small, and medium enterprises
(MSMEs), which account for over 95% of manufacturing units. Many of these enterprises operate with outdated
technology and limited capital, facing challenges in scaling up, digitizing, and integrating into global supply
chains. Issues such as access to credit and compliance burdens further hinder their growth potential.
Government reforms
In the context of analyzing India’s manufacturing sector trajectory, it becomes critical to understand not just which
policies exist, but how they functionally contribute to the development of the manufacturing ecosystem. To do
this effectively, the initiatives have been categorized under Manufacturing- focused initiatives, Infrastructure
focused initiatives and overarching initiatives. This tripartite classification serves multiple objectives within the
report:
• It helps stakeholders understand how different policies influence manufacturing through distinct levers—
whether by directly boosting production, supporting inputs and infrastructure, or improving systemic
conditions.
• Infrastructure-focused reforms are critical for manufacturing efficiency. Improved transportation networks,
logistics facilities, and energy supply are essential for reducing operational costs and enhancing supply
chain efficiency. Understanding these reforms allows for an assessment of how infrastructure
improvements can directly impact manufacturing productivity and competitiveness.
• Targeted manufacturing focused reforms are critical to expanding domestic capacity, attracting investment,
and deepening India’s integration into global value chains.
• Overarching policy changes are crucial to simplifying compliance, reducing structural frictions, and
enabling businesses to scale more competitively.
24
Figure 9: Reform push by the Indian Government
Source: Crisil Intelligence
The Indian manufacturing and allied sectors have seen a host of reforms to aid in improving the competitiveness
compared to peers. Overarching reforms such as Startup India, Goods and Service Tax have aided in
formalisation of the economy and attracting capital. Infrastructure focused reforms have helped in building out
infrastructure to aid in bringing down power cost, improving connectivity via roads, ports, airports aiding reduction
in logistics cost. Manufacturing reforms have helped in seeding new-age sectors while providing a boost to
existing manufacturing sectors while helping in employment generation and catering to the export market.
India’s export basket
As of fiscal 2025, India's merchandise exports are reported to be USD 437 billion, 1.8 % of the world’s trade,
illustrating the country's active role in global trade. This figure reflects a diverse range of products and
commodities that India exports to various international markets.
Though India’s export basket has diversified in recent years, it remains more concentrated than that of major
export-driven economies. A significant share of India’s goods exports is still dominated by a few categories—
petroleum products, gems and jewellery, pharmaceuticals, engineering goods, chemicals, and textiles and now
increasingly electronics driven by mobile phones. While this mix spans both low- and medium-technology
segments, the overall structure is less broad-based compared to countries like China, South Korea, or even
Vietnam, which have a much larger proportion of high-technology and electronics exports. This relative
concentration leaves India more exposed to commodity price swings and sector-specific downturns,
underscoring the need to deepen capabilities in emerging, higher-value export categories to reduce vulnerability
and enhance competitiveness.
25
Figure 10: Share of top commodities in India’s export basket, FY25 (%)
Source: DGFT
Note: Commodities have been classifed at the HS 4-digit level
Petroleum Oils and Oils Obtained from Bituminous Minerals stand out as the highest exported commodity,
accounting for 14% of India's export value. Export values for this category have increased substantially, rising from
USD 31,137 million in fiscal 2017 to USD 62,550 million in fiscal 2025. This significant leap has been driven by
advanced refining infrastructure, increased production capacity, and adherence to international standards,
solidifying India's reputation as a dependable energy supplier worldwide.
As of fiscal 2025, Diamond and Jewellery exports from India reached a value of USD 26,319 million, 6% of the
fiscal 2025 exports, making it the second highest exported commodity by value for the country. This sector is a
vital component of India's export economy, reflecting the nation’s rich heritage in craftsmanship and design. The
global demand for high-quality diamonds and intricately crafted jewellery has contributed to this significant export
figure, positioning India as a key player in the international market for luxury goods. The industry's growth is
supported by a well-established supply chain and a reputation for quality, further enhancing India's status as a
leading exporter in this domain.
Electronics is the third highest exported commodity by value, driven by technological advancements, the ramp up
in manufacturing of mobile phones driven by the PLI scheme coupled with the supply chain diversification pursued
by companies. Exports of electronics surged from USD 1,043 million in fiscal 2016 to USD 25,874 million in fiscal
2025, accounting for approximately 6% of India’s export basket as of fiscal 2025. The primary destinations for
these exports include the USA, UAE, and the Netherlands.
As of fiscal 2025, Medicaments emerged as the fourth largest export commodity from India, with an export value
of USD 22,026 million, accounting for 5% of the export basket. This sector plays a crucial role in India’s
pharmaceutical industry, which is recognized globally for its capacity to produce a wide range of affordable and
high-quality medicines. The growth in medicament exports can be attributed to India's strong manufacturing
capabilities, adherence to international quality standards, strong manufacturing capability in generics and a robust
regulatory framework. Additionally, the increasing global demand for healthcare solutions, particularly in developing
countries, has further bolstered India's position as a significant supplier of pharmaceutical products. The country's
1.7%
5.0%
5.9%
6.0%
14.3%
Auto Components
Medicaments
Telecommunication
Equipment
Diamonds and Jewellery
Petroleum Oils and Oils
Obtained from Bituminous
Minerals
% share
26
commitment to providing accessible healthcare options has solidified its reputation as a reliable source of
medicaments in the international market.
Although rice ranks as India’s fifth-largest export by value, it is excluded from the chart above as the report focuses
specifically on manufactured goods. Accordingly, the next largest manufactured export, automotive components,
is highlighted. Auto components recorded exports worth USD 7,508.87 million in fiscal 2025. The sector’s export
performance reflects the rising global competitiveness of India’s automotive component players driven by
localization efforts, close collaboration with OEMs, JVs with global auto-component players and focus on quality.
Indian component manufacturers are increasingly integrated into global value chains, supplying major OEMs
across Europe, North America, and Asia.
In addition to the top exported commodities, several other sectors have demonstrated remarkable growth and are
noteworthy in India's export landscape.
India has achieved notable success in the agrochemical sector, particularly in insecticides and fungicides. With
exports reaching USD 2,436 million in fiscal 2025, capturing a sizeable share globally. Investments in research
and development, coupled with compliance with international agricultural standards, have positioned India as the
third-largest exporter globally, underscoring its pivotal role in supporting sustainable agriculture.
The capital goods sector has shown significant advancements, reflected in the exports of electrical transformers
and related components, which grew from USD 1,188mn in fiscal 2017 to USD 3,146mn in fiscal 2026. Government
initiatives such as "Make in India" and production-linked incentive schemes have bolstered this progress, creating
a robust manufacturing ecosystem.
India's export basket reflects a blend of both primary goods and manufactured products. While the share of value-
added exports such as petroleum, machinery, transport equipment, chemicals, and electronic items has grown
over the years, a significant portion of export earnings still comes from primary goods and raw materials.
Approximately, 70% of India’s exports are manufactured products, with the remaining 30% comprising primarily or
minimally processed goods. Sectors such as agricultural and allied products, base metals, and even gems in uncut
or semi-processed form highlight this continued reliance on less processed exports. This indicates that despite
strides toward industrialization and higher value manufacturing, India remains partly dependent on commodity-
based exports. The challenge ahead lies in moving further up the value chain—shifting from raw material exports
to more refined, processed, or technologically sophisticated goods that can generate better margins and long-term
economic resilience.
Background of the study
The study is intended to identify manufacturing sectors in India that can support the country’s ambition of becoming
a global manufacturing hub. The assessment focuses on understanding India’s manufacturing landscape in
relation to global trends, sectoral growth opportunities and global benchmarks. It also examines the factors that
influence manufacturing competitiveness, including market potential, infrastructure readiness, policy support, raw
material availability, technology readiness, employment potential and India’s current position in the value chain.
The project has been approached with the objective of identifying sectors where India has strong growth potential
and where targeted interventions can help strengthen domestic capabilities, improve competitiveness, enhance
value addition and support export-led manufacturing growth. The study also draws on the experience of leading
manufacturing countries to identify relevant learnings and develop sector-specific recommendations for addressing
key challenges and promoting growth in the identified sectors.
27
Methodology
Crisil leveraged its ongoing coverage of over 75 traditional, sunrise, and PLI sectors to evaluate manufacturing
opportunities in India. The project was divided into four phases.
Phase 1: Shortlisting Sectors basis their relative attractiveness - Identifying sectors with high growth potential,
based on market size and growth rate in India and globally.
Phase 2: Conducting a comprehensive, three-pronged examination of the shortlisted sectors.
Phase 3: Analyzing best practices in champion countries to inform strategies for the shortlisted sectors.
Phase 4: Developing actionable recommendations and a clear path forward for each sector.
Figure 11:Methodology adopted for the study
Phase 1: Sector selection
In the first phase, the aim was for selection of 12 manufacturing sectors for which a relative attractiveness method
was used. To judge relative attractiveness of each sector, the growth potential across both global as well as domestic,
existing market size, coupled with the employment creating opportunity and strategic alignment with the priorities of
the Indian government were considered.
The list of 62 sectors was primarily sourced from the Ministry of Statistics and Programme Implementation (MOSPI)
database and supplemented by sunrise sectors and those included under the Production-Linked Incentive (PLI)
scheme.
28
Figure 12: List of manufacturing sectors considered for shortlisting
To determine the relative score for each sector, a 4-step methodology was employed, using the following parameters:
domestic market size, global market size, domestic growth rate projection (fiscal 2023 to fiscal 2030), and global
growth rate (fiscal 2023 to fiscal 2030). The calculation process involved:
1. Data Collection: Gathering current and projected market size and growth rate data for the 62 shortlisted sectors.
2. Median Calculation: Determining the median values for each parameter across all 62 sectors.
3. Median Multiplier Calculation: Computing median multipliers for each parameter, which normalized the sector-
specific values against the median values. For example, the Median Multiplier for Domestic Market Size was
calculated as the sector's current domestic market size divided by the median domestic market size of all 62
sectors.
4. Cumulative Score Calculation: Assigning a 25% weightage to each median multiplier and calculating a cumulative
score for each sector.
To provide a visual representation and facilitate a more nuanced understanding, the market size and growth rate
scores were plotted in a 4x4 matrix with quadrants classified as below:
• Q1: High Market Size – High Growth [Most Attractive Sectors]
• Q2: Low Market Size - High Growth [Sunrise Sectors]
• Q3: Low Market Size - Low Growth [Unattractive Sectors]
• Q4: High Market Size - Low Growth [Attractive Sectors]
29
Figure 13: Sector classification matrix based on market size and growth
Source: Crisil Intelligence
Following this analysis, 12 high-potential sectors from the Q1, Q2, and Q4 quadrants, which exhibited strong market
size and growth prospects were identified. The shortlisted sectors were:
1. Automobiles
2. Chemicals
3. Capital Goods
4. Electronics
5. Pharmaceuticals
6. Defense: Defense & Drones
7. Food Processing
8. Textiles
9. Steel
10. Leather and Footwear
11. Telecom Equipment
12. Solar PV Manufacturing
Phase 2: Sector assessment
In Phase 2 of the project, the sectors shortlisted based on market attractiveness underwent a deeper evaluation to
determine their true potential within the Indian context. To achieve this, each sector was evaluated using a 3-pronged
approach: strategic alignment, operational and financial viability, and value chain play. Each prong provided a distinct
perspective on a sector’s suitability.
30
Figure 14: Framework for detailed evaluation of shortlisted sectors
Source: Crisil Intelligence
1) Strategic alignment:
The first approach, strategic alignment, is essential to ensure that sector development is not only economically viable
but also consistent with India’s long-term national priorities. This approach assesses how well each sector aligns
with India’s critical priorities. A sector that is geopolitically advantageous, rich in local raw materials, raw material
dependence on friendly nations, linked to high-export potential, and supportive of productive employment generation
will offer stronger long-term strategic value. This means that sectors are chosen based not just on profitability but
because they serve India's broader strategic ambitions, including reducing import dependence, enhancing global
competitiveness, and driving inclusive economic growth
• Raw material availability: Identified the key global raw material suppliers for each sector and the suppliers that
India relies for import of the raw materials
• Geopolitical considerations: Evaluated India's geopolitical relationships with major supplier countries. These
relationships were classified into positive and neutral
• Global trade landscape: Analyzed the global trade patterns of each sector by identifying the major exporting
and importing countries and their share in total exports as well as imports
• Employment intensity: Examined the employment intensity of sectors, including employment rates,
productivity, and skill requirement levels.
• Technology readiness: Assessed the availability of local technology, foreign partnerships, and tech-know-how
in each sector.
31
2) Operational & financial viability analysis:
Even if a sector is strategically important, it must also be operationally and financially viable to scale in India and
attract private capital and investors. This approach assesses the profitability and sustainability of sectors, ensuring
that they do not rely on ongoing government support and can scale on their own. It evaluates whether India has, or
can develop the necessary cost structures, capital environment, and market access to make the sector viable for
long-term private and public investment that would aid in attracting private capital. Furthermore, it considers
scalability, efficiency, and the return on capital required to foster sustainable growth. This approach grounds the
analysis in financial realism, ensuring that shortlisted sectors are not only desirable but also capable of thriving
independently within India's current economic structure and business climate.
• Profitability: Evaluated the financial performance of each sector by examining the operating margins, Net margins
and Returns on capital (ROCE) for domestic as well as international players.
• Capex intensity: Assessed the capital expenditure requirements for each sector by using the capex-to–sales
metric for domestic and international companies.
• Market size and growth outlook: Evaluated the size and growth potential of each sector in both domestic and
global markets.
3) Value-chain play analysis:
This phase focuses on assessing India's position within the current manufacturing value chain, identifying specific
segments where the country has a competitive edge based on where the bulk of value addition occurs. Rather than
evaluating the sector as a whole, it examines the extent of current participation in the value chain and identifies
untapped opportunities for both forward and backward integration. By analyzing India's position within the value
chain, we can avoid becoming a low-margin, peripheral assembler in global value chains and instead chart a path
toward deeper integration and greater value addition.
• Current position in value chain: Mapped the current position of India in the global value chain of each sector,
including the nodes where India has a presence.
• Forward or backward integration opportunities: Identified opportunities for forward or backward integration in each
sector, including potential partnerships, joint ventures, or acquisitions.
• Profitability in each value chain stage: Analyzed the profitability of each stage in the value chain by using EBITDA
and ROE metrics.
Phase 3: Benchmarking with champion countries
To identify opportunities for India to become a global manufacturing hub, a benchmarking exercise with two leading
manufacturing countries for each of the 12 selected sectors was conducted. This dual-country approach is designed
to extract valuable insights into the factors that have enabled these countries to achieve global supremacy in their
respective sectors. By analyzing two countries per sector, the project aims to understand the effective policy
environment, company actions, and other critical aspects that have contributed to their success and to see which of
the identified best practices can be adapted to India’s context. For example, one country may exemplify a high-tech,
capital-intensive model, such as South Korea’s expertise in electronics, while another may represent a low-cost,
labor-driven model more akin to India’s strengths, such as Vietnam in apparel. This comparative assessment allows
us to contrast different development paths and identify strategies that could be realistically emulated or adapted in
India’s context.
The approach for Phase 3 involved the following steps:
a) Identification of leading manufacturing countries: Top two manufacturing countries based on criteria such
as manufacturing output and competitiveness.
32
b) Key success factors and best practices: Key success factors and best practices that have driven the
manufacturing growth of the selected countries. This included an analysis of their economic policies, trade
agreements, skilling initiatives, investment climate, and other factors in their success.
Phase 4: Recommendations and way forward
In Phase 4, a detailed round of stakeholder consultation meetings with industry leaders from the shortlisted sectors
was organised. The purpose of these meetings was twofold: to uncover insights from the industry leaders themselves
on the ground-level challenges they face and gather their recommendations for scaling up these sectors. These
meetings enabled incorporation of firsthand perspectives, enhancing the accuracy and relevance of the assessments
in previous phases. These on-ground challenges and recommendations from the stakeholders were combined with
challenges emerging from secondary research and recommendations emerging from the best practices from other
countries. The output from phase 4 is targeted recommendations for implementation across factors of production,
regulatory landscape, taxation, FTAs, Technical recommendations based on the gaps identified in Phase 2 and best
practices identified from Phase 3.
To ensure a structured and outcome-oriented approach, each sectoral recommendation follows a three-step
framework:
• Identifying key challenges: The major bottlenecks and constraints currently inhibiting sectoral growth were
identified.
• Recommendation to address the challenge: For each identified challenge, a specific, actionable recommendation
is proposed. These are designed to be transformative yet practical, targeting root causes of the challenge.
• Execution Strategy:
Clear steps to operationalize the recommendation, including necessary policy reforms, infrastructure
development, or investment incentives.
This structured approach ensures that each recommendation is evidence-backed and context-aware.
This edition of the report focuses on four high-potential manufacturing sectors: chemicals, textiles, telecom and
network equipment and solar photovoltaic manufacturing with the other 8 identified above to be released in
subsequent volumes.
Figure 15: Constituents of Volume I
Source: Crisil Intelligence
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The selected sectors represent a combination of export-oriented, technology-intensive and employment-focused
manufacturing opportunities. Chemicals is deeply integrated into global value chains and offers significant scope for
strengthening India’s role in export-led manufacturing. Textiles remains one of India’s most employment-intensive
sectors, with strong linkages to micro, small and medium enterprises (MSMEs), rural and semi-urban economies
and global trade. Telecom and network equipment is critical for reducing import dependence, strengthening domestic
technology capabilities and building competitiveness in digital infrastructure. Solar PV manufacturing is strategically
important for India’s energy transition, domestic manufacturing scale-up and participation in the global clean energy
value chain.
Together, these sectors reflect the broader objective of identifying manufacturing opportunities that can support
India’s transition into a globally competitive manufacturing hub. The study evaluates each sector through a structured
framework covering market attractiveness, strategic alignment, raw material availability, global trade positioning,
technology readiness, financial viability, value-chain opportunities and policy support requirements. It also draws on
international benchmarking and stakeholder consultations to identify actionable recommendations for strengthening
domestic manufacturing capabilities, improving competitiveness and enabling scale.
34
Chemicals Textiles
Telecom and Network
Equipment
Solar PV
Chemicals Textiles
Telecom and Network
Equipment
Solar PV
Volume 1
Chemicals Textiles
Telecom and Network
Equipment
Solar PV
35
36
Table of contents
Executive summary ......................................................................................................................................................... 37
Introduction ..................................................................................................................................................................... 41
Petrochemicals and organic chemicals ........................................................................................................................ 41
Inorganic chemicals .................................................................................................................................................... 42
Specialty chemicals .................................................................................................................................................... 42
Overview of the global chemicals industry ....................................................................................................................... 43
Domestic chemicals industry: A detailed profile ................................................................................................................ 45
Strategic alignment ......................................................................................................................................................... 52
Financial viability ............................................................................................................................................................. 57
Value chain play .............................................................................................................................................................. 60
Case studies and global best practices ............................................................................................................................ 62
China .......................................................................................................................................................................... 63
ASEAN (South Korea, Indonesia, Malaysia, Vietnam, and Thailand) ........................................................................... 66
Recommendations: Policy initiatives and reforms ............................................................................................................ 70
Conclusion ...................................................................................................................................................................... 82
37
Executive summary
Sector overview
India’s chemicals industry is a strategically important part of the country’s manufacturing ecosystem, supplying critical inputs
to agriculture, pharmaceuticals, textiles, automotive, construction, electronics, consumer goods and several other
downstream sectors. The industry accounts for 3-3.5% of the global chemicals market, ranks sixth globally and fourth in
Asia by production, and was valued at $200-220 billion in fiscal 2025. It is expected to grow at a 6-8% CAGR over the next
five fiscals, supported by rising domestic consumption, favourable government policies, expanding manufacturing capacity,
higher disposable incomes, urbanisation and changing consumer preferences.
Globally, the chemicals industry remains large and diversified, with the market projected at $4,300-4,500 billion in 2025 and
expected to reach $5,000-5,500 billion by 2030, implying a 2-4% CAGR. Asia-Pacific is the largest and fastest-growing
region, led by China, while India’s current share remains relatively modest, indicating significant headroom for expansion.
By fiscal 2030, India’s domestic chemicals market consumption is expected to reach $290-310 billion, with the country
aiming to increase its share in global chemical consumption to 5-6%.
The sector’s long-term growth is expected to be driven by multiple structural factors. Low per capita consumption presents
a large opportunity for demand expansion across consumer goods, agriculture, construction, pharmaceuticals and personal
care. India’s large domestic market, improving engineering and research capabilities, supply-chain diversification away from
China, and rising purchasing power further strengthen the growth outlook. The report also highlights that India can transition
from being a large consumption-led market to a more globally relevant manufacturing and export hub if policy, infrastructure
and capability gaps are addressed in a coordinated manner.
38
Industry structure
The domestic chemicals industry is broadly led by three key consumption segments: petrochemicals and organic chemicals,
specialty chemicals, and inorganic chemicals. Petrochemicals and organic chemicals form the largest segment and include
polymers, synthetic fibres, performance plastics, building blocks, intermediates and end-products. These products support
industries such as packaging, textiles, pharmaceuticals, dyes, adhesives and plastics. In fiscal 2025, petrochemicals and
organic chemicals accounted for a sizeable share of the domestic chemicals market.
Specialty chemicals are high-value, low-volume products customised for specific applications. They include dyes and
pigments, paints and coatings, agrochemicals, surfactants, flavours and fragrances, construction chemicals, polymer
additives and textile chemicals. This segment is attractive because it offers higher value addition, stronger margins and
export potential. India is already a net exporter in agrochemicals and colourants, while global supply-chain diversification
creates further opportunities for Indian manufacturers. However, India remains import-dependent in certain specialty
segments such as polymer additives and surfactants.
Inorganic chemicals are essential industrial inputs used in construction, water treatment, food processing, electronics,
manufacturing and agriculture. This segment includes products such as soda ash, caustic soda, chlorine, hydrochloric acid,
carbon black and inorganic pigments. Demand is supported by the versatility of these chemicals and their relevance across
multiple end-use industries. However, the segment faces challenges related to raw material availability, limited domestic
capacity in some products and dependence on imports.
The report highlights that India’s industry structure is constrained by a persistent gap between domestic production and
consumption, particularly in petrochemicals and inorganic chemicals. Feedstock allocation in India is skewed towards bulk
commodities rather than higher-value downstream derivatives. For example, a large share of propylene is used to produce
polypropylene, while ethylene is largely used for polyethylene production. This limits the availability of building blocks for
more complex and value-added chemicals. Strengthening downstream integration and incentivising complex derivatives
are therefore critical to enhancing domestic value addition.
Global case studies
Global example What worked What India can adopt
China Large-scale integrated manufacturing, strong
supplier networks, low-cost production,
industrial zones and active policy support
Build scale, deepen domestic supply chains,
incentivise downstream derivatives and
strengthen cluster-based manufacturing
ASEAN economies Country-level chemical roadmaps, investment
incentives, petrochemical self-sufficiency and
sector-specific policies
Create long-term sectoral plans with clear
investment targets, feedstock security and
technology priorities
Jurong Island,
Singapore
Anchor investments, shared infrastructure,
strong logistics connectivity and proactive
governance
Develop plug-and-play chemical parks with
shared utilities, pipelines, effluent systems and
efficient approvals
Rotterdam and
Nanjing chemical
hubs
Integrated port, pipeline, storage and industrial
ecosystems with stable zoning and strong
cluster discipline
Front-load infrastructure, ensure land-use
stability and create empowered authorities for
chemical hubs
39
Challenges and recommendations
Key challenge Impact on industry Recommended action
Import dependency on
raw materials
Exposure to price volatility,
supply disruptions and
geopolitical risk
Identify critical chemicals for import substitution;
support domestic production through incentives and
viability gap funding
Infrastructure and
connectivity gaps
Higher logistics cost, slower
project execution and lower
competitiveness
Develop integrated PCPIRs, shared utilities, pipeline
grids, common effluent systems and port-linked
chemical hubs
Impact of free trade
agreements (FTAs) and
regulatory interventions
Domestic industry growth and
competitiveness
Negotiate balanced FTAs, create awareness and
ensure effective utilisation of FTAs, promote localised
production and sustainable shipping methods
Chemicals
41
Introduction
The Indian chemicals industry accounts for 3-3.5% of the global chemical industry and ranks sixth globally and fourth in
Asia by production. It was valued at $200-220 billion in fiscal 2025 and is expected to grow at a compound annual growth
rate (CAGR) of 6-8% over the next five fiscals.
On the production side, domestic output is estimated to be 16,000-17,000 kilotonnes (KT) in fiscal 2025, with a 4-6%
CAGR expected through fiscal 2030. Growth is underpinned by rising domestic consumption, favourable government
policies, expanding manufacturing capacity, higher disposable incomes, urbanisation and shifting consumer preferences.
Petrochemicals and organic, inorganic, and specialty chemicals are the key segments of India’s chemicals industry based
on market consumption.
Figure 16: Supply chain of the chemical industry
Note: PP – Polypropylene, PE – Polyethylene, PS – Polystyrene
Source: Crisil Intelligence
Petrochemicals and organic chemicals
Petrochemicals, also known as petroleum distillates, are derived from petroleum and natural gas through a refinement
process. This segment encompasses a wide range of products, including polymers, synthetic fibres and performance
plastics. The category can be broken down into three main sub-segments:
• Building blocks: These are the basic chemicals used to produce other petrochemicals, such as ethylene, propylene,
benzene, toluene and butadiene, which are used in the production of plastics, synthetic fibres, dyes,
pharmaceuticals and adhesives
• Intermediates: These are chemicals used to produce other petrochemicals, including terephthalic acid (PTA),
styrene, vinyl chloride monomer (VCM), phenol, methanol and formaldehyde, which are used in the production of
adhesives, resins and plastics
• End-products: These are the final petrochemical products, such as high-density polyethylene (HDPE), linear low-
density polyethylene (LLDPE), and polyvinyl chloride (PVC). Petrochemicals represent the largest segment of the
chemicals industry
Organic chemicals, on the other hand, are carbon-based compounds used in various applications, such as pharmaceuticals,
agrochemicals and dyes.
Examples of organic chemicals are fertilisers and pesticides, which are used in the agriculture sector.
Crude oil, Natural gas
Minerals, brine
Petrochemicals:
Ethylene, propylene
Polymers: PP, PE, PS
Commodity
chemicals: Phenol,
LAB
Agrochemicals
Colorants
Surfactants
Polymer additives
Textile chemicals
Construction
chemicals
Manufacturers
Distributions
Traders
Feedstock Basic chemicals Specialty chemicals Marketing/sales
42
In fiscal 2025, petrochemicals and organic chemicals accounted for approximately 24% of the domestic chemical industry,
with a market size of ~$50 billion.
Inorganic chemicals
Inorganic chemicals are a vital component of India's industrial foundation, providing crucial materials for various sectors,
such as construction, water treatment and electronics. This broad category of compounds, characterised by the absence of
carbon-hydrogen bonds, includes a wide range of substances, such as metals, salts and minerals.
The applications of inorganic chemicals are diverse and widespread, catering to numerous industries, including
• Agriculture (ammonia is used in fertilisers to promote crop growth)
• Manufacturing (hydrogen peroxide is used for surface treatment of metals)
• Food processing (sodium hydroxide is used in various food processing applications)
Other examples of inorganic chemicals are:
• Alkali chemicals (such as soda ash and caustic soda)
• Chlor-alkali products (such as chlorine and hydrochloric acid)
• Carbon black (used in the production of tyres and other rubber products)
• Inorganic pigments (such as titanium dioxide and iron oxide)
Demand for inorganic chemicals is driven by their versatility and the availability of raw materials, making them an essential
part of various industries. Overall, inorganic chemicals play a significant role in supporting the growth and development of
multiple sectors.
In fiscal 2025, inorganic chemicals accounted for approximately 9% of the domestic chemical industry, with a market size
of ~$17 billion.
Specialty chemicals
Specialty chemicals are high-value, low-volume chemicals used in specific applications. They are often customised based
on the needs of a particular industry or customer and are used to add value to a product or process. Specialty chemicals
can be either organic or inorganic.
Some examples of specialty chemicals are:
Dyes and pigments (used in textiles, paints and coatings)
Paints and coatings (used in construction, automotive and industrial applications)
Agrochemicals (used to control pests and diseases)
Surfactants (used to reduce surface tension and types are anionic, non-ionic, cationic and amphoteric)
Flavours and fragrances (used in food, beverages and personal care products)
In fiscal 2025, the specialty chemicals accounted for approximately 18% of the domestic chemical industry, with a market
size of ~$37 billion.
43
Overview of the global chemicals industry
The chemicals industry is a critical enabler of industrial and consumer value chains, supplying materials that underpin
sectors such as agriculture, pharmaceuticals, automotive, construction, electronics and consumer goods. The industry
encompasses commodity chemicals, specialty chemicals, agrochemicals, polymers and advanced materials.
The global chemicals market is projected to be valued at $4,300-4,500 billion in 2025, comprising a diverse range of
chemicals categorised by chemistry, source and end-users.
From a production and trade perspective, China continues to dominate with a share of approximately 39%, supported by
large-scale integrated complexes and favourable feedstock economics. The European Union (~15%) and the United States
(~13%) follow, with competitive advantages in innovation, regulatory compliance and high-value derivatives. India currently
accounts for 3-3.5% of global output, reflecting substantial scope for market share expansion in the coming decade.
Market growth and projections
The global chemicals market is projected to expand at a CAGR of 2-4% through 2030 to $5,000-5,500 billion. Growth will
be driven predominantly by Asia-Pacific economies, with sustained demand from end-use industries and incremental
contributions from sustainability-driven and technology-intensive segments.
The sector demonstrated resilience during the pandemic-related downturn and has since benefitted from supply-chain
restocking, structural demand in healthcare and food security, and accelerated adoption of specialty chemicals in electric
mobility, renewable energy and sustainable packaging. Long-term growth will be further supported by regulatory push
towards lower-carbon processes, circular-economy initiatives, and advances in bio-based and recyclable materials.
Regional market distribution (2024)
• Asia-Pacific (~55%) remains the largest and fastest-growing region, led by China and supported by expanding
capacities in India, South Korea, Japan and Southeast Asia
• Europe (including Russia, ~20%) is strong in high-value specialties, performance chemicals and sustainability-
focused solutions
• North America (~15%) benefits from cost-competitive shale-gas feedstocks and leadership in life sciences and
advanced materials segments
• Rest of the world (~10%): Africa continues to represent the smallest regional market due to limited industrial
infrastructure and investment
Key players
At a country level, China, Germany, Japan and the United States remain the pre-eminent forces in production, innovation
and international trade. Leading multinational corporations maintain diversified global footprints, while increasingly
evaluating additional manufacturing bases in cost-competitive and geopolitically stable jurisdictions such as India to
enhance supply-chain resilience.
44
Table 1: Key components of chemicals segments
Segments Sub-segments
Basic chemicals
Inorganic chemicals (caustic soda, soda ash, chlorine, titanium dioxide), bulk petrochemicals and
intermediates (ethylene, propylene, BTX, methanol), plastic resins (PE, PP, PVC, PET, PS), synthetic
rubber and fibres
Specialty chemicals
Agrochemicals (active ingredients and formulations), electronic chemicals, polymer additives and
masterbatches, construction chemicals, water treatment chemicals, adhesives and sealants, flavours
and fragrances, dyes and pigments, personal care actives, performance lubricants and fuel additives
Agricultural chemicals
Fertilisers (nitrogenous, phosphatic, potash, complexes), crop protection (insecticides, herbicides,
fungicides, biopesticides)
Consumer chemicals
Surfactants, oleochemicals, preservatives, emulsifiers, rheology modifiers used in soaps, detergents,
shampoos, cosmetics, oral care, household cleaners
Note: PP – Polypropylene; PE – Polyethylene; PS – Polystyrene; PVC – Polyvinyl Chloride; PET – Polyethylene Terephthalate;
BTX – Benzene, Toluene, Xylene
Source: Crisil Intelligence
Figure 17: Global chemicals industry and segment-wise share of the chemicals industry
Global chemicals industry
Segment-wise share of the chemicals industry
Note: Industry size excludes pharmaceuticals. P: Projected
Source: Crisil Intelligence
• The basic chemicals segment remains the domain of feedstock-advantaged nations and mega-scale integrated
players
• Specialty chemicals offer the highest profitability and resilience; leadership is concentrated in Germany,
Switzerland, the US, Japan, and increasingly China and India (for cost-competitive innovation)
• Agricultural chemicals are undergoing rapid transformation due to sustainability regulations, patent expiries and the
rise of biological alternatives
• Consumer chemicals are seeing a structural shift in the supply chain: While formulation and branding remain with
Western fast-moving consumer goods (FMCG) majors, a growing share of functional ingredients is now
manufactured in Asia, particularly India and Southeast Asia.
4,316
4,300-4,500
5,000-5,500
CY19 CY23 CY30P
$bnn
Basic
chemicals
57%
Specialty
chemicals
19%
Agricultural
chemicals
11%
Consumer
chemicals
13%
45
Domestic chemicals industry: A detailed profile
The Indian chemicals industry accounts for 3-3.5% of the global industry and ranks sixth globally and fourth in Asia by
production. It was valued at $200-220 billion in fiscal 2025 and is expected to grow 6-8% over the next five fiscals. Inorganic
chemicals, petrochemicals and specialty chemicals are the three key attractive segments for manufacturers. The domestic
industry produces more than 80,000 products.
1
Figure 18: India’s share in the global chemicals industry
Source: Crisil Intelligence
India’s chemicals industry is a cornerstone of the country’s manufacturing ecosystem, supplying essential raw materials to
critical industries such as agriculture, pharmaceuticals, textiles, automotive and construction.
Besides its hold on domestic production, India also captures the export market and ranks 11
th
in terms of exports by value
for chemicals. As of fiscal 2025, India is a net exporter in agrochemicals and colourants, which account for nearly 59% of
the specialty chemicals industry total market size domestically. For polymer additives and surfactants segments, which
comprise ~29% of the specialty chemicals market, India is a net importer, whereas the textile chemicals and construction
chemicals segments operate mostly via domestic production (forming ~12% of the specialty chemical market in India).
2
Owing to limited feedstock materials and minerals, both inorganic chemicals and petrochemicals will have a trade deficit.
India's high import requirements highlight a significant shortfall in domestic production, underscoring the need to enhance
domestic manufacturing capabilities. By addressing capacity gaps, India can transform its chemicals industry and emerge
as a key global player.
1
India Brand Equity Foundation
2
Crisil Intelligence
India: $200-220 billion
Global: $4,300-4,500 billion
FY25
India: $290-310 billion
Global: $5,000-5,500 billion
FY30P
46
Figure 19: India’s chemicals industry - Market size
Note: Others include pharma, API, biotech, etc.
Source: Crisil Intelligence
Besides robust domestic production, the industry has a strong export footprint, positioning India as the eleventh-largest
exporter of chemicals by value, even though the inorganic chemicals and petrochemicals segments will have a trade deficit
due to limited feedstock of materials and minerals.
India's chemicals industry is hindered by structural constraints that limit its growth and integration into global value chains,
necessitating government intervention to unlock its full potential. Key challenges include:
1. High reliance on imports: India heavily relies on imports, particularly for petrochemical intermediates and specialty
chemicals.
2. Trade deficit: This reliance on imports has resulted in a significant trade deficit, undermining the industry's
competitiveness and sustainability.
By providing targeted support and addressing these structural constraints, the government can help the Indian chemicals
industry to achieve its full potential, reduce its trade deficit, and become a more significant player in the global chemicals
market.
Infrastructure limitations, including insufficient feedstock availability, inadequate common user facilities, and logistical
constraints, further impact cost competitiveness. Additionally, complex regulatory frameworks, environmental compliance
hurdles and skill shortages present significant barriers to domestic production and investment.
The Indian petrochemical industry's feedstock allocation is skewed towards producing bulk commodities, rather than higher-
value chemicals. For instance:
1. Propylene: 95% is used to produce polypropylene (PP) in India, compared with 70% globally
3
3
Powering India’s participation in Global Value Chains, July 2025
Fiscal 2026 to 2030
~5%
~5%
~8%
~6%
~9%
CAGR (%)
47
2. Ethylene: 75% is used for polyethylene (PE) production in India, versus 63% globally
4
3. Benzene: 87% is allocated to alkylbenzene, chlorobenzene and cumene in India, whereas globally only 25% is used
for these chemicals, with a larger share going to more complex derivatives
5
4. Butadiene: About 84% is converted to polybutadiene rubber (PBR) and styrene-butadiene rubber (SBR) in India,
compared with a global average of 54%
6
To address this imbalance and make the Indian petrochemical sector more competitive globally, targeted government
support is necessary. This could include:
• Viability gap funding (VGF) to encourage investments in downstream, higher-value chemical manufacturing
• Incentives for producing complex derivatives, such as ethylbenzene, cumene, cyclohexane and nitrobenzene,
which have higher value-added potential
By providing targeted support, the government can catalyse investments in higher-value chemical production, helping the
Indian petrochemical industry become more competitive and diversified.
India’s share of imports has tripled over the past 20 years, clocking the highest growth rate of ~15%, followed by China and
Brazil.
Petrochemicals and organic chemicals, specialty chemicals, and inorganic chemicals are the three key segments
of India’s chemicals industry based on market consumption.
1. Petrochemicals and organic chemicals: Derived from petroleum and natural gas, this segment includes polymers,
synthetic fibres and performance plastics. It is divided into building blocks, intermediates and end-products, and is the
largest chemicals segment, with a persistent production-consumption gap
2. Specialty chemicals: High-value, low-volume chemicals that drive innovation and customisation in industries such as
pharmaceuticals, agriculture and personal care. Examples include paints, dyes, agrochemicals and surfactants. This
category is research-intensive and accounts for a significant portion of India's chemical exports
3. Inorganic chemicals: Essential materials for construction, water treatment, electronics and other sectors, these
chemicals are a broad category of compounds without carbon-hydrogen bonds. They include metals, salts and minerals,
and are used in various industries, such as agriculture, manufacturing and food processing, driven by diverse
applications and raw material availability.
4
Powering India’s participation in Global Value Chains, July 2025
5
Powering India’s participation in Global Value Chains, July 2025
6
Powering India’s participation in Global Value Chains, July 2025
48
Figure 20: India has strong export potential in dyes, pigments and agrochemicals
Source: DCPC, Crisil Intelligence
As the external environment remains challenging, the industry requires short-term support from both the industry and
policymakers to achieve the targets and vision set for the future.
Focused and timely interventions can help the industry meet evolving demand, while also ensuring environmental safety
and the well-being of workers.
To cater to the increasing demand for chemicals in India, it is essential to significantly boost domestic production capabilities.
This can help India achieve several goals, including:
1. Doubling its share in the global chemicals value chain (GVC)
7
: India aims to increase its participation in the global
chemicals market, targeting a 5-6% share by fiscal 2030
2. Becoming a net-zero importer: By ramping up domestic production, India can reduce its reliance on imports and
become self-sufficient in meeting its chemical needs
3. Creating new job opportunities: The industry is expected to generate 700,000-1 million
8
new jobs by the end of the
decade
To achieve these objectives, India needs to double its production of chemicals to $220-280 billion by fiscal 2030. As of fiscal
2023, the country produces chemicals worth around $110 billion.
9
By 2030, the domestic chemicals market consumption is
expected to reach $290-310 billion, accounting for 5-6% of global consumption.
This ambitious target requires significant investments, infrastructure development and policy support to drive growth in the
industry.
Becoming a net-zero importer
To become a net-zero importer by 2030, India’s chemicals industry can adopt a strategic approach that involves:
1. Boosting exports: Increasing exports of specialty chemicals to around $45 billion
10
, driven by segments such as:
• Dyes and pigments
• Paints and coatings
• Agrochemicals
7
Powering India’s participation in Global Value Chains, July 2025
8
Powering India’s participation in Global Value Chains, July 2025
9
Powering India’s participation in Global Value Chains, July 2025
10
Powering India’s participation in Global Value Chains, July 2025
000 MT
49
• Flavours and fragrances
2. Balancing imports with exports: Offsetting imports of petrochemicals and inorganics with increased exports
3. Enhancing domestic production capabilities: Implementing focused initiatives to improve production capabilities,
enabling India to increase its share of the global chemicals market and reduce reliance on imports
To achieve this aspiration, India’s chemicals industry needs to demonstrate:
• A 10-11%
11
increase in the consumption CAGR to drive demand and growth for the next five fiscals
• A 14%
12
increase in production CAGR to meet growing demand and expand exports
By 2030, the industry can aim to achieve the following export targets
13
to become a net-zero importer:
Table 2: Chemical sector exports target by 2030:
Chemical segment Export target by 2030
Specialty chemicals $45 billion
Inorganic Chemicals $5-10 billion
Petrochemicals $26 billion
The industry requires targeted investments and interventions to help India meet its 2030 targets.
The industry has several strengths, including:
• Growing domestic demand
• Supportive government policies
• Robust manufacturing capabilities
However, there are challenges that need to be addressed, such as:
• Infrastructure gaps
• Regulatory hurdles
• Need for technological advancements
To overcome these obstacles and capitalise on opportunities, the industry requires a comprehensive road map that includes:
• Targeted investments to drive growth and innovation
• Policy interventions to support the industry
• An innovation-driven ecosystem to position India as a leader in the global chemicals value chain
A structured and strategic approach can help India unlock its full potential and become a major player in the global chemicals
industry.
Growth opportunities and trends
The chemicals industry is poised for significant growth, driven by:
11
Powering India’s participation in Global Value Chains, July 2025
12
Powering India’s participation in Global Value Chains, July 2025
13
Powering India’s participation in Global Value Chains, July 2025
50
1. Low per capita consumption: India’s per capita chemical consumption is much lower than the global average and that
in developed economies such as the US or Germany. This gap reflects under-penetration in end-use sectors such as
consumer goods, agriculture and construction, and presents opportunities for new investments.
For instance, in personal care and pharmaceuticals, rising middle-class aspirations could double demand for specialty
chemicals such as surfactants and polymers in the next five fiscals. Investment opportunities are present in greenfield
projects for basic chemicals production, supported by the Production Linked Incentive (PLI) scheme. The low base
creates fertile ground for both domestic firms and multinational entrants to scale up operations, potentially adding value
through localised manufacturing.
2. Large domestic market: A vast population, strong agricultural sector, and growing export demand are expected to
drive industry growth. With a population exceeding 1.4 billion, India represents one of the world’s largest untapped
markets for chemicals, particularly in agrochemicals (accounting for 20% of global demand) and industrial inputs. The
agricultural sector, employing 40-50% of the workforce, relies heavily on fertilisers and pesticides, with demand
projected to grow at a good pace amid efforts to boost farm productivity.
Meanwhile, export demand is surging in textiles, automobiles and electronics, where chemicals like dyes, resins and
adhesives are essential.
3. Geopolitical shifts: The global supply chain’s shift away from China creates an opportunity for India to capitalise on
challenges and become a preferred trade partner. Ongoing trade uncertainties, coupled with post-pandemic supply
disruptions, have accelerated supply chain diversification strategies, positioning India as an attractive alternative for
chemical manufacturing. The Atmanirbhar Bharat initiative, alongside free trade agreements with the UAE and Australia,
enhances this pivot by streamlining logistics and reducing duties. Challenges like raw material shortages persist, but
they offer entry points for joint ventures.
4. Rising gross domestic product (GDP) and purchasing power: The domestic market holds growth potential as GDP
and purchasing power increase. India’s GDP is forecast to reach $5 trillion by 2027, which directly correlates with
heightened chemical demand across consumer durables, housing, and mobility. Purchasing power parity (PPP)
improvements, with household incomes expected to rise, will fuel consumption in high-value segments such as paints,
adhesives and water treatment chemicals.
Government measures such as goods and services tax rationalisation, easier credit access for small and medium-sized
enterprises (SMEs) will unlock growth potential, enabling a shift from low-margin commodities to premium products,
thereby enhancing profitability margins.
5. World-class engineering, research and development (R&D) capabilities: India’s strong engineering and research
capabilities support the industry’s growth. Indian chemical companies have developed cost-effective and efficient
production processes.
For example, the world’s largest single-site refinery-cum-petrochemical complex in Jamnagar, has world-scale crackers,
aromatics and downstream units that consistently achieve 98–99% capacity utilisation and top-quartile energy
efficiency. Similarly, companies have mastered highly complex, multi-step chemistries (e.g., fluorination, high-pressure
hydrogenation and continuous-flow reactions) that very few countries outside Germany, Japan and China can execute
reliably at commercial scale.
On the production side, Indian manufacturers excel in backward integration into critical intermediates and raw materials,
which will help reduce import dependency and improve margins. These operational and engineering strengths,
combined with in-house R&D teams that optimise yields and debottleneck plants, give Indian producers a decisive edge
in both commodity and specialty segments. This capability is a key reason global majors are increasingly outsourcing
complex molecules and partnering with Indian firms for co-development and toll manufacturing, driving higher value
addition and sustained double-digit growth for the sector.
51
Growth projections
India’s share in the global chemicals value chain is expected to reach $290–310 billion by fiscal 2030, clocking a healthy
CAGR of 6 - 8%. This reflects India’s steady shift from being a large importer to a global-scale producer and exporter. The
key macro factors driving this long-term growth are:
1. Rising disposable incomes: The expected increase in disposable incomes in India is expected to contribute to
household consumption growth by 2030. This will drive higher penetration of chemicals-intensive products in multiple
end-use segments, including packaged foods, personal care, household products, pharmaceuticals, coatings and
automotive care.
As households cross key income thresholds, consumption patterns will shift toward branded, performance-oriented and
value-added products, creating steady and broad-based demand for a wide range of basic and specialty chemicals.
2. Urbanisation: Growing urbanisation and evolving consumer preferences for sustainable and health-conscious options
will drive demand for specialty chemicals. India continues to experience rapid urban growth, accompanied by changing
lifestyle aspirations and increasing awareness of health, safety and sustainability. These trends are accelerating
demand for advanced and differentiated chemical products such as low-VOC (Volatile Organic Compounds) and water-
based coatings, eco-friendly surfactants, bio-based materials, performance polymers and functional additives.
The shift towards modern retail, organised housing, personal mobility and green products is structurally increasing the
share of specialty and functional chemicals in the overall consumption basket.
3. Supply chain diversification: Global companies seeking to diversify their supply chains present an opportunity for
India to become a preferred trade partner. Heightened focus by global corporations on risk mitigation and resilience has
accelerated efforts to reduce single-country concentration. India is emerging as a preferred alternative destination
because of its scale advantages, established manufacturing base in agrochemicals and pharmaceuticals, improving
regulatory alignment and competitive cost structure.
This global rebalancing is translating into inbound investments, long-term supply agreements, technology partnerships
and the qualification of Indian facilities as strategic second sources, thereby providing a durable platform for export-led
growth.
Emerging trends
1. Sustainable and health-conscious products: Growing demand for eco-friendly and healthy products will drive
innovation in the chemicals industry. Heightened environmental awareness and regulatory pressure, combined with
evolving consumer preferences, are driving strong demand for eco-friendly, low-toxicity and bio-based chemical
solutions. End-use industries such as personal care, home care, paints and coatings, textiles, and packaging are
increasingly specifying greener formulations - including biodegradable surfactants, plant-derived additives, water-based
resins, and low-VOC or zero-VOC products.
This shift is compelling manufacturers to invest in green chemistry, renewable feedstocks and circular-economy
processes. Companies that develop sustainable portfolios are gaining preferential access to premium domestic
segments and regulated export markets (particularly Europe and North America), while also benefiting from favourable
incentives under India’s evolving environmental framework.
2. Supply chain resilience: India can leverage its manufacturing base to boost export capabilities and become a reliable
trade partner. Global corporations are actively reconfiguring supply chains to reduce single-country risk and enhance
operational continuity. India’s established manufacturing depth in agrochemicals, pharmaceuticals, dyes, pigments, and
specialty intermediates, coupled with its improving infrastructure and policy stability, positions it as a credible
diversification destination.
52
This trend is manifesting through long-term offtake agreements, vendor qualification programmes, joint-venture
investments and the establishment of India-based captive production units by multinational enterprises. The resulting
increase in export-oriented capacity and technology inflow is strengthening India’s reputation as a reliable, scale-
capable trade partner in the global chemicals ecosystem.
3. Global economic shifts: India is expected to become the world’s third-largest economy by 2030, with middle-income
households likely to surge to 181 million
14
in the period, driving demand for chemical products. The resultant surge in
consumption of automobiles, housing, consumer durables, packaged goods and healthcare products will directly
translate into structurally higher demand across the chemicals value chain - from basic building blocks to high-
performance specialties.
This domestic demand tailwind, combined with India’s growing integration into global value chains, is creating a virtuous
cycle of scale, investment and innovation that will underpin long-term industry expansion.
Strategic alignment
Raw material availability
Table 3: Key raw materials used in specialty chemicals manufacturing and leading producer countries
Source: Crisil Intelligence
Methanol, phenol, palm oil, acetic acid and formaldehyde are the key raw materials for the specialty chemicals industry.
The table above shows the top three source countries for each.
The Indian specialty chemicals industry remains heavily dependent on imported key starting materials and intermediates.
The five critical raw materials collectively form the backbone of several high-growth specialty chemical value chains (e.g.,
resins, agrochemicals, surfactants, pharmaceuticals and adhesives).
Strategic implications
• High-intensity materials (methanol, phenol, palm oil derivatives) are overwhelmingly sourced from a limited number
of countries. This concentration exposes Indian manufacturers to price volatility, supply disruptions and geopolitical
risks
• China’s dominance in methanol, phenol, acetic acid and formaldehyde creates a structural vulnerability, particularly
as global buyers pursue supply derisking strategies while Indian producers still rely on Chinese feedstocks for the
same molecules they aim to export
• Palm oil derivatives are tied to Southeast Asia. While geographically closer than methanol or phenol sources, they
remain subject to export restrictions (as seen in Indonesia’s 2022 ban) and sustainability-related trade barriers in
Europe and North America
14
Crisil Intelligence
Raw material Methanol Phenol Palm oil Acetic acid Formaldehyde
Raw material intensity High High High Medium Low
Producer 1 China China Indonesia China China
Producer 2 Saudi Arabia US Malaysia US US
Producer 3
Trinidad and
Tobago
South Korea Thailand Malaysia Germany
53
• Acetic acid and formaldehyde, though less import-intensive in volume terms, are still largely imported or produced
domestically using imported methanol, creating indirect dependency
Emerging opportunities and strategic responses
• Backward integration initiatives: Several large Indian players and consortiums are investing in methanol and phenol
projects (both coal/gas-based and green methanol routes) to reduce import dependence over the medium term.
• Alternative feedstock strategies: Companies are exploring bio-based routes (e.g., bio-methanol, fermentation-
derived acetic acid) and diversifying palm oil derivative sourcing through long-term contracts with Malaysia and new
plantations in northeast India and Andaman and Nicobar Islands.
• Policy support: The government is prioritising these molecules under the Petroleum, Chemicals and Petrochemicals
Investment Regions (PCPIRs) and the PLI scheme for key starting materials, offering viability gap funding and
capital subsidies for domestic mega-plants.
• Inventory and hedging mechanisms: Industry bodies are working with the government to create strategic raw
material buffers and coordinated procurement platforms to reduce price volatility.
Table 4: Geopolitical relation with major raw material supplier countries
Source: Crisil Intelligence
India imports these materials from multiple countries, often because of lower cost and unutilised capacity. For methanol,
major suppliers include Oman, Saudi Arabia and Iran, which together account for over 70% of the total imports. In Iran and
Saudi Arabia, methanol is produced from natural gas which is abundantly available there at much lower cost. Phenol is
imported from Thailand, Saudi Arabia and US since India’s production has not kept pace with the growing downstream
demand.
Palm oil is imported from Indonesia, Malaysia and Thailand owing to its low availability in India because of its unsuitable
climate. Acetic acid is primarily imported from China, Malaysia and Singapore because of its limited domestic installed
capacity. Imports account for less than 1% in formaldehyde supply because of overcapacity in India.
Raw material Methanol Phenol Palm oil Acetic acid Formaldehyde
Supplier country 1 Oman Thailand Indonesia China Spain
Supplier country 2 Saudi Arabia Saudi Arabia Malaysia Malaysia Germany
Supplier country 3 Iran US Thailand Singapore China
Domestic availability Yes Yes Yes Yes Yes
Import share 93-98% 35-40% 60-65% 85-90% ~1%
Geopolitical relationship Positive Neutral
54
1. World trade
Figure 21: World trade
Note: Import and export data includes agrochemicals, dyes and pigments, and surfactants
Source: Trade Map, Crisil Intelligence
China, the US, Germany, India and France dominate the specialty chemical export market owing to abundant low-cost raw
materials, strong process engineering capabilities and low-cost manufacturing capabilities. China leads with a 16% share
(2024), driven by the country’s engineering expertise, technological advancement, high production capacity and abundance
of low-cost raw material. The US, with a 10% share, is home to some top specialty chemical players. It is the second largest
producer of specialty chemicals with abundant natural resources, a highly skilled workforce and global distribution networks.
Germany also holds a 10% share (2024), with companies benefiting from large production facilities, excellent research
landscape and world-class infrastructure. India’s share (8%) is because of its increased production capacity, technological
advancement and favourable government policies, whereas France (6%) is the leading partner in the European Union for
chemicals owing to its stable business climate that attracts global investors.
On the import side, Brazil leads with a share of 6%, driven by surging demand from key end-user industries such as personal
care and agriculture. Despite its economic strength, the country faces challenges owing to limited domestic investments in
R&D. Germany holds a 5% share, mostly importing dyes and pigments despite its strong presence in the specialty chemicals
industry. France (5%) depends heavily on imports for raw materials and intermediate products to support its industries and
maintain production levels. The US (5%) has substantial import demand, driven by essential inputs used for domestic
chemical production. Canada (5%) imports specialty chemicals because of its limited capacity.
55
Figure 22: World trade
Note: Export data includes agrochemicals, dyes and pigments, and surfactants
Source: Directorate General of Foreign Trade (DGFT), Crisil Intelligence
Indian specialty chemicals exports to various destinations have increased owing to a combination of market demand, trade
agreements, competitive manufacturing costs and strategic positioning. In 2024, the US (17%) remained the largest
destination, benefitting from the increased technological prowess of Indian manufacturers and infrastructure development
in the US. Brazil (16%) is also an important export destination, given its increasing demand from end users such as personal
care and agriculture. Bangladesh (4%) has also become a key market, owing to increased demand for specialty chemicals
driven by rising requirement for high-performance chemicals and emphasis on value-added manufacturing sectors.
China (4%) mostly imports dyes and pigments from India because of its availability of resources and since they are cheaper.
Japan (4%) has also been an important market owing to its commercial relations with India, aided by partnerships such as
the Comprehensive Economic Partnership Agreement.
As of calendar year 2024, India's presence in major import markets was limited at ~8%, indicating a huge opportunity for
the growth in exports. This share is moderate mainly due to intense international competition and a strong focus on the
domestic market. As a net exporter of specialty chemicals, India is poised to see an increase in exports on account of its
cost competitiveness, rising international demand and technological advancement. The global shift away from China creates
new opportunities for Indian exporters.
To cater to the increasing demand for chemicals in India, it is essential to improve domestic production, which could boost
India's share in the global chemicals value chain and transform the country into a net zero importer.
By fiscal 2030, India's chemicals market consumption is projected to reach $290-310 billion, accounting for 5-6% of global
chemical consumption. To achieve this, the country’s consumption needs to log a CAGR of 10-11% and production needs
to log a 14% CAGR.
56
This can be accomplished by boosting specialty chemical exports to $45 billion, driven by segments such as dyes and
pigments, paints and coatings, agrochemicals, and flavours and fragrances. Additionally, the inorganic chemicals segment
could contribute $5-10 billion in exports, while the petrochemicals segment could expand exports to $26 billion from $21
billion.
15
To become a net zero importer, India aims to balance imports of petrochemicals and inorganic chemicals with $20-25 billion
exports of specialty chemicals. Reaching these milestones requires a plan that prioritises investments and interventions.
India's chemicals industry has competitive advantages, including rising domestic consumption, supportive policies and
strong manufacturing capabilities. However, challenges such as infrastructure gaps, regulatory hurdles and the need for
technological advancements need to be addressed.
To overcome these challenges and capitalise on opportunities, a comprehensive roadmap is necessary. This includes
fostering targeted investments, enabling policy interventions and building an innovation-driven ecosystem to position India
as a leader in the global chemicals value chain.
15
Powering India’s participation in Global Value Chains, July 2025
57
2. Technological readiness
Source: Crisil Intelligence
Financial viability
Source: Crisil Intelligence, company reports.
Note: The capex number reflects capital expenditure data reported at the company level.
58
Operating margins, net margins and return on capital employed (ROCE) are consistently higher for the international players
compared with domestic ones, indicating higher input costs and intense competition among domestic players. The industry
faces challenges and stiff competition due to China’s dominance, driven by its massive production capacity and lower costs.
Additionally, international companies benefit from cost efficiencies by leveraging economies of scale, accessing cost-
effective global supply chains and optimising production.
Sectoral outlook
The domestic market size as of fiscal 2024 (~Rs 3,064 billion) is estimated to log a CAGR of 6-8% between fiscals 2024
and 2030, driven by increasing demand in domestic and international markets, advancement in chemical technology and
shift towards higher value chemicals. In contrast, the international specialty chemical market (~Rs 52,277 billion) is expected
to log a moderate 4-6% CAGR due to increasing demand from end-user industries such as automotive, pharmaceuticals,
agrochemicals and construction.
Figure 23: Domestic and global growth outlook for specialty chemicals
Note: The number represents the market size
Source: Crisil Intelligence, company reports.
Employee productivity
The specialty chemical industry’s employee productivity is 1.82 times compared with the aggregate manufacturing sector in
value terms on account of its complex manufacturing processes coupled with automation and skilled employees.
59
Figure 24: Employee productivity
Note: The numbers represent the ratio of gross value added per person engaged in the sector relative to that of the industry, RMG: Ready-made
garments
Source: Crisil Intelligence, Annual Survey of Industries 2022
Skill requirement
The chart below shows the skill level distribution in the workforce in the specialty chemical sector. Minimally skilled workers
handle tasks like material handling and distribution. Semi-skilled workers operate machinery, perform basic quality checks,
etc. Skilled workers are involved in advanced manufacturing, research and development, among others.
Figure 25: Skill requirement
Source: Crisil Intelligence, National Skill Development Corp
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Value chain play
The chemical industry is complex and multifaceted, relying on a range of raw materials, including organic and inorganic
inputs. The industry can be categorised into several stages, including feedstock, basic chemicals, specialty chemicals, along
with marketing and sales.
Feedstock
The chemical industry relies on a range of raw materials. For instance, organic raw materials include oil, gas, coal and bio-
based products. Petrochemicals come from oil and gas, while oleochemicals are derived from plants and animal materials,
primarily palm kernel oil and coconut oil. Inorganic inputs include minerals, salt and brine.
Basic chemicals
Basic chemicals are produced in large quantities and serve as the building blocks for a range of consumer and industrial
products. This includes petrochemicals such as ethylene, propylene and benzene, which are used in plastics and other
products. Inorganic chemicals are extracted from raw materials such as brine and minerals using processes such as chlor
alkali method. These chemicals are essential for manufacturing a range of products across various industries.
Specialty chemicals
This stage involves production of specialty chemicals such as paint, adhesive, inks, coatings and surfactants. These
products are specialised and diverse, designed to meet specific market or customer demands, primarily within other
industries. They are directly sold to end markets such as automotive, construction, pulp and paper, printing and textiles.
Marketing and sales
This stage of the value chain focuses on marketing and selling products. These chemical products cater to a diverse range
of industries including agriculture, automotive, construction, pharmaceuticals, surfactants and personal care.
Figure 26: Performance benchmarking of India's chemical value chain
Source: Crisil Intelligence, company reports
Profitability lies in specialty chemicals, which are high-margin products. However, in fiscal 2024, margins were affected due
to oversupply caused by inventory destocking, increased imports and declining discretionary spending, leading to reduced
revenue.
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Areas where the sector has government support
Significant market potential and a rapidly growing Indian economy have increased the demand for chemicals.
The following table illustrates support and guidance from the government for India to position its chemicals sector as a
global leader:
Table 5: Key government initiatives supporting the chemicals sector
Scheme Objective
Petroleum, Chemicals and
Petrochemicals Investment
Regions (PCPIRs)
Under the new PCPIR Policy 2020-2035, the government aims to make a combined investment
of $142 billion by 2025, $213 billion by 2030 and $284 billion by 2035 in all PCPIRs across the
country. The four PCPIRs — Andhra Pradesh (Visakhapatnam), Gujarat (Dahej), Odisha
(Paradeep) and Tamil Nadu (Cuddalore and Nagapattinam) — are expected to generate
employment for ~34 lakh people
Supply chain derisking by global
multinationals
The rerouting of manufacturing to India has benefited some Indian specialty chemicals players
Anti-dumping duty (ADD)
With the over-supply of chemical commodities, particularly from countries such as China,
Taiwan and South Korea, the government of India has implemented proactive anti-dumping
measures to safeguard local producers and reduce cheap imports. The ADD is applicable on
imports of sodium nitrite, toluene diisocyanate (TDI), purified terephthalic acid (PTA), phthalic
anhydride, phenol, aniline, chlorinated polyvinyl chloride (CPVC), isopropyl alcohol and soda
ash, among others.
Chemical Promotion Development
Scheme (CPDS)
The primary objective of this scheme is to facilitate growth in the chemicals and petrochemicals
industry with knowledge dissemination through studies, surveys, data banks and promotional
materials. The three main components of the scheme are knowledge-product creation,
knowledge dissemination and excellence awards for research and innovation
Centres of excellence (CoEs)
The scheme aims to modernise manufacturing, improve product quality and drive technological
advancement by incentivising educational and research institutions. 18 CoEs were approved as
of December 2024
Quality control orders (QCOs)
The scheme aims to make adherence to specific product standards mandatory, so domestic
manufacturers and overseas suppliers meet the quality and safety parameters set by the Bureau
of Indian Standards (BIS)
Source: Crisil Intelligence
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Case studies and global best practices
Evaluating countries that lead the chemical manufacturing sector globally and assessing government
policies/initiatives/frameworks/incentives which have contributed to the sector’s growth, with a focus on nations with high
production volumes and those with economic conditions like India. This approach can help in identifying key strategies
which India could adopt to boost its own chemical manufacturing sector.
Table 6: Selection of top chemical manufacturing countries
Country Production ($ billion, CY24) CAGR (CY24-CY30)
China 2,269 2-3%
India 192 7-9%
South Korea 166 1-2%
Malaysia 47 6%
Indonesia 36 5%
Thailand 26 3%
Vietnam 4 9%
Source: Crisil Intelligence
China, India and ASEAN countries such as South Korea, Indonesia, Malaysia, Vietnam and Thailand are top chemical
manufacturing countries, driven by high demand from downstream industries. Among these, China leads through rapid
investment and intense competition and fragmentation across large numbers of segments.
India is rapidly growing on account of a favourable regulatory environment, labour utilities and capital cost, while ASEAN
countries benefit from government policies, geographical locations and labour cost.
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China
Investments in the new chemical segments
In 2023, China accounted for nearly 45%
16
of the total global chemical production and 46%
17
of capital investment. Initially
focussed only on basic chemicals to meet the domestic demands with minimal technology requirement, the country now
dominates the global market for many commodity and fine chemicals. China holds 55%
18
of the global acetic acid capacity,
50%
19
of the global carbon black capacity and 45%
20
of the global titanium dioxide capacity.
China's petrochemicals and plastics production have logged remarkable growth, driven by strategic investments in
infrastructure, research and development (R&D) and by leveraging the country’s unique competitive advantages. China’s
chemical industry accounts for ~23% of global exports and 12% of global imports, while meeting 75-80% of the domestic
demand. Over the last two decades, the country has transformed from being a net importer in 2010 to a net exporter across
multiple product categories, establishing itself as a dominant player in the global chemical market.
The industry's growth trajectory can be divided into three distinct phases. In the initial phase, state-owned enterprises drove
expansion through significant investments and the establishment of small-to-medium-scale production facilities, relying
heavily on imported technologies to build critical capabilities, such as, ethylene production. As the industry matured,
multinational corporations entered the market, and joint ventures emerged, combining local resources with foreign expertise.
In recent years, government policy reforms have enabled private enterprises to consolidate and develop domestic
technologies. This has accelerated the sector’s modernisation and large-scale expansion, with privately owned companies
now playing a major role in advancing China’s petrochemicals and plastics industry.
All such chemicals require relatively low levels of technology and innovation, allowing them to be produced in large volumes,
enabling Chinese producers to benefit from strong economies of scale. However, companies focussed on these basic
products increasingly face economic pressure owing to intense competition, overcapacity and slowing demand growth.
As a result, the industry is shifting toward new-age chemicals, specialty chemicals and energy transition related products.
Several state-owned enterprises have expanded into these emerging areas and are making rapid progress as innovators.
Supply chain competitiveness
The Chinese supply chain has become highly competitive, largely due to its favourable capital expenditure (capex) structure,
which is ~70%
21
of that in Western countries. This cost advantage has made China an attractive location for multinational
corporations (MNCs) seeking cost-efficient manufacturing locations. Factors contributing to China's competitive advantage
include:
1. Labour costs In China, labor cost comprises 44
22
percent of overall cost which accounts to 20 to 40
23
percent of the
cost of labor in the US. This significant gap allows Chinese firms to maintain a much lower overall cost structure.
2. Labour productivity: China has 2-3
24
times higher labour productivity compared with many other regions, resulting in
a more efficient supply chain with a greater output in lesser time. This higher productivity enables Chinese firms to
produce more goods at a lower cost.
16
China Britan Business Focus
17
China Britan Business Focus
18
Information Technology and Innovation Foundation
19
Information Technology and Innovation Foundation
20
Information Technology and Innovation Foundation
21
Powering India’s participation in Global Value Chains, July 2025
22
Powering India’s participation in Global Value Chains, July 2025
23
Powering India’s participation in Global Value Chains, July 2025
24
Powering India’s participation in Global Value Chains, July 2025
64
3. Competitive supplier network: China's supplier network is also among the most competitive globally, with continuous
price competition driving down material costs. This allows firms operating in China to access key components and
materials at significantly lower prices.
4. End-to-end domestic supply chain: China offers a distinct advantage through its end-to-end supply chain, enabling
companies to source most required materials and services locally. This reduces import costs, minimises supply chain
bottlenecks, and enhances overall operational efficiency.
While China’s chemical industry has grown rapidly, the country has also faced an economic slowdown and rising geopolitical
uncertainties in recent years. Several nations have imposed trade restrictions—such as the US import tariffs, Germany's
de-risking efforts, and the European Union's (EU) Green Deal Industrial Plan, which includes tariffs on titanium dioxide
imports—creating challenges for Chinese chemical companies.
Despite these pressures, China's competitive supply chain remains its major strength, helping the country to maintain its
position as an attractive investment destination. The government continues to support the sector through infrastructure
development and initiatives that promote innovation. As the global landscape evolves, China's favourable capex structure,
low labour costs, high labour productivity, competitive supplier network and integrated domestic supply chain are likely to
sustain its competitiveness and continued growth in the chemical industry.
Regulatory environment and government policies -
Import tariffs and anti-dumping duties
China imposed tariffs on paraxylene, propylene and Ortho xylene exported from Taiwan in 2024, raising the import duty on
paraxylene from 0%
25
to 2%
26
that year.
PP copolymer grade tariffs to move up to 6.5%
27
from its duty-free status.
Country to retain the anti-dumping duties on imports of o-chloro-p-nitroaniline from India
Easing trade restrictions
• China's proactive approach to industrial development has been a major driver of its competitiveness. The creation of
specialised industrial zones and clusters has significantly reduced production and logistics costs for domestic
companies. These zones feature modern infrastructure, including advanced wastewater treatment facilities, energy-
efficient systems and compliance with stringent regulatory standards.
• Clustering of companies within the same sector also lowers transportation costs and boosts overall productivity. The
government has strengthened competitiveness further by liberalising trade and improving market access for foreign
investors. Trade restrictions have fallen sharply—from nearly 200 in 2013 to just a few dozen in 2021. The expansion
of free trade zones, growing from 1 in 2013 to over 20 in 2022, has also enhanced China's position as a global
manufacturing hub. These zones offer attractive incentives such as reduced barriers and improved market access to
international markets, encouraging foreign direct investment and supporting continued economic growth.
Work plan for the petrochemical and chemical industry
China's 14
th
Five-Year Plan
28
, introduced in 2020 during the Covid-19 pandemic, prioritises self-reliance and sets ambitious
targets for the chemicals and petroleum sectors, including the development of innovative materials. The plan seeks to
achieve high levels of self-sufficiency in various areas, such as:
25
S&P Global
26
S&P Global
27
S&P Global
28
Powering India’s participation in Global Value Chains, July 2025
65
• 70% in engineering plastics
• 90% in specialty rubbers and elastomers
• 85% in high-performance fibres, and
• 75% in new chemical materials
To support these goals, the government is promoting the development of advanced technologies, such as next-generation
catalysts, efficient purification processes, and carbon capture and utilisation solutions. China has also outlined strong
environmental goals for 2025 under the Industrial Green Development Plan, which include increasing the share of renewable
energy to 33%, reducing carbon emissions by 2.6 giga tonnes and limiting crude oil processing.
The government has committed to achieving peak carbon emissions by 2030 and net-zero emissions by 2060, with a focus
on carbon-neutral production, carbon capture technologies, and the use of renewable energy and green feedstocks. To
support these goals, it has introduced supportive policies and eased trade restrictions, attracting increased foreign
investment into the industry.
Additionally, a two-year work plan (2023-2024) was launched to boost the development of the petrochemical and chemical
sectors, emphasising energy conservation, carbon reduction, and pollution control. The plan included the following
measures:
• Promoting energy efficiency and pollutant emission limits in the refining, ethylene and other sectors
• Encouraging the adoption of intelligent manufacturing technologies
• Improving management of chemical parks and refining fiscal policies
• Securing stable supplies of production factors at reasonable prices through medium-to-long-term contracts
Overall, China's strategic plans and policies aim to drive growth in the petroleum and chemical sectors while minimising the
environmental impact and achieving self-sufficiency in key areas.
66
ASEAN (South Korea, Indonesia, Malaysia, Vietnam, and Thailand)
A coordinated approach among South Korea, Indonesia, Malaysia, Vietnam and Thailand leverages each country’s
strengths to build a self-sustaining regional chemical ecosystem. Governments in these countries are prioritising the sector
through significant investments and strategic policies.
Regulatory environment and policies in ASEAN
South Korea
In South Korea, the Ministry of Environment of Korea (MoE) established the Act on Registration and Evaluation of Chemical
Substances (K-REACH) in January 2015.
Source: Crisil Intelligence
In 2024, the country revised its requirements for new chemical substances registration under K-REACH. These revisions
not only revised the regulatory framework, introducing new requirements for registration, evaluation and risk management
of chemical substances, but also aligned South Korea’s chemical regulations with international standards, facilitating global
trade.
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Import tariffs
• South Korea applies a flat 10%29 value added tax (VAT) on all imports and domestically manufactured goods.
• Tariffs and taxes must be paid in Korean won within 15 days after goods clear customs.
Indonesia
Investment goals
• Indonesia aims to become ASEAN’s largest petrochemical producer with $31 billion30 in planned investments by 2030,
focusing on self-sufficiency through the North Kalimantan superhub.
• The country imported $22.2 billion31 and exported $11.2 billion32 in chemicals.
Recent developments
• Lotte Chemical Titan is investing $433 billion in a new ethylene project. Indonesia’s refining capacity stands at 1.1
million34 barrels per day (b/d), the third largest in the region.
Government actions
• The ‘Making Indonesia 4.0’ roadmap emphasises reducing imports, expanding domestic petrochemical capacity and
developing biofuels and bioplastics.
Malaysia
Investment goals
• Malaysia’s chemical industry roadmap 2030 (CIR2030) targets increasing the sector’s contribution to over 4.5%35 of
GDP by 2030, with $8.8 billion36 in added-value contributions.
Recent developments
• CIR2030 identifies base chemicals and specialty chemicals as priority segments, aligning with the New Industrial Master
Plan 2030 (NIMP 2030).
Government actions
• The roadmap supports targeted investments and industrial development to advance Malaysia’s petrochemical sector
into more complex specialties and strengthen downstream capabilities.
Vietnam
Investment goals
29
Southeast Asia Chemicals
30
Southeast Asia Chemicals
31
Southeast Asia Chemicals
32
Southeast Asia Chemicals
33
Southeast Asia Chemicals
34
Southeast Asia Chemicals
35
Southeast Asia Chemicals
36
Southeast Asia Chemicals
68
• Vietnam’s chemical industry, valued at $4 billion37 by 2024, is growing at CAGR of 8.73%38. Key segments include
fertilizers, pharmaceuticals and petrochemicals.
Government actions
• The 2022 strategy targets 10-11%39 annual growth by 2030, focussing on sustainable development and technological
advancement. It also emphasises cross-ministerial collaboration in policy, investment, technology and workforce
development.
Thailand
Investment goals
• The petrochemical industry currently contributes ~5%
40
to GDP, driven by strong domestic demand. The Map Ta Phut
complex is a key asset.
Recent developments
• The RAPID project, part of Petronas’s $27 billion
41
Pengerang Integrated Complex, includes a petrochemical refinery
and related units, although its inauguration has been delayed.
Government actions
• Thailand’s ‘Bangkok Goals on Bio-Circular-Green (BCG) economy’ focusses on climate mitigation, sustainability, trade
and effective waste management.
How Asian policies supercharged the chemical industry over the last decade
China
• Reform and open-door policy (1978): This attracted foreign investment to special economic zones, fuelling growth
• Government support: Low-cost capital, subsidies and relaxed environmental regulations reduced operating costs
• R&D investment: Between 2007 and 2017, heavy investments in research and development (R&D) strengthened
China’s global competitiveness compared with the EU, while Japan saw a modest 1-2% increase in capex and R&D
spends.
• Special economic zones: These zones offered tax breaks and infrastructure support and attracted significant
investment from Hong Kong and Taiwan.
• Market growth: China’s share of global chemical sales jumped to 42% in 2023 from 24% in 2010, accounting for nearly
half of the global supply.
Malaysia
The decline of Malaysia’s tin ore and natural rubber industries was driven by government actions after independence in
1957.The government introduced industrial strategies and policies to boost the petrochemicals value chain and attract
foreign investment, leading to rapid economic growth in the early 1990s and accelerating the development of the chemical
industry. Key government measures that helped the Malaysian chemical industry include:
37
Southeast Asia Chemicals
38
Southeast Asia Chemicals
39
Southeast Asia Chemicals
40
Southeast Asia Chemicals
41
Southeast Asia Chemicals
69
• Diversification policies: post-1957, the government focussed on shifting from the traditional (tin and rubber) industries
toward manufacturing and chemicals.
• Attracting foreign investment: Industrial strategies and policies helped drive economic growth effectively and
establish major chemical plants.
• Establishment of PETRONAS (1974): Under the Petroleum Development Act, PETRONAS was granted full ownership
and rights to explore and exploit Malaysia’s oil and gas resources. The company operates through production-sharing
contracts, enabling effective resource management and driving industry growth.
• Infrastructure development: The Peninsular Gas Utilisation project initiated by PETRONAS in 1984 and completed
in 1993, created the country’s longest gas pipeline, enabling efficient natural gas transmission.
• Creation of industrial hubs: The development of petrochemical hubs in Kerteh, Gebeng and the Pasir
Gudang/Tanjung Langsat area provided essential infrastructure and services, attracting major companies.
Indonesia
Since the 1997 economic crisis, Indonesia has prioritised foreign direct investment (FDI) to support job creation, economic
growth and poverty reduction. The chemical sector has been a major focus, benefitting from these targeted investment
incentives.
• Investment incentives: Indonesia has strengthened its efforts to attract FDI through measures such as reduced import
duties and easy financing.
• Infrastructure and jobs: In the Banten province, investment in the chemical industry has enhanced infrastructure
development and generated significant indirect jobs.
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Recommendations: Policy initiatives and reforms
Recommendation IA: Strengthen domestic feedstock production
To achieve an ambitious target of achieving a 5-6% share in the global chemical value chain by 2030, with a net zero trade
balance, it is essential to identify the chemicals that need to be prioritized for government interventions.
Reducing import dependency
The chemicals industry requires a significant production boost to facilitate import substitution and reduce single-source
dependency. The bulk of the domestic demand for essential chemicals is met through imports, which stand at $75 billion.
Also, many of these imports come from just a few supplier countries. By increasing production capacity and enhancing
product quality, India can become a competitive player in the international market, particularly in segments like specialty
chemicals, where it currently has a minimal presence.
The chemicals industry accounts for 30-40% of the total raw material imports within different segments:
• Deficit in C1, C2, C3 and C7: India imports 70-80% of high-value raw materials, especially active pharmaceutical
ingredients, ethylene and propylene, for the merchant market and methanol and toluene for domestic consumption.
Figure 27: Production capacity versus demand in India and the Middle East (million metric tonne or MMT)
Note: Positive values represent excess production capacities over existing demand, whereas negative values represent a supply deficit
C1, C2, and C3 petrochemicals are derived from hydrocarbons with 1, 2, and 3 carbon atoms, respectively
Source: DCPC, Crisil Intelligence
C1, -2.5
C2, 1
C3, -0.5
C7, -0.4
C1, 7.5
C2, 7
C3, 3
C7, 2.2
-4 -2 0 2 4 6 8
C1
C2
C3
C7
Middle EastIndia
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To reduce import dependency, the government may implement the following strategies:
1. Identify chemicals for import substitution: This process involves analysing import data, growth rates and market
shares of chemicals. This will help identify chemicals that can be produced domestically.
2. Provide incentives to encourage domestic production: The government can provide incentives, like Production
Linked Incentives (opex subsidies), to encourage domestic production of the identified chemicals. This can help reduce
import dependency and increase domestic production capacity.
3. Improve infrastructure and logistics: This can help reduce transportation costs and increase the competitiveness of
domestic producers. It includes investing in ports, roads and warehouses, as well as streamlining customs procedures.
Imports are expected to increase in the medium term because of non-availability of raw material. Also, there is a wide gap
between gas and methanol prices. Hence, purchasing methanol from the spot market is more cost-effective than producing
it in-house. Similarly, there is an increase in the import of toluene because of its use as a precursor in the production of
benzene, xylene and TDI.
Forward integration of oil and gas refineries into downstream petrochemical manufacturing, i.e., crude oil to chemicals
is accelerating. This may limit feedstock availability in the merchant market. Thus, long-term supply agreements or captive
production would be critical.
In 2020, the Indian government launched the coal gasification scheme to gasify 100 MMT of coal by 2030, thereby
reducing reliance on imports, especially of the oil, gas, fertiliser and petrochemical sectors, and conserving foreign
exchange.
The government has also approved a Rs 8,500 crore incentive scheme for coal gasification projects, encouraging both
private companies and public sector undertakings to participate.
The government is also encouraging public and private players to set up bamboo-to-methanol plants to produce green
methanol. Cachar Paper Mill in Panchgram (Assam) has already commissioned this project, valued at Rs 2,000 crore. It is
expected to generate 18,900 jobs.
Recommendation IB: Promote backward integration
From Petrochemicals side of thing, as much as 50-60% of the feedstock (such as naphtha and natural gas) required for
plastics and synthetic fibres is imported in India.
Under the coal gasification projects, India aims to gasify 100 MMT of coal by 2030, this creates a diversified feedstock
system that is more resilient to global supply disruptions. The Ministry of Coal is offering a 50% rebate in revenue share
to promote coal gasification. It is also offering long-term coal allotments to gasification plants.
Mega coal to chemicals complexes is catalysing new downstream clusters in methanol-to-olefins, ammonia derivates and
synthetic fuels. Co-location of downstream consumers lowers logistics costs, ensures steady feedstock supply and supports
globally competitive manufacturing ecosystems.
Integrated chlor-alkali complexes linking chlorine production with downstream PVC, CPVC, chloromethanes, solvents and
specialty chemicals-reduce reliance on imports and stabilise chlorine economics. This model ensures consistent feedstock
availability for domestic manufacturers and supports industrial competitiveness. Growing requirements of PVC,
pharmaceuticals (active intermediates) and water-treatment chemicals justify capacity expansion. This strengthens India’s
role as a reliable hub for global supply chains and improves availability of high-value feedstocks in export-oriented industries.
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Together, coal gasification and chlorine downstream development broaden India’s feedstock base across carbon-hydrogen
and halogen value chains. They reinforce global supply chain stability, support regional industrial clusters, reduce import
dependence, and strengthen India’s role as reliable partner for critical chemicals manufacturing.
Figure 28: Domestic demand for methanol is met largely through imports, driven by rising consumption of formaldehyde, acetic
acid, pharmaceuticals and chloromethane
Source: Crisil Intelligence
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Recommendation IIA: Ensure integrated infrastructure, faster approvals for
PCPIR success
The government has been devising measures to increase the share of the domestic chemical industry in the global market.
The challenges that the industry faces and require urgent attention include inadequate infrastructure, regulatory bottlenecks,
and shortage of skilled talent. According to a report published by the Department of Chemicals and Petrochemicals (DCPC),
the chemical sector should be encouraged to invest in refineries to address the surging fuel demand, increase the
processing capacity of crude oil and produce feedstock for downstream industries.
PCPIRs: An overview and current standings
Petroleum, chemicals and petrochemicals investment regions (PCPIRs), introduced by the Government of India under the
PCPIR policy, are large, specifically delineated industrial regions planned to promote investment in petroleum, chemicals
and petrochemicals in an integrated and infrastructure-led manner.
Each PCPIR was envisaged as a mega industrial region of around 250 square kilometres (sq.km.) or more, with at least
40% of the area earmarked as a processing zone for manufacturing units and the remaining area (non-processing) allocated
for residential, commercial, social and institutional infrastructure.
42
The idea was to move away from fragmented industrial development and create globally competitive clusters with shared
utilities, logistics, ports and social infrastructure, reducing costs, improving efficiency and attracting large domestic and
foreign investments.
The policy was brought in at a time when India’s chemical and petrochemical demand was rising steadily, but investments
were constrained by inadequate infrastructure, regulatory delays and lack of integrated planning. Through PCPIRs, the
government aimed to attract large anchor investments, such as refineries and crackers, enable downstream and ancillary
industries, boost exports, generate employment and ensure environmentally planned industrial growth.
Four PCPIRs were approved across India—the Dahej PCPIR in Gujarat, the Visakhapatnam–Kakinada PCPIR in Andhra
Pradesh, the Paradeep PCPIR in Odisha and the Cuddalore–Nagapattinam PCPIR in Tamil Nadu. Each of these regions
was expected to develop around a large anchor petrochemical or refinery complex that would drive downstream investments
over time
.43
Regional overview
The performance of PCPIRs has been uneven, with each chemical hub having its unique strengths and challenges:
Gujarat (Dahej): The Dahej PCPIR in Gujarat is widely regarded as the most successful implementation of the policy. The
presence of ONGC Petro Additions Ltd (OPaL), whose petrochemical complex was commissioned in March 2017, provided
the region with a strong anchor. Supported by robust port connectivity, early infrastructure development and proactive state
government involvement, the Dahej PCPIR has attracted cumulative investments of more than Rs 1.2 lakh crore, as per
official ministry data. Employment generation in the region is estimated at ~2.38 lakh jobs, including direct and indirect
employment.44 The availability of feedstock, reliable utilities and proximity to export markets have encouraged growth of
several downstream chemical and polymer units, making Dahej a functioning industrial ecosystem rather than just a notified
zone.
42
Policy Resolution for Promotion of Petroleum, Chemicals and Petrochemical Investment Regions (PCPIRs)
43
PCPIR - Department of Chemicals and Petrochemicals
44
PCPIR - Department of Chemicals and Petrochemicals
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Another major factor was Gujarat’s early and sustained infrastructure readiness. Port connectivity at Dahej was already
operational and continuously expanded, road and rail connectivity were strengthened early, and utilities such as water,
power and gas pipelines were developed ahead of demand. Gujarat already had a mature petrochemical ecosystem.
Existing refineries, chemical manufacturers, skilled manpower, ancillary industries and service providers reduced execution
risk.
Odisha (Paradip): The Paradip PCPIR in Odisha has also made tangible progress, though at a slower pace compared with
Gujarat. The commissioning of Indian Oil Corporation’s Paradip refinery in February 2016 acted as the anchor project for
the region. According to official data, investments of around Rs 47,000 crore have been realised in the PCPIR so far, with
employment generation of ~40,000 jobs.45 While the core refinery is operational, downstream petrochemical development
has taken time due to infrastructure gaps and phased investment decisions. Nevertheless, the region is considered
operational, with continued efforts by the state government to attract petrochemical and chemical manufacturing units
around the refinery complex.
Andhra Pradesh (Visakhapatnam to Kakinada): The Visakhapatnam-Kakinada PCPIR in Andhra Pradesh, which has a
large, notified area of 640 sq.km. and a strategic coastal location, has not been able to secure a strong anchor petrochemical
complex under the PCPIR framework. Official figures indicate investments of ~Rs 18,000 crore and employment generation
of ~1.41 lakh jobs, but much of this activity is not directly linked to an integrated PCPIR-led petrochemical value chain.46
Delays in infrastructure development, land acquisition challenges, regulatory coordination issues and the absence of a
committed anchor project have limited investor confidence. Reports by government bodies have highlighted execution gaps
and lack of momentum as key reasons for the slow progress of this PCPIR.
47
Land acquisition and environmental clearances faced delays due to local resistance, coastal regulation constraints and
administrative coordination issues. Policy continuity at the state level was another challenge. Changes in priorities and focus
across administrations reduced momentum and delayed decision-making on large capital-intensive projects.
Tamil Nadu (Cuddalore and Nagapattinam): The Tamil Nadu PCPIR covering the Cuddalore and Nagapattinam region
has seen the least progress and is effectively stalled. Although it was initially notified under the PCPIR policy, the state
government cancelled the local planning area notification in 2020, which significantly weakened the institutional framework
required for its development. As per parliamentary responses, investments in the region remained limited at ~Rs 8,000
crore, with employment below 14,000 jobs and no major anchor petrochemical project realised. Policy uncertainty, local
opposition, environmental concerns and shifting state priorities contributed to the lack of progress, resulting in the PCPIR
not evolving as originally envisaged.
The region faced strong environmental and social opposition, particularly due to its coastal ecology and existing livelihood
concerns. This made land acquisition and project approvals politically and administratively difficult.
More than a decade after the policy was introduced, only two PCPIRs can be considered operational—one is partially
realised, and one has effectively stalled.
The experience with PCPIRs shows that policy notification alone is not sufficient to create large industrial ecosystems.
Successful PCPIRs have been those with strong anchor projects, early infrastructure development, consistent state support
and proximity to ports and markets. Lagging PCPIRs have faced challenges, such as delays in land acquisition,
environmental clearances, weak coordination between central and state authorities, lack of anchor investments and policy
reversals. As of the latest official position, Dahej and Paradeep PCPIRs are operational, with significant investments and
employment, the Andhra Pradesh PCPIR remains underdeveloped relative to its original plan, and the Tamil Nadu PCPIR
is not progressing under the original policy framework.
45
PCPIR - Department of Chemicals and Petrochemicals
46
PCPIR - Department of Chemicals and Petrochemicals
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Recommendations and way forward for PCPIRs and Indian chemical hubs
1. Approach to planning and implementation
a. Formulate an overarching master plan that draws upon the most successful global models and practices in
the field
b. Design and implement a realistic and workable public-private partnership framework capable of mobilising
the required financial resources for timely project delivery
c. Develop a comprehensive feedstock security plan that covers the entire value chain, ensuring consistent
and adequate raw material availability specifically for downstream manufacturing units
d. Create a strong backbone of logistics facilities, general infrastructure, and an interconnected pipeline grid
2. Measures from government
a. Establish a unified single-window mechanism that enables rapid and expedited approvals
b. Offer attractive concessions to investing companies, including rebates on GST and income tax, plus
exemption from customs duty on imported raw materials/feedstocks
c. Install dedicated full-time committees and leadership for each PCPIR, along with specialised managerial
and technical support teams
3. Launch focused programmes for building skilled manpower
The current institutional framework for domestic chemical hubs faces challenges in implementation, with only Gujarat having
a dedicated management board. A central empowered committee and administrative body may be set up at the chemical
hub level. The empowered committee will oversee strategic direction, policymaking and investment screening for chemical
hubs, while the administrative body will handle day-to-day operations, investment screening, land management and
coordination with service providers at the chemical hub level.
Case study on Jurong Chemical Park: A successful model
Jurong Island in Singapore is a global leader in the chemical industry. It ranks among the top 10 hubs worldwide in terms
of chemical exports. With an impressive $40 billion investment to enhance its production capacity, Jurong Island has
attracted more than 100 chemical companies. The success of the park can be attributed to its high production capacity,
well-developed shared infrastructure and excellent strategic connectivity. "Jurong Island boasts a substantial cracker
capacity of 4 MMTPA for ethylene and 2.5 MMTPA for propylene, ensuring efficient petrochemical production and a steady
supply of raw materials for downstream industries.
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Key factors contributing to Jurong's success
1. High production capacity: Jurong Island has a substantial cracker capacity, ensuring efficient petrochemical
production and a steady supply of raw materials for downstream industries.
2. Well-developed shared infrastructure: The island features well-developed shared infrastructure, including utilities
and logistics, which lowers operational costs and enhances overall efficiency.
3. Excellent strategic connectivity: Jurong Island's strategic location and connectivity through comprehensive transport
networks ensure the seamless transportation of raw materials and finished products.
4. Effective governance and proactive role of the government: Providing a conducive business environment and
streamlining regulatory processes, the Singapore government has played a crucial role in the development of the park.
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Replicating the Jurong model in India
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India can learn from the success of Jurong Island and replicate its principles to the domestic chemical industry. By investing
in refineries and petrochemical complexes, building a collaborative ecosystem and developing well-planned infrastructure,
the country can create a world-class chemical industry. The government can play a proactive role in providing a conducive
business environment, streamlining regulatory processes and attracting investments.
Takeaways from other leading global hubs - Port of Rotterdam, Nanjing Chemical Industrial Park
The Port of Rotterdam is the largest port and one of the biggest petrochemical hubs in Europe. It hosts multiple large
refineries and integrated petrochemical complexes operated by various multinational chemical and petrochemical
companies.
The Nanjing Chemical Industrial Park is one of China’s major state-backed chemical clusters, anchored by large state-
owned enterprises and multinational companies.
Some key takeaways from the set-up and success of these industrial hubs:
• Secure and operationalise anchor refinery or cracker projects before notifying large investment regions
• Plan ports, pipelines, storage, utilities and industrial plots as one integrated system
• Front-load core infrastructure instead of waiting for demand to emerge
• Create a single empowered authority with decision-making power
• Ensure long-term land use, zoning and regulatory stability to reduce investor risk
• Build shared pipelines, utilities and effluent systems to lower entry barriers for downstream units
• Enforce cluster discipline by allowing only relevant chemical and petrochemical industries
• Focus on fewer, deeper, execution-ready clusters rather than multiple underdeveloped regions
Proposed governance structure for Indian chemical hubs
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The proposed governance structure for Indian chemical hubs includes a central empowered committee and administrative
body. The empowered committee will oversee strategic direction, policymaking and investment screening for the hubs, while
the administrative body will handle day-to-day operations, investment screening, land management and coordination with
service providers at the chemical hub.
Key entities and their roles
1. Empowered committee: Oversees strategic direction, policymaking and investment screening for all chemical hubs.
2. Administrative body: Handles day-to-day operations, investment screening, land management and coordination with
service providers at the chemical hub level.
3. Anchor tenants: Provide essential feedstock for downstream industries and work closely with chemical companies.
4. Infrastructure and services: Develop shared infrastructure, including utilities and logistics, to lower operational costs
and enhance overall efficiency.
Recommendations
1. Invest in refineries and petrochemical complexes: Encourage investment in refineries to address the surging fuel
demand and increase capacity to process crude oil and produce feedstock for downstream industries.
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2. Build a collaborative ecosystem: Foster partnerships with technology providers and international suppliers of crude
oil to strengthen crude oil supply and enhance bilateral energy cooperation.
3. Develop well-planned infrastructure: Invest in shared infrastructure, including utilities and logistics, to lower
operational costs and enhance overall efficiency.
4. Streamline regulatory processes: Provide a conducive business environment and streamline regulatory processes to
attract investments and facilitate the growth of the industry.
5. Attract investments: Attract investments from domestic and international players to enhance the production capacity
and competitiveness of the industry.
By implementing these recommendations, India can make the chemical industry more competitive, sustainable and
innovative and ultimately increase its share in the global market.
Recommendation IIB: Upgrade port infrastructure
India has 12 major ports and 205 notified minor ports. Most were developed several years ago and require significant
upgrades. The design of existing ports is inadequate to meet the current requirements for faster turnaround and higher
cargo volumes, resulting in delays in cargo movement
Key issues/pain-points
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I. Insufficient handling capacity
• Indian ports lack dedicated berths and specialised handling capacity for chemicals
• Compared with benchmarks, the gap is large
i. Antwerp (Belgium): 286 MMT
ii. Kandla: 138 MMT, Paradip: 135 MMT
With chemical volumes rising, current infrastructure cannot keep pace
II. Limited storage capacity
• Specialised tankage for hazardous and bulk chemicals is inadequate
• Antwerp offers 9.6 MMT + 6.15 million sq. m covered storage, while Indian ports often have 3-5 MMT storage
capacity
• Storage shortage leads to delays, longer turnaround time and safety risks
III. Low mechanisation
• Heavy dependence on manual handling due to budget constraints
• Lack of advanced cranes, compressors and vacuum systems slows operations
• Manual processes also heighten safety risks for hazardous materials
IV. Poor last-mile connectivity
• Weak road, rail and pipeline connectivity between ports and chemical clusters
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• In contrast, Antwerp is within 500 km of 60% of Europe’s consumer market and has seamless multimodal
connectivity
• Port infrastructure needs a revamp to boost chemical exports: The industry is seeking world-class port infrastructure
for better logistics performance, higher maritime trade, economic growth and higher yield to be able to create a
global impact. Indian ports have a far lower handling capacity compared with global standards. This needs
immediate attention in terms of expansion.
• India has 12 major ports and 205 notified minor ports. Most were set up several years ago and need to be upgraded
at a considerable cost. However, the design of existing ports is inadequate to meet the current requirement for a
quick turnaround and handling of increased volumes, which is causing delays in cargo movement. The turnaround
time in India, therefore, remains vastly inferior. The government and the port authorities must take appropriate action
to bridge such gaps.
• However, Union Budget 2025-26 marks a significant push toward modernising India's ocean freight logistics sector.
Strategic initiatives such as the maritime development fund, shipbuilding clusters and tax incentives, port
connectivity enhancements under the PM Gati Shakti programme were launched to boost shipbuilding, improve
port connectivity and encourage green shipping practices, ultimately driving economic growth and strengthening
India's position in international trade.
Recommendations
The type and extent of port infrastructure required for different chemicals varies depending on the chemical's properties,
handling requirements and transportation modes.
Liquid chemicals
• Tanker berths: Dedicated tanker berths with suitable draft and mooring facilities to accommodate large tankers.
• Storage tanks: Adequate storage tank capacity to store liquid chemicals, with features such as heating, cooling and
nitrogen blanketing.
• Pumping systems: High-capacity pumping systems to transfer liquids between ships, tanks and pipelines.
• Pipeline infrastructure: Extensive pipeline networks to transport liquids to and from storage tanks, processing facilities,
and other ports
Dry bulk chemicals
• Dry bulk terminals: Specialised dry bulk terminals with features such as conveyor belts, silos and warehouses to handle
dry bulk chemicals.
• Unloading facilities: Grab cranes, bucket elevators or pneumatic conveyors to handle dry bulk chemicals.
• Storage facilities: Adequate storage facilities such as silos, warehouses or open storage areas to store dry bulk
chemicals.
• Loading facilities: Loading facilities such as conveyor belts, bucket elevators or pneumatic conveyors to load dry bulk
chemicals onto ships or trucks.
Gas chemicals
• Gas terminals: Specialised gas terminals with features such as liquefied natural gas and liquefied gas chemicals.
• LNG terminals: Specialised terminals with features such as regasification facilities, storage tanks and pipelines.
• Petrochemical terminals: Specialised terminals with features such as ethylene crackers, propylene and other
petrochemical facilities.
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Focus on chemicals to make India a global manufacturing hub for chemical sector:
To enhance the competitiveness of India's chemical industry, the government has proposed a revised governance and
operational framework for chemical parks. This framework emphasises centralised coordination, state-level autonomy and
seamless integration of stakeholders, with clearly defined accountability and responsibilities.
Global best practices
India can draw inspiration from successful global chemical parks, such as:
1. Jurong Island in Singapore: Contributes to ~3% of Singapore's GDP and employs thousands of people.
2. Ludwigshafen Chemical Park in Germany: Generates ~€20 billion in annual revenue and is one of the largest
chemical parks in the world.
3. Jubail Industrial City in Saudi Arabia: Houses over 100 companies and produces ~7% of the world's petrochemicals,
generating thousands of jobs.
Institutional framework
The institutional framework for India's PCPIRs could include the following:
1. High-powered committee: With representatives from the Union Ministry of Ports, Shipping and Waterways, the
Department of Chemicals and Petrochemicals, and senior officials from other central ministries and departments may
be constituted. The committee would also seek advice from public and private terminal operators, industry members,
and safety and compliance experts.
2. Management Boards: Special purpose vehicles (SPVs) that handle master planning, infrastructure development and
investment facilitation.
Challenges and opportunities
Despite progress, India's chemical hubs face challenges, such as:
1. Operating difficulties
2. Contractual issues
3. Reluctance from international companies to enter ventures without majority shareholding
To address these challenges, it is essential to:
• Enhance coordination and optimise infrastructure development
• Streamline regulatory processes
• Prioritise sectoral growth
• Address environmental and community issues
By implementing these recommendations, India can overcome its port infrastructure challenges and emerge as a global
leader in the chemical sector, driving economic growth and sustainable development. With a world-class port infrastructure,
India can enhance its competitiveness, increase exports, and improve safety standards, ultimately achieving its goal of
becoming a global manufacturing hub for the chemical sector.
Recommendation III: Leverage FTAs; safeguard domestic growth
The domestic chemicals industry generates more than two million jobs and plays a crucial role in the nation's economic
output. However, the industry faces significant challenges, including a widening gap between imports and domestic
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production, which is forecasted to expand substantially. The free trade agreements (FTAs) that are already signed and that
are under negotiations, particularly with the Middle Eastern countries, have brought both opportunities and challenges for
the industry. This section examines the impact of the FTAs on the industry, highlighting the gaps and challenges that need
to be addressed to make it competitive and self-reliant.
Gaps and challenges
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FTAs have a mixed impact on the chemicals industry, with several roadblocks that complicate growth and competitiveness.
The key challenges faced by the industry include:
1. Cost competitiveness and import surge: India's chemical imports reached nearly $75 billion in fiscal 2023, with China,
Saudi Arabia and the United States being major suppliers. The influx of low-cost chemical imports, particularly from the
Asia-Pacific FTA partners, has put pressure on domestic players, making it difficult for them to compete with cheaper
imports.
2. Limited protection for sensitive sectors: FTAs often include sensitive product lists, which allow some sectors
protection through tariffs. However, India's sensitive lists do not adequately shield critical segments within the chemicals
industry, such as petrochemical intermediates and specialty chemicals, from zero-duty imports.
3. Impact on value-added manufacturing: FTAs inadvertently promote raw material imports over local value-added
manufacturing expansion, which curtails job creation and economic development. Although India exported around $44
billion worth of chemicals in fiscal 2024, much of this was in lower-value segments, limiting opportunities for more
advanced and specialised manufacturing.
4. Inadequate feedstock and infrastructure support: FTAs have increased India's dependence on imported feedstock,
as most domestic producers lack access to competitively priced raw materials. The lack of basic feedstock infrastructure
means that the industry remains exposed to global supply chain risks, further constraining growth.
5. Overlooked industry-specific needs in FTA negotiations: FTAs typically focus on broader economic interests
without adequately addressing the specific needs of the chemicals sector, which demands a nuanced approach.
Fostering balanced growth from future FTAs
To build a more resilient and competitive chemicals industry, India needs to negotiate FTAs that incorporate specific
provisions for the sector. The following initiatives could help:
1. Targeted FTA negotiations: India could negotiate FTAs that incorporate industry-focused protections, such as tariff
quotas or selective duty exemptions on critical raw materials and petrochemical feedstock, while retaining tariffs on
imported finished products to protect domestic manufacturers.
2. Awareness and effective utilisation of FTAs: Improving awareness and accessibility of FTA provisions could
enhance their utility and ensure that exporters are able to take full advantage of tariff reductions. Simplifying
administrative processes, especially around proving the origin of exports, could lower costs and improve compliance.
3. Promoting localised production and sustainable shipping methods: The government may promote investments in
localised production, sustainable shipping methods and robust trade infrastructure to ensure stability in the future.
Case study: The Indo-Japanese free trade agreement
The CEPA between Japan and India, signed in FY11, has played a significant role in shaping trade relations, particularly
affecting India's trade balance in the chemicals sector. Since the agreement, Japan's exports to India have nearly doubled,
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while India's exports to Japan have seen limited growth, leading to a more pronounced trade imbalance. This imbalance is
notably reflected in the chemicals sector, where India's import-to-export ratio with Japan has worsened. The FTA's rules of
origin and product-specific norms have created barriers for Indian chemical exports, highlighting the need for a review of
the CEPA's terms to ensure that the chemicals industry can better capitalise on export opportunities to Japan.
Going forward, India must prioritize FTAs that avoid such restrictive norms and ensure more balanced, mutually beneficial
market access for its chemical industry.
The government may explore to subsidise the outward freight or manage the ocean freight rate and provide freight support
packages to help the industry deal with increasing freight rates. It may also introduce competitive financing or tax structures
for micro, small and medium enterprises to help them maintain or grow their position in the chemical industry.
FTAs have created a mixed landscape for the Indian chemicals industry, with several challenges that need to be addressed
to foster a competitive and self-reliant industry. The government needs to negotiate FTAs that incorporate specific provisions
for the sector, promote localised production and sustainable shipping methods, and impose ADD on key chemicals to protect
the domestic industry. By doing so, India can build a more resilient and competitive chemicals industry capable of
capitalising on global supply-chain opportunities and contributing to the country's economic growth.
Recommendations
1. Revise customs duty: Revise customs duty on several products, including laboratory chemicals, phosphoric acid, and
boric acid to support domestic manufacturing and curb competition.
2. Subsidise freight: Subsidise outward freight or manage ocean freight rates and provide freight support packages to
help the industry deal with increasing freight rates.
3. Competitive finance: Make available competitive finance or tax structures for micro, small and medium enterprises to
help them maintain or grow their position in the chemical industry.
4. Promote localised production: Promote investments in localised production, sustainable shipping methods and robust
trade infrastructure to ensure future stability.
5. Imposing ADD: Impose ADD on several key chemicals to protect the domestic industry from cheaper imports and
provide a level-playing field for domestic manufacturers.
By implementing these recommendations, India can foster a competitive and self-reliant chemicals industry capable of
contributing to the country's economic growth and development.
Regulatory Framework for Dual-Use Chemicals
• The current framework is approval-centric, resulting in multiple clearances, repetitive documentation and lengthy
approval timelines.
• Excessive compliance requirements, overlapping regulatory oversight and procedural delays increase operational
and legal risks for legitimate users.
• Regulatory scrutiny focuses more on permissions than on actual industrial end-use, with limited incentives for
voluntary compliance and self-disclosure.
• A more facilitative framework is proposed through voluntary disclosure windows, safe-harbour protection, digital
reporting systems, risk-based monitoring, standardised end-user declarations and corrective-action mechanisms
before penalties.
These measures would improve transparency, reduce compliance burdens and strengthen regulatory oversight.
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Conclusion
The Indian chemical industry is a vital component of the country's economy, contributing significantly to its growth and
development. The industry has the potential to become a global manufacturing hub, driven by increasing demand from end-
user industries, government support and a favourable regulatory environment. However, the industry faces several
challenges, including inadequate infrastructure and significant environmental and safety issues.
The government and industry stakeholders must work together to address these challenges, implementing a comprehensive
strategy that promotes domestic production, enhances competitiveness and fosters innovation, which can be achieved by
investing in research and development, developing infrastructure and providing incentives to support the growth of the
industry. The industry must also adopt sustainable practices, reduce its environmental impact and ensure the safety of its
workers and the communities.
The Indian chemical industry has a diverse range of products, including petrochemicals, specialty chemicals and inorganic
chemicals. The industry is expected to log a CAGR of 6-8% between fiscals 2024 and 2032, driven by the growth of the
automotive, construction and pharmaceutical sectors. The industry is also expected to benefit from the government's
initiatives to promote domestic production, enhance competitiveness and foster innovation.
To achieve the goal of making India a global manufacturing hub for the chemical sector, the government and industry
stakeholders must work together to implement a comprehensive strategy that addresses the existing challenges. The
recommendations outlined are poised to significantly help India to achieve economic growth, create job opportunities and
increase its global competitiveness.
Key recommendations
1. Promote domestic production and reduce import dependency
The government and industry stakeholders must work together to reduce dependence on imports and enhance
competitiveness. By reducing its reliance on imports, India can conserve foreign exchange, mitigate the impact of global
price volatility and ensure a stable supply of essential chemicals. This can be achieved through the promotion of domestic
production, encouraging investments in the chemical sector and implementing policies that support the growth of the
industry.
2. Investing to improve competitiveness
I. Develop infrastructure: The government must invest in infrastructure development, including the construction of new
ports, roads and railways, and upgrade the existing infrastructure to promote growth. Apart from these, focus on
establishing integrated facilities must be on our list to increase our global competitiveness with little reliance on imports
II. Provide incentives: The government must provide incentives, such as production-linked incentive schemes, to support
growth and encourage investment.
III. Adopt sustainable practices: The industry must adopt sustainable practices, such as the use of renewable energy,
waste reduction and recycling, to reduce its environmental impact.
By developing a competitive chemical industry, India can enhance its global reputation, attract foreign investments, and
become a preferred destination for chemical manufacturing and sourcing. This can lead to increased market share and
improved efficiency and productivity.
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3. Leverage FTAs while safeguarding domestic industry growth
The Indian chemicals industry faces challenges from increasing imports and evolving trade dynamics. A balanced approach
that safeguards domestic industry while promoting global competitiveness will be critical to positioning India as a resilient
and globally integrated chemicals manufacturing hub.
To make India a global manufacturing hub for the chemical sector, it is essential to promote and incentivise the production
of certain chemicals which have high demand, growth potential and strategic importance.
Table 7: Priority chemicals for enhancing domestic manufacturing capabilities
Chemicals
Domestic
capacity (FY25)
(KTPA)
Utilisation
levels (FY25)
Import value
(FY25) ($
million)
Import
dependency
(FY25)
Import
dependency
(FY30)
Share (%) of countries in
India’s import basket
(FY25)
Phenol 280 131% 263.48 41% 31%
Thailand – 47%
Singapore – 14%
Korea – 12%
South Africa – 8%
US – 7%
Methanol 746.64 15-20% 917.67 85-90% 85-90%
Oman – 50%
Saudi Arabia – 22%
Qatar – 13%
Iran – 5%
Bahrain – 4%
Acetic acid 196 80-85% 477.43
85-90%
85-90%
China – 51%
Malaysia – 23%
Singapore – 14%
Taiwan – 7%
Oman – 2%
Source: Crisil Intelligence
Phenol’s demand is driven by end-user industry growth along with capacity additions of its downstream products such as
polycarbonates and BPA. Domestic consumption was at 596 KTPA as of fiscal 2025. Import dependency was reduced to
40% as of fiscal 2025 and is expected to decline to 30% by fiscal 2030 owing to capacity additions by existing as well as
new players.
Methanol is one of the largest consumed organic chemicals in India. Domestic consumption stood at 3,309 KTPA for fiscal
2025 and import dependency was at 85-90% as of fiscal 2025; the latter is expected to remain the same till fiscal 2030.
Manufacturers opt for imports owing to unfavourable cost economics. No significant methanol capacity additions are
expected in the next five years. But, by leveraging coal gasification, India can reduce methanol imports and enhance
domestic production. Moreover, India is also aiming for 100 million tonne (MT) coal gasification by 2030 with investments
worth over Rs 4 lakh crore, which would help in reducing import dependency.
Acetic acid is one of the major organic chemicals imported in India. Demand for acetic acid stood at ~1,380 KTPA as of
fiscal 2025. Import dependency was 85-90% for the fiscal and is expected to remain the same till fiscal 2030 as no capacity
addition is planned. There is less incentive for the manufacturer to produce acetic acid because of the high production cost
due to dependency on methanol (the primary raw material), for which India is again dependent on imports.
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85
Table of contents
Executive Summary ............................................................................................................................... 87
Introduction ........................................................................................................................................... 90
Overview of Indian textile industry .......................................................................................................... 91
Global textile industry overview .............................................................................................................. 94
Textiles value chain ............................................................................................................................... 97
Cotton ................................................................................................................................................ 97
MMF (polyester) ................................................................................................................................... 98
Strategic alignment – RMG and MMF .................................................................................................. 100
Raw material availability – RMG ...................................................................................................... 100
Raw material availability – MMF ...................................................................................................... 102
Global trade – RMG ........................................................................................................................ 103
Global trade – MMF ......................................................................................................................... 105
Technology readiness - RMG ........................................................................................................... 107
Technology Readiness - MMF ......................................................................................................... 108
Financial viability - RMG .................................................................................................................. 108
Financial viability - MMF .................................................................................................................. 109
Employee productivity ..................................................................................................................... 110
Skill requirement ............................................................................................................................. 111
Growth drivers ..................................................................................................................................... 112
Benchmarking against competing countries ......................................................................................... 116
Bangladesh ..................................................................................................................................... 117
Vietnam ........................................................................................................................................... 119
China .............................................................................................................................................. 121
Policy framework and industry support mechanism .............................................................................. 123
Recommendations: Policy initiatives and reforms ................................................................................. 124
Recommendations for Enhancing Raw Material Cost Competitiveness ............................................ 124
Recommendations to improve the scale of operations ..................................................................... 129
Recommendations to expand market outreach in the downstream sector ........................................ 132
Improving efficiency of labour in the textile sector ............................................................................ 135
Recommendation on policy support for branding of Indian textiles ................................................... 137
Strengthening specific segments of the textile industry .................................................................... 138
86
Textiles
87
Executive Summary
Sector overview
India’s textile and apparel industry (T&A) is one of the country’s most important manufacturing sectors,
contributing approximately 2% to national GDP, 11% to manufacturing GVA, and 9% of merchandise exports.
The sector is also the second-largest employer after agriculture, providing livelihoods to more than 45 million
people and supporting widespread MSME-led industrial development. In fiscal 2025, India exported textile
products worth USD 37.7 billion and accounted for 4.1% of global textile and apparel exports, making it the
sixth-largest textile exporter globally. The sector therefore plays a critical role in advancing India’s
manufacturing, export, employment, and inclusive growth objectives.
Global opportunity
The global textile industry is expected to reach approximately USD 1.8 trillion by 2027, supported by rising
disposable incomes, urbanisation, growth in e-commerce, and increasing demand for apparel, home textiles,
and technical textiles. While natural fibres continue to occupy a significant share of global consumption, demand
is increasingly shifting towards man-made fibres (MMF), particularly polyester, owing to their durability,
versatility, and suitability for performance apparel and technical applications. As global consumption patterns
evolve, countries with strong capabilities across both cotton and MMF value chains are expected to be best
positioned to capture future growth opportunities.
India’s competitive position
India possesses several natural and structural advantages, including a strong raw material base, manufacturing
capabilities for complete value chain, and a sizeable domestic market. The country is among the world’s largest
FY30 target
88
cotton producers and remains the largest exporter of cotton yarn. However, achieving the government’s target
of USD 100 billion in textile exports by fiscal 2030 will require India to expand beyond its traditional strength in
cotton textiles and develop greater competitiveness in MMF-based segments that are witnessing faster global
growth.
Several structural factors are expected to support the growth of India’s textile industry over the coming years.
Rising incomes, expanding urbanisation, increasing adoption of e-commerce platforms, and growing demand
for value-added apparel are expected to drive domestic consumption. At the same time, increasing global
demand for technical textiles, sustainable products and MMF-based garments presents significant export
opportunities. Government initiatives such as the Production Linked Incentive (PLI) Scheme for Textiles, PM
MITRA Parks, the Samarth skilling programme, the National Technical Textiles Mission and the recently
announced Mission for Cotton Productivity are expected to further strengthen manufacturing capabilities and
improve sector competitiveness.
Lessons from Global Leaders
The experiences of leading textile-exporting countries provide valuable lessons for India.
Bangladesh has emerged as one of the world’s leading garment exporters through competitive labour costs,
dedicated export-oriented industrial zones, strong infrastructure support, and preferential market access
arrangements that have enabled rapid export growth.
Vietnam has strengthened its position through extensive trade integration, strong foreign direct investment
inflows, specialized industrial parks, and close integration with global supply chains. The country has
successfully leveraged trade agreements and a favorable investment environment to become a major global
textile manufacturing hub.
China continues to dominate the global MMF ecosystem through long-term industrial planning, strong policy
support, large-scale manufacturing capacities, extensive R&D investments, and integrated supply chains
spanning raw materials to finished textile products.
The experiences of these countries underscore the importance of scale, trade competitiveness, integrated
manufacturing ecosystems, technology investments, and policy support in building globally competitive textile
industries.
Key Challenges Hindering Competitiveness
Despite its strong foundations, India faces several structural challenges that constrain its global
competitiveness.
First, the domestic textile industry remains heavily reliant on cotton, even as global demand increasingly shifts
towards MMF-based products. Limited availability and higher costs of key MMF feedstocks such as PTA and
MEG affect the competitiveness of downstream manufacturers.
Second, manufacturing capacities in critical segments such as weaving and processing remain fragmented,
with a large proportion of production concentrated among MSMEs that often face constraints relating to
technology adoption, scale, and productivity.
Third, Indian exporters continue to face market access disadvantages relative to competing countries such as
Bangladesh and Vietnam, which benefit from wider preferential trade arrangements in major export markets.
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Fourth, labour productivity in the textile sector remains significantly below the overall manufacturing average,
while gaps in skilling, technology adoption, and innovation continue to affect competitiveness. Private sector
investment in research and development also remains limited relative to leading global peers.
Strategic Priorities for Accelerating Growth
To strengthen India’s global position and accelerate export growth, the report identifies the following priorities:
• Improve raw material competitiveness by addressing MMF feedstock constraints, improving cotton productivity
and quality, and rationalising duties.
• Promote scale through infrastructure support for MSMEs, technology upgradation, larger weaving and
processing capacities, and greater foreign investment.
• Expand market access through deeper trade integration and targeted FTAs.
• Enhance productivity through workforce skilling, labour welfare measures, and technology adoption.
• Strengthen emerging segments such as technical textiles, MMF-based products, sustainable textiles, and
premium Indian weaves.
Way Forward
India possesses raw material base, a complete value chain, entrepreneurial ecosystem and policy support
necessary to emerge as a leading global textile manufacturing destination. However, achieving the target of
USD 100 billion in textile exports by fiscal 2030 will require a strategic shift towards MMF-led growth, stronger
integration with global value chains, enhanced productivity, improved market access, and sustained investment
in innovation and technology. A coordinated policy approach focused on competitiveness, scale, and value
addition can transform the sector into a major engine of exports, employment generation, and industrial growth
over the coming decade.
90
Introduction
Textile is one of the oldest industries and encompasses all segments—from cultivation and production of raw
fibres such as natural cotton and silk or synthetic fibres such as polyester—as well as the designing,
manufacturing and distribution of final products such as yarn, fabric and garments. It is one of the most
significant global sectors, covering both small-scale and large-scale enterprises involved in processing and
manufacturing of various textile products. These enterprises contribute notably to industrial output, exports and
employment.
Against this backdrop, this report aims to evaluate the government policies, initiatives, frameworks, and
incentives that have facilitated the growth of the global textile manufacturing sector, with a particular focus on
identifying countries that have emerged as leaders in this space. By examining the strategies and best practices
of nations with high production volumes, significant export market share, and extensive global coverage, this
report seeks to inform the development of targeted interventions that can help India's textile manufacturing
sector become globally competitive. Specifically, the report will assess the key strategic priorities that India
needs to address in order to drive growth, enhance productivity, and increase its market share in the global
textile industry. By doing so, the report aims to provide a roadmap for India's transformation into a global
manufacturing hub for textiles.
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Overview of Indian textile industry
The textile and apparel industry accounts for 2% of India's gross domestic product (GDP)
53
and 11% of
manufacturing GVA
54
. It is also a major export contributor, representing 9% of total merchandise exports
55
.
In fiscal 2025, India exported textile items
56
worth $37.7 billion.
As the second-largest employment generator after agriculture, the textile industry provides jobs to over 45
million people
57
, including a significant number of women and rural population. Furthermore, nearly 80% of
the industry's capacity is spread across micro, small, and medium enterprise (MSME) clusters
58
throughout
the country, promoting inclusive growth.
The industry is, therefore, well-aligned with the government's key objectives, including Make in India, Skill
India, women's empowerment, rural youth employment and inclusive growth.
On the global stage, India is the sixth-largest exporter of textiles and apparel
59
, with a 4.1% share of the
global market in calendar year 2024. This significant presence in the global export market underscores the
importance of the textile industry to India's economy and highlights its potential for continued growth and
development.
The Indian textile and apparel industry is vibrant and diverse, with a value chain spanning the entire
production process—from fibre to finished apparel. The value chain includes an upstream segment,
comprising cotton fibre, man-made fibre (MMF), cotton yarn, and man-made yarn and filament; a mid-
stream segment, that includes cotton, synthetic, and blended fabric; and a downstream segment,
comprising readymade garments (RMG), home textiles and technical textiles. The industry's product
portfolio is remarkably diverse, ranging from handmade craftsmanship to contemporary and modern
fashion, offering a broad range of products.
India is a major cotton producer, accounting for approximately 22% of global output in the 2023/24
marketing year, which runs from August 1st to July 31st
60
. However, the global textile market is shifting
towards man-made fibers (MMF).
Over the past three years, India has experienced a decline in cotton production, whereas the production of
MMF has shown an upward trend.
Cotton’s virtues such as softness, breathability and versatility make it a preferred choice for apparel and
home textiles. However, changing fashion trends and growing demand for durable, wrinkle-resistant and
quick-drying fabrics is driving the rise of MMF such as polyester.
Recognising this shift, the Indian government has introduced several schemes to promote domestic MMF
manufacturing, thereby strengthening the country's competitiveness.
53
Ministry of Statistics and Programme Implementation (MOSPI)
54
Ministry of Statistics and Programme Implementation (MOSPI)
55
Directorate General of Foreign Trade (DGFT)
56
Directorate General of Foreign Trade (DGFT)
57
Press Information Bureau
58
Economic Survey 2024
59
Trade statistics for international business development
60
U.S. Department of Agriculture
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Figure 29: Production of man-made fibre in million kgs
Source: Ministry of Textile, Office of the Textile Commissioner, Crisil Intelligence
Cotton yarn production in India declined 5% annually from 3,962 million kgs in fiscal 2020 to 3,438 million
kgs in fiscal 2023. In contrast, production of manmade filament yarn and blended/non-cotton yarn grew 2%
annually, reaching 3,650 million kgs. Despite this decline, India remains the largest exporter of cotton yarn,
accounting for 29% of global exports in CY 2023. Meanwhile, demand for polyester yarn is rising owing to
its versatility and use in technical textiles, performance wear and sportswear.
Figure 30: Production of filament yarn and spun yarn in million kgs
Source: Ministry of Textile, Office of the Textile Commissioner, Crisil Intelligence
1,688
1,326
2,016 1,904
3,962
3,625
4,075
3,438
1,702
1,521
1,758
1,746
2019-20 2020-21 2021-22 2022-23
Manmade filament yarn Cotton yarn Blended & 100% Noncotton yarn
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Although woven fabric production has increased, India continues to rely on imports owing to quality and
cost concerns. In contrast, the knitting fabric segment is more self-sufficient, with local production meeting
a significant portion of domestic demand.
The Indian textile and apparel industry comprises both, domestic and export segments. Historically, the
domestic segment has grown faster than exports, which have been impacted by the global slowdown,
Covid-19 pandemic and high export tariffs levied by the European Union (EU), compared with the zero-
import duty for other exporting countries, such as Bangladesh. The domestic industry is divided into ready-
made garments (RMG), technical textile and home textiles, with RMG as the largest segment, followed by
technical textile. For exports, the industry is RMG-dominated, followed by home textiles.
Figure 31: Indian textile and apparel market – overall market in $ billion
Source: DGCIS, Crisil Intelligence
P*- Target set by Government of India
India's textile industry is well positioned globally, particularly in cotton production. However, it faces several
challenges that must be addressed to achieve the export target of $100 billion by fiscal 2030 (up from $37.7
billion in fiscal 2024). These challenges include issues related to global demand dynamics, supply chain
disruptions, production limitations, competitive disadvantages, and structural inefficiencies. To meet this
target, India needs a strategic, multi-layered approach that addresses both industry-specific and broader
trade-related challenges.
Exports Domestic
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Global textile industry overview
The global textile industry encompasses a range of products, including upstream segments such as fibres,
yarns, and fabrics, as well as downstream segments comprising garments, home textiles and technical
textiles. The industry experienced consistent growth from 2018 to 2023, except for Covid-19-linked decline
in 2020. The market recovered with 3.8% year-over-year growth in 2021, a 3.9% increase in 2022 and a
0.3% increase in 2023.
The global textile industry is expected to grow at a CAGR of 2.5-3.5% from 2023 to 2027, reaching $1,780-
$1,830 billion in revenue terms by 2027. This growth will be driven by fast fashion, the expansion of e-
commerce platforms, urbanisation and growing disposable incomes, that are transforming the market and
driving demand.
Figure 32: Global textile market
Source: Crisil intelligence and Grandview Research
Between 2018 and 2023, natural fibres accounted for ~44% of the textile market in value terms, driven by
their versatility, sustainability and environmental appeal. Natural fibres are likely to maintain their leading
position going forward.
With a market share of 29%, polyester ranked second in value terms between 2018 and 2023. Its durability,
resistance to wrinkles and fast-drying properties made it an ideal material for a wide range of applications
in apparel, home textile and technical textile.
At 20%, nylon held the third-largest market share, owing to its durability, elasticity and moisture-wicking
properties. Its applications range from women's stockings and parachutes to industrial uses, where its
superior strength and stretchability, compared with polyester, makes it a preferred choice, supporting
expectations of higher future growth.
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In addition to these leading fibres, other segments, such as polyethylene (PE), polypropylene (PP), aramid
and polyamide, also hold a significant market presence. Polyethylene's unique properties, including its high
resistance to acids and alkalis at elevated temperatures and low moisture absorption, have driven its rising
demand. The market share of different fibres is expected to remain largely unchanged by 2027.
Figure 33: Fibre-wise segmentation of global textiles by value (%)
Source: Crisil intelligence and Grandview Research
The global textile trade logged a CAGR of 1% from 2018 to 2023, reaching $901 billion. Although the Covid-
19 pandemic caused a dip in 2020, the trade rebounded in 2021 with a 16% year-on-year increase.
However, growth slowed in 2022 and 2023 owing to inflation and weak consumer sentiment, resulting in an
8% decline in 2023. Additionally, within the textiles sector, apparel dominated the global textile trade,
followed by fabrics and home textiles.
96
Figure 34: Global textile trade (CY2018-2024)
Note: Trade numbers have been calculated based on global export data; Harmonized System (HS) codes used for analysis include:
50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 65, 4203, 4303, 4304
Source: ITC Trade, Crisil Intelligence
Figure 35: Breakup of global textile trade (CY2023)
Source: ITC Trade, Crisil Intelligence
The Asia Pacific region—led by China, India, Bangladesh and Vietnam— remains the largest supplier of
downstream textile products, driven by well-established manufacturing capabilities, large labour pools and
raw material availability. The US and the EU, on the other hand, serve primarily as major consumption
markets.
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Textiles value chain
Cotton
Ginning
The textile value chain begins with the planting of cotton in March, April and May, followed by harvesting in
September and October. The freshly harvested cotton is then sent to ginning units, where it is processed.
Ginning of cotton involves separating raw cotton from seeds to produce lint, the fibre used in spinning. This
process is crucial, as it prepares the cotton for the subsequent stages, ensuring that the quality of the fibre
is preserved. Ginning plays a vital role in determining the final quality of the yarn, as it removes impurities
and short fibres, thereby creating a cleaner and more uniform product that is essential for efficient spinning.
Spinning (cotton)
Following ginning, the cotton lint is spun into yarn, the fundamental building block of textiles. In this stage,
cotton fibres are twisted together to create yarns of varying thicknesses and strengths, depending on the
intended use.
Weaving and knitting
The yarn is then woven or knitted into fabric, which forms the intermediate stage of the textile value chain.
This fabric can vary widely in terms of texture, weight and appearance, depending on the weave or knit
pattern used. The fabric is then dyed, printed or finished according to the requirements of the final product,
with additional processes such as bleaching or mercerising enhancing its characteristics. This stage is
critical as it determines the aesthetic and functional qualities of the final garment.
Garmenting
Finally, the fabric is transformed into RMGs, the end products that reach consumers. In this stage, the fabric
is cut, stitched and assembled into various clothing items, ranging from basic apparel to intricate fashion
garments. The RMG segment is where the creative and technical aspects of fashion design come together,
producing finished products that meet market demands in terms of style, comfort and durability. This final
stage is the most labour-intensive and involves various skill levels, from basic sewing to advanced tailoring
and quality control, ensuring that the garments meet industry standards and consumer expectations.
98
MMF (polyester)
Raw material
Polyester is produced through the continuous polymerisation of purified terephthalic acid (PTA) and mono
ethylene glycol (MEG). PTA is obtained from paraxylene, which is derived from naphtha, a hydrocarbon
produced through crude oil distillation. MEG is produced from ethylene. Ethylene is produced via steam
cracking of hydrocarbons (like naphtha or ethane).
Fibre and yarn
PTA and MEG are combined to produce polyester staple fibre and polyester filament yarn. Polyester staple
fibre is further converted into 100% polyester spun yarn or combined with materials such as cotton, viscose,
wool and other materials to produce blended yarn. On the other hand, polyester filament yarn is made from
long, continuous strands of polyester.
Weaving and knitting
Polyester yarns are then knitted or woven to create blended fabrics, which can be a mix of polyester and
other materials, or 100% polyester fabrics. The fabric is then treated with dye, print or finish to meet the
final product's requirements.
Garment/ made-ups
Fabric thus generated through weaving and knitting is used to make a wide range of products, including
garments like sportswear, activewear and dresses, as well as home textiles like bedspreads, curtains,
carpets and tablecloths.
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Figure 36: Domestic presence and profitability across textile value chain
Note: Positioning of red arrow indicates the presence in the domestic market
Note: The list of companies is representative, not exhaustive.
Note: EBITDA and RoE are average for FY21, FY22, FY23
Source: Crisil Intelligence, Company Reports
100
Strategic alignment – RMG and MMF
The RMG segment is a key pillar of the domestic textile industry, accounting for 50-60% of the domestic
market and 42% of the country's total textile exports, which amounted to $37.7 billion in the fiscal year
2024, according to Crisil Intelligence.
In the upstream segment, the domestic textile industry is currently dominated by cotton. However, the global
shift towards MMF-based textiles has highlighted the need for India to enhance its MMF production capacity.
To achieve the government’s vision of $100 billion textile exports by fiscal 2030, it is essential to scale up
MMF production capacity over the next five years.
Raw material availability – RMG
RMG companies produce apparel, such as shirts and t-shirts, in standard sizes, which are then sold to
retailers. In India, the majority of apparel is typically made from cotton, polyester or a blend of both. Natural
fibres constitute approximately 65% of the total fibre production in India, with cotton being the predominant
fibre, accounting for more than 75% of the natural fibre. Meanwhile, polyester dominates the MMF and
filament segment, making up over 80% of the total MMF production (refer to Annexure V).
Table 8: Key RMG raw materials and major producing countries
Note: Raw material intensity refers to the proportion of raw material costs to the total cost of the final product
Source: Crisil Intelligence
The table highlights the availability and intensity of raw materials for the textile industry, focusing on two
key fibres: cotton and polyester. Cotton has high raw material intensity, indicating its significant availability
and utilisation in the global textile industry. China, India and Brazil are the leading producers of cotton, with
these countries having vast agricultural areas dedicated to cotton cultivation. These nations not only supply
cotton to their domestic industries but also play a critical role in the global cotton trade, making them critical
players in the global textile value chain.
The table also indicates that polyester, much like cotton, has a high raw material intensity. This reflects the
significant global demand for synthetic textiles, which are predominantly made from polyester fibres. The
high intensity of polyester production is driven by its widespread use in various applications, from everyday
apparel to industrial fabrics, due to its durability, versatility and cost-effectiveness. Leading producers such
as China, India and Indonesia have capitalised on this demand by establishing robust polyester
manufacturing industries, supported by readily available petrochemical resources.
India’s prominent role in both cotton and polyester production positions it as a versatile player in the
global textile industry, capable of catering to diverse market needs. However, domestically, cotton-based
textiles have maintained their dominance.
Raw materials Cotton Polyester
Raw material intensity High High
Producer 1 China China
Producer 2 India India
Producer 3 Brazil Indonesia
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Table 9: Countries from where India procures raw materials
Source: Crisil Intelligence
*Based on quantity imported in fiscal 2025
India is one of the largest producers of cotton globally, with a significant portion of its textile industry being
self-sufficient in cotton procurement. Extensive cotton cultivation across states such as Gujarat,
Maharashtra and Telangana ensures that more than 90% of the cotton used in the domestic textile industry
is sourced domestically.
In terms of polyester production also, the country is largely self-sufficient, with major players such as
Reliance Industries Ltd, Indo Rama Synthetics (India) Ltd, Filatex India Ltd, Sanathan Textiles Ltd and
Bombay Dyeing Manufacturing Company Ltd leading the charge. The country produces a wide range of
polyester fibres, which are crucial for both the domestic textile industry and export markets.
According to the Asia petrochemical industry conference (APIC) Country Paper 2025, India's polyester
production capacity, which includes polyester staple fibre and partially oriented yarn, stood at ~6.2 million
tonne in fiscal 2024. However, the actual production was ~4.8 million tonne, resulting in a capacity utilisation
rate of ~ 77%, down from 80% in fiscal 2023. The primary reason for the decrease in utilisation was a slump
in demand from the downstream garment and home textile segments.
The availability of raw materials such as cotton and polyester is crucial for India’s RMG sector. Having a
stable and indigenous supply of these inputs ensure that the domestic RMG industry can operate efficiently
and without disruptions that could arise from heavy reliance on imports.
This strong raw material base not only supports domestic manufacturing but also enhances India’s
competitiveness in the global market. To be sure, India’s position as a leading producer and exporter of
cotton, particularly cotton yarn, solidifies its importance in the global textile supply chain.
Also, the ability to supply high-quality downstream textiles at competitive prices makes the country a
preferred partner for many global brands.
As a result, the RMG sector in India continues to thrive, contributing significantly to the economy via exports
and providing largescale employment.
Raw Materials Cotton Polyester
Supplier country 1 India India
Supplier country 2 Australia* China
Supplier country 3 Brazil* Indonesia
Domestic availability Yes Yes
Import share 5-10% 5-12%
Geopolitical relationship Positive Neutral
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Raw material availability – MMF
India's MMF industry is driven by polyester and viscose, which together account for ~97% of total fibre
consumption.
The major raw materials to make polyester are paraxylene, PTA and MEG, with the Indian MMF sector
relying majorly on imports of PTA and MEG.
The top three source countries for each of the raw materials for the global textile industry are:
Table 10: Top raw material sources for global textile industry
Source: Crisil Intelligence
India’s limited PTA and MEG capacities can be attributed to high barriers to entry due to the capital-intensive
nature of setting up manufacturing facilities. As a result, the market is dominated by a few large players,
including Reliance Industries Ltd, MCPI Pvt Ltd and Indian Oil Corporation Ltd in PTA production, and
Reliance Industries Ltd, India Glycols Ltd and Indian Oil Corporation Ltd in MEG production.
Second, India's dependence on crude oil imports, a key feedstock for PTA and MEG production, exposes
the industry to significant risks, including price volatility and exchange rate fluctuation. The uncertainty and
volatility of crude oil prices, combined with the depreciation of the rupee, can increase the cost of feedstock
procurement, affecting the competitiveness of domestic production.
India imports PTA and MEG from multiple countries, primarily due to cost and logistical considerations.
Table 11: Countries from where India procures raw materials
Source: Crisil Intelligence
Domestic production meets about 75% of India’s PTA demand and ~65% of its MEG demand, with the
remainder met through imports
The presence of a large-scale petrochemical industry in China and Taiwan, mainly in the aromatics value
chain, has resulted in the countries becoming major exporters. Furthermore, availability of cost-effective
Raw materials Paraxylene PTA MEG
Raw material intensity High High Medium
Producer 1 South Korea China Saudi Arabia
Producer 2 Japan South Korea USA
Producer 3 China Thailand Canada
Raw materials PTA MEG
Supplier country 1 China Kuwait
Supplier country 2 Taiwan Saudi Arabia
Supplier country 3 Thailand Singapore
Domestic availability Yes Yes
Import share ~25% ~35%
Geopolitical relationship Positive Neutral
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raw materials (crude oil and natural gas) has resulted in Kuwait and Saudi Arabia becoming India’s major
trade partners.
Global trade – RMG
China is the world's largest exporter of RMG, accounting for ~29% share, owing to its robust domestic
manufacturing capabilities. However, its share in the global RMG export market has declined due to ongoing
supply chain derisking by manufacturers and a ban on Xinjiang cotton.
Asian countries, particularly Bangladesh and Vietnam, play an important role in the global RMG industry.
These countries are leveraging their large labour base, cost-effective production capabilities and growing
industrial capacities to become dominant exporters in the RMG market. Over recent years, their influence
has only grown, reflecting a broader trend, where Asian economies are increasingly becoming the world’s
manufacturing hubs, supplying garments to developed markets.
On the other hand, developed countries such as the US, Germany and other European nations continue to
be the largest consumers of these garments. These countries import vast quantities of RMGs, driven by
strong consumer demand and reliance on global supply chains that source affordable and diverse fashion
products from Asian manufacturers. These dynamics underscore a global trade pattern, where production
is concentrated in developing economies and consumption is predominantly in wealthier, developed
markets.
Figure 37: World Trade
Note: HS codes 61 and 62 considered
Source: Trade Map, Crisil Intelligence
Major RMG exporting countries Major RMG importing countries
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The market share trends illustrated in the charts suggest that Asian manufacturers, particularly those in
Bangladesh and Vietnam, are increasingly capturing a larger slice of the global market. This shift reflects
their growing competitiveness and rising demand for their products in global markets. Concurrently, the
stable yet slightly diversifying import patterns of developed countries indicate that while these continue to
rely heavily on imports from a few key Asian suppliers, there is also a gradual exploration of new sourcing
options to meet their domestic demand.
In terms of global demand, the steady increase in export as well as import of RMGs points to a robust and
expanding market. The growing middle class in developing countries, along with a sustained appetite for
fast fashion in developed economies, continues to drive this demand.
As Asian countries strengthen their position as the world’s garment manufacturers, these are likely to
continue benefiting from these global consumption trends, strengthening their roles in the international trade
landscape.
As illustrated in the below chart, the major export destinations for the Indian RMG industry shifted somewhat
between 2018 and 2024. Still, the US remains the largest market, increasing its share from 26% in 2018 to
33% in 2024, underscoring the continued strong demand for Indian garments in the US market. The UAE
also remains a significant market, although its share decreased slightly to 8% from 12%. This shift might
reflect changes in trade policies, consumer demand, or increased competition from other RMG exporting
countries.
The data also shows a moderate increase in the share of exports to Australia and the Netherlands,
indicating that India's RMG industry is successfully penetrating new markets or expanding its presence in
existing ones. The stability or slight increase in exports to these markets reflects a strategic broadening of
the country’s export base, which could help mitigate risks associated with overreliance on a few key
markets.
Figure 38: Major export destinations for Indian RMG industry
Note: HS codes 61 and 62 considered
Source: Trade Map, Crisil Intelligence
This diversification is crucial for sustaining growth and resilience in the face of global economic
uncertainties and shifting trade dynamics.
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As India continues to navigate the complexities of global trade, maintaining and expanding its foothold in
diverse markets will be key to ensuring the long-term vitality of its RMG sector.
Global trade – MMF
China is the largest exporter of MMF, accounting for ~48% of global exports, supported by strong domestic
manufacturing capabilities. Favourable government policies resulted in faster capacity additions, boosting
overall production capacities. Presence of all major global RMG players outsourcing and manufacturing in
China has further bolstered production volume. The US is the second-largest exporter of synthetic fibres,
with higher focus towards polyester and nylon. Robust raw material support, owing to the availability of
crude oil and petrochemical products, along with lower power costs, creating a favourable production
environment for the US.
Presence of major exporters, including India and Indonesia, facilitates easier and cost-effective availability
of input material.
On the import front, major outsourcing destinations such as Vietnam (8%) and Bangladesh (5%) are among
the largest importers of synthetic fibres. The expansive garment manufacturing industry in these countries
results in sustained requirement for synthetic fibres. The absence of manufacturing and technological know-
how and extremely competitive markets further restrict the growth of domestic manufacturing.
Italy (3%) maintains steady import levels to meet domestic demand for luxury. Also, despite domestic
production, the US (4%) and China (4%) continue to import, depending on availability of cost-effective
products globally.
Figure 39: Global trade dynamics pertaining to the MMF industry
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Note: HS codes 54 and 55 considered
Source: Trade Map, Crisil Intelligence
Indian MMF exports have remained steady due to favourable global demand-supply dynamics. Presence
of domestic textile and intermediaries’ industry, along with competitive manufacturing cost, makes the
country a strong competitor for global exports. In 2024, overall exports declined, owing to lower global
demand resulting from growing recessionary pressures. Increasing dumping from China further resulted in
lower competitiveness of domestic products and reduction in overall capacity utilisation.
India-UAE free trade agreement (FTA) and the government’s PLI scheme are expected to boost cost-
effective production of synthetic fibres in India. Indian manufacturers can leverage competitive production
costs, efficient supply chains and the ability to produce grades that meet diverse market requirements to
meet the growing international demand.
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Figure 40: Major export destinations for Indian MMF industry
Note: HS codes 54 and 55 considered
Source: Trade Map and Crisil Intelligence
Technology readiness - RMG
Note: The green logo denotes that the parameter is available in India, while the red logo denotes that it is not
Source: Crisil Intelligence
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Technology Readiness - MMF
Note: The green logo denotes that the parameter is available in India, while the red logo denotes that it is not
Source: Crisil Intelligence
Financial viability - RMG
Figure 41: Profitability Benchmarking of India’s RMG Sector Against Key Global Peers
Source: Crisil Intelligence, company reports
Note:The financial year for India is April-March, while for Bangladesh, it is July-June.
The list of companies used for this analysis is available in Annexure 1
The margins of domestic RMG companies are at par with those of international players. However, the
margins of Vietnamese RMG companies are lower owing to their concentration on low-margin export
markets and lack of high-premium products, which limits their ability to command higher prices.
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Financial viability - MMF
Figure 42: Profitability Benchmarking of India’s MMF Sector Against Key Global Peers
Source: Crisil Intelligence, company reports
Please note that international players considered are Xinfengmin, Hengyi and Tongkun and domestic players considered are
Century Enka, Indo Rama and Filatex India.
In the MMF segment, the overall financial profile of the international players is significantly better than that
of the domestic players. Indian players incur higher costs, primarily due to two reasons – import
dependence on raw materials and low-capacity utilisation of domestic players. Despite having a robust fibre
and yarn industry, India lacks raw material capacities for some key raw materials such as PTA-MEG. Global
oversupply of raw materials at competitive prices is the key reason for lack of domestic capacities for
feedstock, resulting in import reliance, inflating costs for downstream players. Despite being a net-exporter
of fibres, India faces consistent pressure from international players (mainly China), resulting in lower
capacity utilisation impacting returns. Higher economies of scale and backward integration have enabled
global players to have a favourable and competitive cost structure vis-à-vis Indian players. Furthermore,
the presence of SMEs and lower focus towards technology/machinery upgradation have resulted in higher
wastage and lower efficiency for Indian manufacturers, thereby increasing costs.
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Employee productivity
Figure 43: Gross value added per person engaged across sectors
Note: The numbers represent the ratio of gross value added per person engaged in the textiles sector relative to that of other
sectors
Source: Crisil Intelligence, Annual Survey of Industries 2022
The chart presents a comparison of employee productivity across different sectors by examining the ratio
of gross value added (GVA) per person engaged. In this comparison, the textile sector's employee
productivity is notably lower than the overall industry average. The ratio for textiles stands at 0.50, which is
half of the overall industry benchmark of 1.00. This indicates that, on average, each worker in the textiles
sector contributes significantly less to the GVA compared with their counterparts in other industries. The
high-value sector, represented by a ratio of 2.26, shows more than double the productivity of the average
industry worker, further highlighting the productivity gap between textiles and more capital-intensive or
technology-driven industr ies.
Several factors contribute to the relatively low employee productivity in the textile industry. One primary
reason is the labour-intensive nature of textile production, particularly in segments like garment
manufacturing, where a large portion of the work is manual. Unlike high-value sectors that often rely on
advanced machinery, automation and high levels of capital investment, the textile industry, especially in
developing countries, tends to depend heavily on low-cost labour. This reliance on manual processes can
limit the efficiency and speed of production, leading to lower productivity per worker.
Additionally, the textile industry often faces challenges such as fluctuating raw material costs, outdated
technology and stiff competition in global markets, which can further suppress productivity. Investments in
modernising equipment and training workers are often limited, especially in smaller firms, resulting in
inefficiencies. The sector's dependence on seasonal demand and the variability in orders also contribute to
inconsistencies in production levels, making it difficult to maintain a high and steady productivity rate. This
combination of factors explains why the employee productivity in textiles remains below the overall industry
average.
2.26
1.00
0.50
0.31
High Overall Industry Textiles Low
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Skill requirement
The readymade garments industry relies heavily on a workforce distributed across three skill levels as can
be seen from the chart below: minimally skilled, semi-skilled and skilled workers. The majority, comprising
54% of the workforce, falls into the minimally skilled category. These workers typically handle basic,
repetitive tasks such as cutting fabric, performing simple sewing operations, operating basic machinery and
packing garments.
Semi-skilled workers, who make up 31% of the workforce, perform more complex tasks that require a
degree of technical expertise. Their responsibilities might include operating advanced sewing machines,
assembling garment components, conducting quality control, and assisting with machinery setup. The
smallest segment, skilled workers, represents 15% of the industry’s workforce. These individuals take on
the most complex and critical roles, such as pattern making, advanced tailoring, supervising production
lines and ensuring quality standards. They often lead specialised processes and provide training to less
skilled workers, reflecting their significant experience and expertise.
Figure 44: Skill-level distribution: Indian textile sector
Source: Crisil intelligence and National Skill Development Corporation
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Growth drivers
Key growth drivers for the Indian textile sector are:
• Favourable demography
India's middle and high-income classes are expected to clock significant growth over the next decade.
By fiscal 2031, the share of middle- and high-income groups is expected to reach ~95% from 86%,
supported by growth in per capita income. This growth will lead to increased domestic consumption of
textiles and apparel, as rising disposable incomes fuel demand for high-quality clothing and textiles.
Figure 45: Income-based split of the population
P: Projected
Note: The low-income group comprises those earning less than Rs 125,000 per annum; middle-income group comprises those earning
between Rs 125,000 and Rs 30 lakh per annum; and high-income group comprises those earning more than Rs 30 lakh per annum
Source: People Research on India’s Consumer Economy (ICE) 360° survey, Crisil intelligence
• Urbanisation
As per the World Bank, India's urban population has grown substantially, from 32.8% of the total
population in 2018 to 36.9% in 2024. Despite this growth, the country still lags other major economies
in terms of urbanisation, presenting a significant opportunity for further development. As urbanisation
accelerates, Indian fashion is poised to undergo a transformation, with western casual wear becoming
increasingly popular. Urban areas can expect a surge in demand for fashionable clothing, while
traditional and ethnic wear will continue to be preferred for special occasions, resulting in a growth in
overall apparel demand.
15% 14%
5% 2%
82%
82%
84%
72%
3% 4%
11%
26%
FY16 FY21 FY31P FY47P
Low Income Middle incomeHigh Income
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Figure 46: Urban population as a percentage of total population of key economies (CY 2024)
Source: World Bank and Crisil Intelligence
• Government and policy support
The Indian government has implemented several initiatives to support the textile sector, including the
Production-Linked Incentive (PLI) scheme and the PM MITRA Parks Scheme. These schemes aim to
increase manufacturing, attract investments and create large-scale infrastructure, making Indian textiles
more competitive globally. The government has also launched the Samarth scheme, a skill development
programme, to ensure a steady supply of skilled labour for the manufacturing sector and sustainable
growth.
• Rise of e-commerce
According to a report by ANAROCK and ET Retail, the Indian e-commerce market is expected to witness
substantial growth, rising from $125 billion in 2024 to $345 billion in 2030, and eventually reaching $550
billion by 2035. As the market expands, companies will be able to reach a wider audience, offering a
variety of products at competitive prices, leading to an increase in demand for apparel in Tier 2 and Tier
3 cities, as well as in Tier 1 and metro cities, providing a significant boost to the entire apparel sector.
• Diversification of product portfolio
The Indian textile industry is undergoing a significant transformation, driven by a strategic focus on
diversification and expansion of its product offerings. Manufacturers are broadening their product ranges
to include technical textiles, functional textiles, and value-added products, in addition to traditional
segments such as apparel and home textiles. The government's initiatives, including the National
Technical Textiles Mission, are also facilitating this diversification by providing support for research,
development and promotion of technical textiles, thereby enabling the industry to explore new
opportunities.
• Focus on sustainable manufacturing practices
The global market is witnessing a significant shift towards sustainable products, with a growing demand
for eco-friendly processes and the use of recycled materials. In line with this trend, the Indian
government is also promoting sustainable practices to enhance competitiveness. As a result, the textile
57.7%
36.9%
65.5%
83.5%
84.9%
88.0%
40.2%
World India China USA UK BrazilVietnam
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industry is placing increasing emphasis on sustainability and environmentally friendly practices, which
can provide Indian textile players with a competitive advantage in the global market.
• Strong raw material base and integrated value chain
The Indian textile industry benefits from a rich raw material base and a fully integrated value chain. The
country ranks as the second-largest producer of cotton and silk, the largest producer of jute, and a
leading producer of polyester and viscose. This strong raw material availability ensures a steady supply
and cost competitiveness. In addition, India’s end-to-end integration, from raw materials to finished
goods, reduces import dependency and enhances production efficiency. These strengths enable the
industry to respond swiftly to global demand shifts, driving sustained growth, expansion, and
competitiveness in international markets.
RMG outlook
We expect the domestic RMG sector to log a CAGR of approximately 5% (see the graphic below) between
fiscals 2023 and 2030. Exports are projected to see a slightly higher growth rate of around 6%. This growth
in the export market is expected to be supported by improved market access, including the India-UK CETA
and the India-EU FTA, which is expected to provide additional market access once implemented.
Figure 47: RMG sector CAGR between FY23 and FY30
Source: Crisil Intelligence and company reports
Moreover, India’s emphasis on cotton textiles contrasts with the global shift towards synthetic materials
such as polyester. This mismatch in production focus has led to slower growth in the exports, with the
country not being able to meet the rising demand for synthetic textiles while remaining a dominant player
in cotton textiles. However, the global market’s preference for synthetic fibres, driven by their versatility and
lower costs, poses a challenge for India’s RMG sector to capture a larger share of international trade. To
enhance growth, the country may need to diversify its textile offerings and adapt to global market trends,
ensuring its RMG industry remains competitive both domestically and internationally.
Several demand drivers are poised to boost the growth of the domestic RMG industry in the future. Rising
disposable incomes and urbanisation are creating a more fashion-conscious consumer base, leading to an
increase in demand for diverse and high-quality garments. Additionally, the growth of e-commerce platforms
has made it easier for consumers to access a wide range of apparel, driving up demand further.
Domestic International
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
RMG market growth outlook: domestic vs international
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On the global front, the shift towards sustainability is expected to benefit India's RMG sector, as international
buyers are increasingly seeking suppliers who can offer eco-friendly materials and adopt ethical
manufacturing practices, areas in which India is already making significant strides. Moreover, the country’s
young population and growing middle class, coupled with the government's Make in India initiatives, are
likely to spur domestic production and consumption, supporting the long-term growth of the RMG industry
both domestically and internationally.
MMF outlook
According to our estimates, the domestic MMF market size at $ 6.8 billion is expected to clock a CAGR of
6-7% between fiscals 2023 and 2030, driven by growth in domestic consumption and increasing MMF
penetration. The domestic market is poised to outdo export growth due to several factors. For one, there is
a growing shift in consumer preference towards MMF over natural fibres such as cotton, driven by the rising
cost of natural fibres and increasing demand for more durable, versatile and affordable textiles. Additionally,
the country’s large and rapidly expanding middle class is fuelling demand for a wide range of clothing and
home textiles, which heavily utilise MMF. Moreover, government initiatives, such as the Production Linked
Incentive (PLI) scheme, are encouraging domestic manufacturing and innovation in the textile sector, further
boosting the MMF market. With its strong position in global textile exports and robust domestic
consumption, the domestic MMF sector is poised to grow faster than the global average.
Figure 48: MMF Industry CAGR between FY23 and FY30
Source: Crisil Intelligence, Company Reports
Domestic International
4.4%
4.6%
4.8%
5.0%
5.2%
5.4%
5.6%
5.8%
6.0%
6.2%
MMF market growth outlook: domestic vs international
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Benchmarking against competing countries
China, India, Bangladesh and Southeast Asian countries, such as Vietnam, Indonesia, Cambodia and Sri
Lanka, are leading readymade garments manufacturing countries, driven by availability of labour and
demand from the US and the UK. China leads by rapid investments and intense competition and
fragmentation across large numbers of segments in natural fibre as well as synthetic textiles. Indian textiles
rely on self-sufficiency in cotton, while other countries leverage availability of low-cost manpower to be cost
competitive in the international markets.
India is growing rapidly, supported by a favourable regulatory environment, thrust on synthetic textiles
production and entry into value addition, while competitors benefit from government policies, trade pacts,
geographical advantages and labour cost.
Table 12: Share of key exporting countries in the global RMG trade
Exporters 2004 2010 2015 2019 2023 2024
China 22% 35% 37% 29% 30% 29%
Bangladesh 3% 4% 6% 9% 9% 10%
Vietnam 2% 3% 5% 6% 6% 7%
India 3% 3% 4% 3% 3% 3%
Indonesia 2% 2% 2% 2% 2% 2%
Source: ITC Trade Map, Crisil Intelligence
Note: Figures correspond to calendar years
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Bangladesh
Textiles production is pivotal to Bangladesh’s economy, making the country one of the largest textile and
garment exporters in the world. The industry accounts for more than 85% of Bangladesh’s total exports,
driven by its large-scale production of RMG. Bangladesh has leveraged its competitive advantage of low
labour costs and a large workforce to attract international brands and retailers. The sector has also
benefited from favourable trade agreements, such as the Generalised System of Preferences (GSP) in the
European Union, which allows for duty-free access to key markets.
Fiscal incentives
The government offers cash incentives on 43 export product categories, ranging from 0.5% to 15% of export
value; readymade garments (RMG) receive a base incentive of 4%. Specific incentives include:
• A 1% cash incentive to all RMG exporters based on free-on-board (FOB) value
• An additional 4% incentive for exports to new markets beyond the EU, US, and Canada
• An additional 4% incentive for SME exporters with export volumes below $5 million
• An additional 2% incentive for exports to the EU
• Extra incentives for products manufactured using local fibres
These incentives are being gradually phased out as Bangladesh transitions out of Least Developed Country
(LDC) status by 2026. To offset this, the government is offering electricity tariff waivers of up to 10%, duty
exemptions on capital machinery imports, and low-interest loans for green energy initiatives.
The Duty Drawback Scheme refunds duties paid on imported raw materials, helping exporters lower their
production costs.
Tax benefits
• Corporate tax rate: Revised in 2022 to 15% for listed textile companies, versus 27.5% for non-listed
and 20% for listed companies (general)
• VAT exemptions: In place since 2016 on select textile products and raw materials; a VAT exemption on
domestically produced recycled fibre was under consideration as of April 2024 (traders currently pay
7.5% on purchase and 15% at point of sale)
• Port services exemption: 100% VAT exemption on port services for fully export-oriented industries and
EPZs, covering both imported and locally manufactured goods (granted by the National Board of
Revenue)
Infrastructure development
• Special economic zones (SEZs): Managed by BEPZA to attract foreign investment, offering a 5–7
year tax holiday, duty-free import/export, double taxation relief, 100% foreign ownership, no investment
ceiling, and full profit repatriation
• Garment Palli: A BGMEA-developed integrated garment park covering the entire value chain—from
sourcing to shipment—improving productivity and reducing costs
• Ports and Logistics: Modernisation of Chittagong (handles 90%+ of trade) and Mongla ports, backed
by $650 million in World Bank funding (June 2024) for the Bay Terminal deep seaport
• Compliance and Sustainability: Effluent treatment plants mandatory in large units; Bangladesh has
90 green-certified garment factories, the highest globally (USGBC)
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Trade agreements and market access
Bangladesh enjoys duty-free, quota-free access to the EU under the GSP and Everything But Arms (EBA)
schemes, with readymade garments accounting for nearly 90% of the EU's imports from Bangladesh. As a
member of SAARC and BIMSTEC, the country also benefits from reduced regional trade barriers. In
addition, Bangladesh has negotiated bilateral trade agreements with major economies such as China and
India, securing preferential access and reduced tariffs for its textile exports.
Financial Assistance and Subsidies
• Export development fund: Managed by the Bangladesh Bank, this fund offers low-interest loans to
exporters for financing raw materials and equipment
• Subsidies for raw material: The government provides subsidies for importing essential raw material,
such as cotton and dyes, to lower production costs and enhance competitiveness
Capacity Building and Skill Development
• Training programmes: In collaboration with the International Labour Organisation (ILO) and BGMEA,
the government runs training programmes that enhance technical skills, improve management
practices, and raise awareness of occupational safety and quality control.
• Textile institutes: Specialised institutions, such as the Bangladesh University of Textiles and the
National Institute of Textile Engineering and Research, play a key role in building a skilled workforce.
• Sustainable production practices: The Better Work Bangladesh programme further supports this effort
by improving labour standards and overall business competitiveness.
Environmental and Compliance Support
• ETPs: The government provides financial support for setting up ETPs, which are mandatory for large
textile units.
• Sustainable production practices: Initiatives such as the Green Textile Initiative offer incentives for
adopting eco-friendly production methods.
• Partnership for Cleaner Textiles (PACT): An IFC-led programme supporting factories across the value
chain in adopting cleaner practices, with BGMEA as the implementing partner and global brands such
as Levi's, Puma, and Tesco as partners
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Vietnam
Vietnam’s textile industry, comprising over 6,000 textile and garment manufacturing companies as of June
2022, is one of the country’s leading export industries, employing more than 2.5 million workers. In 2020,
Vietnam surpassed Bangladesh to become the second-largest exporter of readymade garments globally. A
combination of labour availability, low labour costs, and free trade agreements (FTAs) with key trading
partners drives the growth of the Vietnamese textile industry.
Export incentives
• Cash incentives: Provided to export-oriented enterprises, particularly in the textile and garment sectors,
to reduce costs and enhance global competitiveness
• Duty Drawback Scheme: Refunds duties paid on imported raw materials, lowering production costs
and improving the competitiveness of Vietnamese textiles
Tax benefits
Corporate tax rate: Vietnam offers a corporate tax rate of 20%. Companies that make new investments in
key sectors such as technology, garments, footwear and automobiles, or produce goods that are not
currently manufactured in Vietnam or meet EU quality standards, are eligible for substantial tax incentives
Infrastructure development
• Special Economic Zones (SEZs): Offer preferential tax rates and exemptions, import duty exemptions,
reduced land lease rates, and support services; Vietnam has four key economic regions (north, south,
central, and Mekong Delta), with the south hosting multinationals such as Nike and Adidas
• Industrial parks: Provide dedicated facilities for textile units, enhancing operational efficiency and
supporting growth
Trade agreements and market access
• Preferential trade agreements: Vietnam benefits from various FTAs, including the Comprehensive and
Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade
Agreement (EVFTA), which eliminate tariffs on garments and textiles, enhancing market access
• Regional trade agreements: As a member of ASEAN and the Regional Comprehensive Economic
Partnership (RCEP), Vietnam enjoys reduced trade barriers and regional cooperation
• Bilateral trade agreements: Significant bilateral trade agreements with the EU, Japan and South Korea
provide preferential access and reduced tariffs for Vietnamese textiles
Financial assistance and subsidies
• Export Development Fund: The Vietnam Development Bank offers export financing and credit facilities
to support textile and garment businesses
• Support for SMEs: The Small and Medium Enterprises Development Fund (SMEDF) provides financial
support, training, and market access programmes to boost the productivity and competitiveness of
small and medium enterprises (SMEs)
Skill development
• Training programmes: Industry–global brand collaborations focus on advanced manufacturing and
management skills
• Textile institutes: Technical universities and vocational colleges offer specialised training in textile and
garment technology
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Policy frameworks and Initiatives
Vietnam's textile industry has attracted significant FDI, with foreign-backed companies accounting for ~60%
of fabric and garment exports and ~70% of yarn exports. Investments originate from China, Singapore,
Japan, South Korea, and Taiwan—with Chinese companies being the largest contributors (over half of
textile FDI and roughly one-third of spinning capacity).
Vietnam's appeal stems from its proximity to key transport corridors, extensive shoreline, economic and
political stability, and business-friendly incentives such as tax cuts and streamlined procedures. It has
invested heavily in infrastructure (ports, railways, roads, SEZs, industrial parks) and signed 18 FTAs,
including the CPTPP, EVFTA, and RCEP, offering investors preferential market access.
Legal reforms under the Law on Investment 2020 and Law on Enterprises 2020 have made investing safer
and easier, with key provisions:
• Asset protection: Lawful assets cannot be nationalised or confiscated through administrative measures
• Choice of incentives: Existing incentives are retained if new laws are less favourable
• Efficient registration: Investment certificates issued within 5 working days of approval
• Growth support: Incentives apply to both new and expansion projects
• Project flexibility: Investors may adjust, transfer, merge, or divide projects
• Long-term stability: Project durations of up to 70 years (within economic zones) and 50 years (outside)
• Vietnam has also signed over 80 double taxation avoidance agreements (DTAAs) as of 2024, easing
the tax burden on foreign investors. Reflecting this, the Asia Manufacturing Index ranks Vietnam
second, ahead of India, as a preferred manufacturing destination in Asia.
Vietnam has also signed over 80 double taxation avoidance agreements (DTAAs) as of 2024, easing the
tax burden on foreign investors. Reflecting this, the Asia Manufacturing Index ranks Vietnam second, ahead
of India, as a preferred manufacturing destination in Asia.
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China
According to the International Cotton Advisory Committee (ICAC), China has emerged as the dominant
driver of synthetic and cellulosic fibre production, accounting for approximately 70% of the world's total
man-made fibres (MMF) in 2023. China's MMF exports, spanning fibres, yarn, fabric, and finished products,
have grown significantly, recording a 6% compound annual growth rate (CAGR) between 2017 and 2023.
Figure 49: Total Chinese MMF exports in million tonne
Source: Trade Data Monitor and Crisil Intelligence
Note: 12-month totals ending in September of each year. For example, Oct-17 represents exports from October 2017 to September
2018
The significant growth in China's MMF production can be attributed to a range of supportive policies,
including:
China’s five-year plan
China's five-year plan serves as a roadmap for national development, providing strategic direction for key
industries, including textiles. The 12th Five-Year Plan, for instance, aimed to drive innovation in the textile
industry by achieving breakthroughs across 50 technologies, spanning spinning, weaving, printing, dyeing,
textile processing, and environmentally friendly methods.
During the 14th Five-Year Plan period, the Ministry of Industry and Information Technology (MIIT) and the
National Development and Reform Commission (NDRC) issued the "Guiding Opinions on the High-quality
Development of China's Chemical Fiber Industry," setting ambitious goals for the chemical fibre (MMF)
industry by 2025:
• Increasing industrial added value by 5% annually while maintaining a stable global market share
• Boosting R&D investment to 2% of total expenditure and enhancing the development of high-
performance fibres
• Improving the green manufacturing system, with output of bio-based and degradable fibre materials
growing by over 20% annually
1.6 1.6 1.3 1.5 1.6 1.7 1.9
3.6 3.9 3.9
4.7 5
5.7 5.5
6.5
6.8
6.2
7.9
8.8
9
9.9
6.7
6.7
5.8
6.9
7.7
7.6
8.4
18.3
19.1
17.2
21.1
23.1
24
25.7
Oct-17 Oct-18 Oct-19 Oct-20 Oct-21 Oct-22 Oct-23
Synthetic and cellulosic fibresMMF yarn MMF fabric MMF products
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Collectively, the five-year plan provides a comprehensive blueprint that helps the sector prioritise efforts,
allocate resources, and make informed decisions about future growth.
Pre-tax super deduction of R&D expenses
Under China's pre-tax super deduction policy, eligible companies can deduct 200% of their research and
development (R&D) expenses from their income, effectively reducing their tax liability. The policy applies
broadly across most industries, with limited exceptions on a negative list. This enables the MMF segment
to invest in cutting-edge research, enhancing competitiveness and driving technological advancement.
Reduced corporate income tax
As part of China's Western Development Policy, domestic companies investing in chemical fibre
manufacturing in selected western regions, including Xinjiang, are eligible for a reduced corporate income
tax rate of 15%, compared to the standard rate of 25%. This preferential rate applies to investments made
between January 1, 2021, and December 31, 2030.
Export tax rebate
China's export tax rebate policy refunds the value-added tax (VAT) and consumption tax (CT) paid during
production and distribution, making Chinese goods more competitive internationally by eliminating double
taxation on exports. Current rebate rates on textile products range between 13% and 16%, offering
significant support to textile exports.
Tax incentives to encourage equipment upgrades
In 2015, the government introduced the "Circular on Further Improving the Enterprise Income Tax Policies
relating to the Accelerated Depreciation of Fixed Assets," allowing textile companies to apply accelerated
depreciation on purchased fixed assets from January 1, 2015. Companies could choose between two
options:
• Shortened depreciation period: Depreciate newly purchased assets over a shorter timeframe, subject
to a minimum of 60% of the standard period
• Accelerated depreciation method: Apply either the double declining balance method or the sum-of-the-
years'-digits method to depreciate assets faster
This policy encouraged companies to upgrade equipment and remain competitive, ultimately benefiting the
wider industry.
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Policy framework and industry support mechanism
The following initiatives are aimed at supporting the Indian textile industry:
1. PLI scheme for textiles
• The PLI scheme for textiles aims to boost the production of MMF apparel, fabrics and technical
textiles in India
• The scheme has approved 96 applications, with a proposed investment of Rs 32,085 crore and a
projected turnover of Rs 2,32,158 crore. As of July 2025, the scheme generated investments of
Rs 7,343 crore, with a turnover of Rs 4,648 crore and exports of Rs 538 crore in the textile sector
2. Pradhan Mantri Mega Integrated Textile Region and Apparel park (PM MITRA parks)
PM MITRA parks will help India's textile industry scale up and create a modern, integrated value chain
Update on PM Mitra parks:
• Madhya Pradesh: As of September 2025, 1,294 acres of land has been allocated to 91 companies,
with expected investments exceeding Rs 20,000 crore and creation of over 72,000 jobs
• The PM Mitra Park in Telangana, developed at a cost of ₹1,695 crore, was inaugurated as the
country's first functional PM MITRA Park in May 2026.
3. Samarth scheme
• The scheme aims to provide demand-driven, placement-oriented skilling programmes, creating
jobs in the organised textile and related sectors
• As of August 2025, according to the Ministry of Textiles, the scheme had trained 4.57 lakh
beneficiaries, with 3.55 lakh (78%) of them having secured placements.
4. Rebate of State and Central Taxes and Levies (RoSCTL) on exports of apparel, garments and made-
ups, effective until September 30th, 2026
The RoSCTL scheme enables Indian exporters to remain competitive in the global market by
reimbursing state and central taxes/levies embedded in the exports of made-up articles and garments,
ensuring a level playing field
Other subsegment-specific schemes include:
• Mission for Cotton Productivity
It empowers farmers with advanced scientific and technological tools to enhance cotton yields, fibre
quality and resilience to climate and pest-related stresses, ultimately boosting their overall
productivity
• National Technical Textiles Mission (NTTM)
NTTM was launched in 2020 with a financial outlay of Rs 1,480 crore, focusing on research,
innovation and development to boost the technical textiles sector
As of March 2025, NTTM had received a total allocation of Rs 517 crore since its inception.
Furthermore, 168 research projects with a combined value of approximately Rs 509 crore have
been approved under NTTM
• National Handloom Development Programme (NHDP)
NHDP is a comprehensive initiative that aims to promote the integrated development of the
handloom sector in India, including financial assistance for loom upgradation, marketing support,
and access to domestic and export markets
• National Handicrafts Development Programme
It is a supportive initiative that provides a range of benefits to handicraft clusters and artisans,
including basic inputs, infrastructure support and capacity enhancement, to help them access and
serve target markets.
124
Recommendations: Policy initiatives and reforms
Recommendations for Enhancing Raw Material Cost Competitiveness
Adequate availability of quality raw materials, such as natural fibres and man-made fibres, at internationally
competitive prices is a prerequisite for achieving the target of increasing the textile business size to $350
billion by 2030, from the current level of $179 billion.
In the case of cotton, the Minimum Support Price (MSP) often leads to domestic cotton prices being higher
than international cotton prices, particularly when there is increased production of cotton in the global
market. Furthermore, Indian cotton faces additional challenges, including having one of the lowest cotton
yields and a lack of quality cotton.
On the other hand, the production of man-made fibres (MMF) is also hindered by significant challenges.
India has domestic production capacity for PTA and MEG; however, supply-demand imbalances and import
dependence affect the cost competitiveness of polyester production. Additionally, the inverted duty
structure in MMF negatively impacts MMF yarn and fibre producers.
Given these challenges, it is essential to address these issues to create a level playing field with other
competing countries, such as China, Bangladesh and Vietnam, in terms of availability and pricing. Without
this, the Indian industry will struggle to compete globally.
Recommendation – I: Addressing the inverted duty structure between feedstock
and downstream industry in the polyester-based MMF industry
The introduction of the revised GST rates in September 2025 aimed to rectify the inverted duty structure in
the MMF sector. Previously, the GST was 18% on polyester fibre, 12% on polyester yarn, and 5% for
subsequent stages, resulting in significant input tax credit accumulation for yarn and fabric manufacturers.
The revised GST rates for all stages are 5%, including fibre, yarn and fabric, easing working capital pressure
on manufacturers. However, the revision did not completely address the inverted duty structure as the main
raw materials, PTA and MEG are still taxed at 18%, while downstream products are taxed at 5%, leading
to a higher inversion of duty, resulting in a significant accumulation of funds at the hands of yarn and filament
manufacturers. This will cause higher blockage of working capital for MMF yarn players and hinder the
industry's ability to expand.
Suggestions to implement recommendations:
Addressing the inverted duty structure: A revision of the duty structure to lower GST on essential raw
materials like PTA and MEG can significantly ease cash flow constraints for industry players. This move is
expected to provide crucial support to the sector and encourage the production of polyester fibre.
Recommendation – II: Enhanced Accessibility to MEG
The manufacturing of polyester requires PTA and MEG. Specifically, approximately 0.86 kg of PTA and 0.34
kg of MEG are required to produce 1 kg of polyester. India have a significant PTA production capacity of
approximately 6.5 MMTA, with Reliance Industries, Indian Oil Corporation Limited (IOCL), and MCPI as
major producers. In view of the planned substantial expansion, with 5.5 MMTA of new capacity expected to
be added in the next 2-3 years, India may achieve self-sufficiency in PTA production, nearly doubling its
current capacity. As a result, no adjustment to the import duty on PTA is required.
125
Details on upcoming project:
Source: Company reports, Crisil Intelligence
The global MEG market's oversupply situation has resulted in Indian producers exercising caution, with no
imminent plans for substantial capacity expansion. Therefore, to foster growth in the polyester industry,
governments may implement policies that improve access to MEG for Indian polyester producers, thereby
supporting the sector's expansion.
Suggestions to implement recommendations:
Removal or reduction of customs duty on MEG:
With approximately 35% of the country's MEG requirements being met through imports due to insufficient
domestic capacity, and no new substantial capacities on the horizon, the government may consider
eliminating or reducing the 5% customs duty on MEG imports. This move would help reduce the
manufacturing costs of polyester and enable domestic polyester manufacturers to produce yarn at
competitive rates, thereby boosting the industry's global competitiveness.
Recommendation – III: Accelerate adoption of recycled content in MMF
garmenting
Indian polyester manufacturers must prioritise scaling up recycled inputs like recycled polyethylene
terephthalate (rPET) and chemically or mechanically recycled chips. This strategic move will not only shield
them from raw-material volatility but also ensure they meet the EU's rapidly rising sustainability standards.
The Ecodesign for Sustainable Products Regulation (ESPR), which took effect on July 18, 2024, sets
requirements for products sold in the EU to contain more recycled content, use fewer hazardous
substances, and have a lower carbon footprint. The ESPR provides a framework for product-specific
ecodesign requirements, which may include recycled-content requirements for textiles and apparel. Hence,
it is important to provide policy support to accelerate the adoption of recycled materials in MMF garments.
Suggestions to implement recommendations:
• Improving waste collection: India's recycling ecosystem can be strengthened by introducing a digital
marketplace that connects informal waste aggregators with formal recycling units. This can be
complemented by establishing centralised sorting hubs, which can help ensure a stable and traceable
feedstock supply, ultimately enhancing the overall efficiency of the recycling process
Promoter Project details
Capacity
addition
Current status
GAIL Ltd
GAIL acquired the purified terephthalic acid (PTA)
manufacturing facility of JBF Industries Limited
through a resolution plan sanctioned by the
National Company Law Tribunal (NCLT).
Following the acquisition, the entity was renamed
as GAIL Mangalore Petrochemicals Limited
1.2 million
metric
tonnes
Project expected to
be completed in
2026
Indian Oil Corporation
Limited
The project involves setting up a Paraxylene and
Purified Terephthalic Acid (PX-PTA) facility at
Paradip, in the Jagatsingpur district of Odisha
1.2 million
metric
tonnes
Project expected to
be completed by
December 2026
Reliance ltd
A single-train Purified Terephthalic Acid (PTA)
plant project at Dahej is under implementation by
Reliance Industries
3.2 million
metric
tonnes
Project expected to
be completed by
June 2027
126
• Introducing minimum amount of recycled materials in MMF garments: In the long run, the
government may introduce regulations requiring MMF garment manufacturers to incorporate a
minimum amount of recycled materials into their products. Certifications like the Global Recycled
Standard (GRS) and Recycled Claim Standard (RCS) may be used to validate recycled content claims,
ensuring transparency and accountability
Recommendation – IV: Improving cotton productivity
India's cotton yield is significantly below that of several major cotton-producing countries and the global
average due to the use of outdated cotton seeds that are ineffective against the pink bollworm
(Pectinophora gossypiella), erratic weather, increasing seed costs and a lack of awareness among small-
scale farmers. Additionally, the country's small landholdings make it difficult to utilise various farm
equipment, further exacerbating the issue.
Figure 50 Global peer benchmarking of cotton productivity
Note: The data is based on the cotton marketing season, which commences in August and ends in July.
Source: Crisil Intelligence, USDA
Current initiative
The Union Budget for fiscal 2026 introduced a five-year Cotton Mission to tackle the issue of stagnant
cotton productivity, with a focus on extra-long staple varieties. The mission will provide technical support to
farmers, with a total outlay of Rs 2,500 crore over five years. The mission's three key objectives are:
• Improving cotton yield and productivity through strategic interventions such as research and human
resource development
• Modernising ginning and pressing units
• Promoting sustainable natural fibres such as banana, milkweed and bamboo, to diversify the country's
fibre base
Suggestions to implement recommendations:
• Providing new cotton seed technology: In 2002, India introduced Bt cotton, a genetically modified
(GM) crop developed by Monsanto in collaboration with Maharashtra Hybrid Seeds Company.
Marketed under the brand name Bollgard, this crop was specifically designed to combat American
bollworm (Helicoverpa armigera), a pest that had been causing significant damage to cotton crops. In
458
1,570
1,345
859
1,989
1,559
683
436
2,089
1,911
1,008
2,156
1,580
789
0
500
1000
1500
2000
2500
India China Brazil USA AustraliaTurkey World
average
Cotton yield (kg per hectare)
2015/162021/222022/232023/24
127
2006, India approved the use of Bollgard II, which has two genes for protection. This superior
technology further enhances the crop’s ability to control bollworm, tobacco budworm and other cotton
pests, making it the dominant cotton variety grown in the country. Despite its initial success, Bt cotton
is now facing significant challenges. The effectiveness of Bollgard II cotton seeds against bollworms
has decreased, resulting in decreased yields. Additionally, the emergence of secondary pests, such as
aphids and whiteflies, has become a significant problem. The increased cost of Bt cotton seeds is also
a major concern for small-scale farmers, who are struggling to maintain profitability amid declining
yields and increasing pest pressure.
• The Indian cotton industry is at a critical juncture, and it is essential to address these challenges to
ensure the long-term sustainability of cotton production. The country may accelerate the development,
evaluation and adoption of next-generation cotton seed technologies, including indigenous insect-
resistant, disease-tolerant and climate-resilient varieties, subject to applicable regulatory approvals.
This is necessary to improve crop yields, reduce losses and enhance the competitiveness of India’s
cotton industry.
• Training farmers: Despite training efforts, farmers remain skeptical about adopting new practices. To
overcome this, alternative approaches can be explored, such as partnering with local leaders, engaging
progressive farmers as mentors, and demonstrating the benefits of new techniques. Additionally,
mobile-based tools can be utilised to educate farmers on best practices such as soil testing and
herbicide use as well as innovative methods such as plastic film mulching, furrow irrigation, seedling
transplanting and precision seeding. Special emphasis should be placed on crop protection from
insects and effective agricultural management practices during the training. A nationwide initiative can
be implemented, comprising campaigns and training programmes for farmers on regenerative
practices.
• Increasing use of artificial intelligence in cotton farming for weather prediction and pest monitoring:
Erratic climate change poses a significant threat to cotton production as rising temperatures, droughts
and unpredictable weather patterns can lead to reduced yields and lower crop quality. However,
advances in machine learning can help mitigate these impacts by providing accurate weather
predictions. By leveraging historical data, satellite imagery and sensor data, machine learning models
can help farmers make informed decisions about planting, harvesting and irrigation, ultimately
contributing to more sustainable and resilient cotton production. Artificial intelligence (AI) can also be
used for real-time monitoring of pests, enabling farmers to make informed decisions about pest
management
Recommendation–V: Removal of import duty on cotton
In February 2021, the Government of India had announced an 11% duty on imported cotton. As of now, the
Government temporarily exempted custom duties on imports of raw cotton from 1 June 2026 to 31 October
2026. The measure aims to augment the availability of cotton for the domestic textile industry, reduce input
costs, improve the competitiveness of the textile and apparel sector.
Due to the minimum support price (MSP), domestic cotton prices do not move in tandem with international
cotton prices. When domestic cotton prices are lower than international cotton prices, the import duty has
a minimal impact on the textile industry. However, when domestic cotton prices are higher than international
cotton prices, the domestic value chain gets impacted, including the profitability of spinners and the
competitiveness of the textile sector. When domestic cotton prices exceed international prices, the imports
surge and exports decline. This makes cotton more expensive for Indian textile manufacturers as they must
choose between high-priced domestic cotton and imported cotton with an 11% duty. In contrast, countries
128
such as Bangladesh and Vietnam, which rely on imported cotton, do not have import duty on cotton, giving
them a competitive edge.
Figure 51: Cotton price comparison: domestic vs international
Source: Industry, Ministry of Commerce and Industry, Crisil Intelligence
Suggestions to implement recommendations:
To address this issue, the government may consider removing the import duty on cotton, thereby bringing
domestic players on a par with international players, or allow a certain quantity of cotton to be imported
duty-free, which could help fulfil the demand that is not being met by domestic producers and ensure a
stable supply of raw materials.
Recommendation–VI: Improving quality of cotton
India's cotton ginning segment has undergone significant modernisation, driven by various state and central
government subsidies. Although a substantial number of Indian ginning factories have upgraded their
facilities, many still face challenges in maintaining optimal production practices. Specifically, due to cost
constraints, a large number of ginning factories fail to clean the kapas (raw cotton) before ginning. According
to a research paper titled "Technological Evolution and Current Practices in the Indian Ginning Industry,"
published in 2024, a staggering 64% of factories do not clean the kapas at all before ginning, while 23%
rely on manual cleaning methods. Ginners also tend to avoid using lint cleaners, which can improve the
grade and appearance of cotton lint by removing small impurities and short fibers after ginning. The quality
issues arising during ginning are permanent and cannot be corrected in the later stages of cotton textile
value chain.
129
Suggestions to implement recommendations:
• Monitoring and Compliance for Modernised Ginning Units: Ginners who have benefited from subsidies
for modernisation should be obligated to employ kapas cleaners and lint cleaners. Compliance can be
ensured by requiring ginners to submit regular digital reports detailing kapas cleaner and lint cleaner
usage statistics, and quality reports.
• Standardised testing framework: Presently, India lacks a standardised testing framework for ginned
cotton. Implementing a standardised database with uniform testing parameters, methods, and a
centralised data upload system will ensure consistency and accountability among ginners. This will
motivate ginners to enhance their cleaning and handling practices. Additionally, it will facilitate a shift
towards quality-based cotton procurement, moving away from traditional bulk pricing methods
This measure is expected to yield cleaner lint, thereby strengthening the competitive position of Indian
cotton textiles in the global market.
Recommendations to improve the scale of operations
Recommendation I: Infrastructure and policy support for textile firms
According to Economic Survey 2024, approximately 80% of textile and apparel producers are micro, small
and medium enterprises (MSMEs), which typically operate on a relatively small scale. These MSMEs often
lack access to advanced machinery and technology, certification centres and digital infrastructure, hindering
their ability to participate in e-commerce and access global markets. Hence, it is essential to address this
issue.
Current initiatives
The government has launched the PM MITRA parks scheme, which aims to increase infrastructure support
for MSMEs. Each of the seven PM MITRA parks will span a minimum of 1,000 acres and provide plug-and-
play infrastructure, a vital component for MSMEs. This infrastructure will include dedicated facilities,
transport networks and e-commerce support, enabling MSMEs to operate efficiently. By bridging the gap
between small-scale manufacturers and large, export-oriented competitors, the PM MITRA scheme is
expected to enhance the competitiveness of MSMEs and facilitate their growth. Upon completion, each
park is envisaged to generate 100,000 direct jobs and 200,000 indirect jobs, thereby making a significant
contribution to employment creation. Furthermore, it is estimated that each PM MITRA park will attract
investments of approximately Rs 10,000 crore, providing a substantial boost to the industry.
Suggestions to implement recommendations
Promoting modernisation and innovation: To enhance productivity, competitiveness and product quality,
it is important to address technological gaps among textile firms. Government support may be provided to
facilitate the replacement of outdated machinery, adoption of automation and advanced production
technologies, and integration of resource-efficient and environmentally sustainable practices.
Facilitating access to information and certifications: Cluster-level certification centres may be
established as a one-stop support mechanism for MSMEs to meet domestic and international market
requirements. These centres could provide guidance and assistance in obtaining the certifications, testing
and compliance-related documentation required for textile exports, thereby reducing procedural difficulties
and facilitating smoother access to global markets.
130
Recommendation II: Attracting foreign direct investments
The textile sector accounts for only ~0.67% (average of past 12 years) of India's total FDI inflows. Despite
a 7% CAGR in overall FDI inflows over fiscals 2014-2025, the textile sector's FDI growth was limited to 2%
during the period. Key challenges facing the sector include lack of trade agreements, underdeveloped
infrastructure and regulatory hurdles.
Figure 52: FDI inflow trends pertaining to the Indian textile sector
Source: Department for Promotion of Industry and Internal Trade, Crisil Intelligence
Current initiatives
India allows 100% FDI in the textile sector under the automatic route. Single-brand retail also permits 100%
FDI, subject to certain conditions. In contrast, multi-brand retail has a 51% FDI limit, with specific
requirements.
Suggestions to implement recommendations:
• Reduction of stamp duty and registration fees
Stamp duty and registration charges vary significantly across Indian States and can add materially to
project establishment costs. This disparity makes property purchases in India relatively expensive
compared with countries such as Mexico, which has abolished traditional stamp duties in favor of
localized acquisition taxes. To attract foreign investors and remain competitive, it is crucial for India to
revisit its stamp duty structure and consider reducing these charges for investors.
• Streamlining approvals
To promote foreign investment in India, it is crucial to simplify the process of setting up a factory.
Currently, companies must navigate a complex web of approvals from various departments, including
the municipal corporation, state pollution control board, and others. This process is not only time-
consuming but also costly. A potential solution is to create a centralised online platform that offers a
one-stop solution for all approvals where land registration is electronically linked to all relevant state
departments. This would enable companies to obtain all necessary approvals through a single online
application, reducing the complexity, time and cost associated with setting up a factory in India.
199197
230
619
454
166
356
299
247
169
310
255
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
0
100
200
300
400
500
600
700
FY14FY15FY16FY17FY18FY19FY20FY21FY22FY23FY24FY25
FDI inflow: Textile
Textile FDI inflow in India (US$Mn)Total FDI inflow in India (US$Mn)
131
• Removal of exit barriers
According to a study by the Quality Council of India, which was conducted for the Economic Survey,
the time taken to close a company in India is excessively long, requiring approximately 1,570 days (4.3
years) to complete, even in the absence of any complications. Much of this time, nearly three years, is
spent navigating clearances and refunds from government agencies, such as the income tax
department, GST administration, and provident fund authority. This emphasises the need for reform
and simplification of exit procedures to facilitate easier business closure and promote a more business-
friendly environment.
Several measures can be taken to address the exit barriers, such as introducing a single-window
clearance for winding up companies with no liabilities and streamlining the process of repatriating
foreign funds when a company ceases operations.
• Support for foreign companies investing in PM MITRA parks
To promote technology transfer and reduce dependence on imports, the government may support
foreign firms that establish joint ventures with Indian companies in PM MITRA Park. This will encourage
foreign companies to share advanced technology and set up production units in the park, specifically
in segments where India currently relies heavily on imports.
By implementing these measures, India can fortify its presence in the textile industry, elevate its global
standing and attract substantial foreign investment, thereby achieving sustained growth and ultimately
transforming the sector to make it more competitive globally.
Recommendation – III: Creating large-scale capacities in the weaving and
processing sub-sectors
India’s textile sector uses outdated weaving and processing technologies, particularly the unorganised
power loom segment. This practice hinders its fabric quality and productivity. To bridge the gap with
competing countries such as China, it is essential to shift from obsolete shuttle looms to advanced shuttle-
less looms. Shuttle-less looms, such as rapier and air-jet looms, are faster and more efficient, thereby
increasing production and improving fabric consistency.
Suggestions to implement recommendations:
• Promoting adoption of shuttle-less looms:
The Ministry of Textiles may undertake a market research study to identify potential buyers with consistent
demand for high-quality fabrics. The findings of the study could be leveraged to identify existing textile
clusters with the potential to cater to such demand and facilitate their technological upgradation through
appropriate support. This would enable the clusters to enhance their product quality, productivity and
competitiveness in line with market requirements.
The Ministry may also play a facilitative role in establishing linkages between identified buyers and textile
clusters, including facilitating discussions on bulk procurement commitments that provide greater market
certainty to clusters while offering reliable sourcing opportunities to buyers. Such an approach could help
foster sustainable, long-term partnerships between buyers and clusters.
At the cluster level, the respective associations may be encouraged to aggregate and manage bulk fabric
orders, thereby streamlining the sales process, improving bargaining power, and ensuring that weavers
receive a fair price for their products.
132
Recommendation – IV: Promoting research and development (R&D) in the private
sector
The Indian textile sector lags in technology due to inadequate investment in R&D by the private sector.
Compared with Chinese peers, India's private sector lags in R&D investments, with top textile companies
allocating a mere 0.21% of sales towards R&D, significantly lower than the 2.25% spent by top Chinese
textile companies (as per Annexure IV). To drive innovation and competitiveness, it is essential to incentivise
and encourage private sector investment in R&D. Their participation in R&D is crucial for the sector to
progress, address environmental concerns and capitalise on emerging opportunities and challenges.
Suggestions to implement recommendations:
To encourage design innovation, some support may be provided to companies purely on outcome basis
that invest in design development and achieve commercial success with these designs.
This approach will lead to a reduction in the share of low-value-added products in India's export basket,
thereby increasing the dependence of international retailers on Indian suppliers and making it more difficult
for them to diversify to alternative suppliers.
Recommendation – V: Improving cost competitiveness
The textile industry in India is characterised by high logistics costs, exacerbated by the geographical
dispersion of the sector. For example, cotton produced in Gujarat, Andhra Pradesh and Maharashtra is
often transported to Rajkot and Coimbatore for spinning. The yarn is then sent to Pali, Erode or Bhiwandi
in Maharashtra for weaving, knitting and processing. The finished fabric is transported to major consumption
hubs such as Mumbai, Delhi, Bengaluru and others, where it is converted into ready-made garments. This
complex supply chain highlights the interconnectedness of the sector and the dependencies that exist
across the entire value chain.
Suggestions to implement recommendation:
• Lower charges for textiles cluster using dedicated freight corridor (DFC)
The DFC offers a significant opportunity for textile clusters to reduce logistics costs, as rail transport is
cheaper and more environment-friendly than road transport. To promote the use of DFC, the
government may offer lower charges for specific textile clusters transporting goods using this corridor.
Recommendations to expand market outreach in the downstream sector
Recommendation – I: Enhancing market access through trade agreements
To expand India's export reach, FTAs play a critical role in reducing trade barriers. Recent agreements,
such as the FTA with Australia, have demonstrated early success in boosting exports. Similar agreements
with other key markets, can help Indian exporters gain duty-free or preferential access, thereby making
Indian textiles more competitive globally.
133
Table 13: India’s key FTAs and country-wise RMG export growth rate
Countries
FY22
(YoY
RMG
growth in
quantity)
FY23
(YoY
RMG
growth
in
quantity)
FY24
(YoY
RMG
growth
in
quantity)
FY25
(YoY
RMG
growth
in
quantity)
Trade agreements
Japan 1% 12% -1% 14%
In 2011, India and Japan signed a Comprehensive Economic
Partnership Agreement (CEPA), allowing for duty-free import of
Indian garments to Japan. Despite this, textile and apparel trade
growth between the two countries has been modest. However,
on January 27, 2021, the textiles committee, Ministry of Textiles,
government and Japan's Nissenken Quality Evaluation Center
signed a memorandum of understanding (MoU) to enhance the
quality of Indian textiles and meet the requirements of Japanese
buyers through various initiatives, including testing, inspection
and conformity assessment, as well as training, capacity
building, R&D and consultancy services
Australia 25% 2% 24% 36%
The India-Australia Economic Cooperation and Trade
Agreement came into effect on December 29, 2022, providing
immediate duty-free access to 96.4% of India's exports to
Australia in value terms, including textiles and apparel, which
were previously subject to a 5% import duty
Mauritius -17% 38% 1% 7%
The Comprehensive Economic Cooperation and Partnership
Agreement entered into force on April 1, 2021. Under this
agreement, over 300 domestic goods from various sectors,
including agriculture, textiles (comprising 27 product lines),
electronics and others, will gain market access in the African
nation at concessional customs duty rates
UAE 13% 4% -8% 6%
The India-UAE CEPA, signed on February 18, 2022 and
effective from May 1, 2022, has India securing immediate duty
elimination on over 80% of its tariff lines, accounting for 90% of
the country's exports in value terms, with most of these lines
pertaining to labour-intensive sectors, such as textiles, which
previously attracted tariffs ranging from 5% to 10%
UK 14% -7% -5% 13%
On May 6, 2025, the government officially announced the
successful completion of the India-UK FTA. This agreement
provides extensive market access for goods across sectors,
encompassing India's export interests. With the elimination of
tariffs on ~99% of tariff lines, covering ~100% of trade value, the
India-UK FTA is expected to significantly enhance the
competitiveness of Indian textile goods in the UK market relative
to those of other countries.
Source: Directorate General of Commercial Intelligence and Statistics (DGCI&S), Crisil Intelligence
Table 14: Share of key FTA countries in India’s RMG export basket (volume-wise)
Countries FY21 FY22 FY23 FY24 FY25
Japan 1.16% 0.95% 1.15% 1.18% 1.18%
Australia 1.48% 1.50% 1.64% 2.10% 2.50%
Mauritius 0.23% 0.15% 0.23% 0.24% 0.22%
UAE 10.58% 9.92% 10.03% 9.83% 8.96%
UK 7.6% 7.03% 7.03% 6.93% 6.86%
Source: DGCI&S, Crisil Intelligence
134
Table 15: Duty-free access for RMG
Exporting countries
Importing
countries
India China Vietnam Bangladesh
US No No No No
EU-27 No
@
No No* Yes
UK Yes No No* Yes
Canada No No Yes Yes
South Korea Yes No* Yes No*
Australia Yes Yes Yes Yes
UAE Yes No No No
Russia No No No* No
Mexico No No No* No
Malaysia No* Yes Yes No*
Panama No No No No
Brazil No No No No
Kuwait No No No No
Switzerland Yes Yes Yes Yes
Israel Yes Yes Yes Yes
Saudi Arabia No No No No
Note: Bangladesh is enjoying duty-free access in UK, EU, Japan, Canada, Korea and Australia owing to its LDC status
* Exporting countries are subject to lower tariffs on RMG exports than other countries due to preferential treatment from importing
countries
“Yes” indicates availability of duty-free/preferential tariff access for RMG products under applicable FTAs, GSP/LDC schemes or
other preferential arrangements, subject to product-specific tariff lines and rules of origin.
@
FTA has been completely negotiated but yet to be ratified
Source: ITC Trade Map
India has an advantage over China, Bangladesh and Vietnam
No advantage to any of the four exporting countries
India has a disadvantage over China, Vietnam or Bangladesh
India and Bangladesh have an advantage over China and Vietnam
India and Vietnam have an advantage over China and Bangladesh
Suggestions to implement recommendations:
• Leveraging India’s strengths in cotton: FTAs should also focus on promoting India’s core strengths,
such as cotton textiles, to maximise export opportunities. Collaborative initiatives within FTAs to
promote Indian cotton as a high-quality, sustainable option could create additional demand in
international markets
• FTAs with high-potential markets: While traditional markets such as the EU and the US remain
crucial, India may strive to sign FTAs with these countries and simultaneously explore new trade
opportunities with high-growth markets such as Mexico, Canada, Malaysia, Brazil, Panama, Russia,
Kuwait and Saudi Arabia (Annexure II)
• Market development: Expanding into new markets can be achieved through:
o Identifying the specific types of garments needed in those countries by examining their import
data on apparel
o The industry association engaging with various clusters to design and manufacture the required
products for export to the identified countries.
o Organising trade shows and exhibitions in the target countries to showcase offerings and attract
potential buyers
135
Recommendation – II: Focus on sustainability practices
The mounting environmental concerns have made regulatory support for sustainable production a
necessity, with policies such as the Eco-Design for Sustainable Products Regulation (ESPR) and the
Corporate Sustainability Due Diligence Directive (CSDDD) playing a key role. Moreover, a significant
number of retailers in the US and EU are using sustainability criteria to evaluate suppliers, and major buyers
are increasingly requiring certifications that demonstrate compliance with environmental and social
standards.
Suggestions to implement recommendations
• Promoting sustainable practices: The government's support for sustainable practices in the textile
industry can be instrumental in driving industry-wide change. By offering support, the government may
encourage industry players to adopt environmentally friendly methods, including Closed-Loop
Recycling, green technology adoption, development of advanced sustainable fibers like bamboo fibre,
banana fibre, and hemp, and the use of recycled materials. Textile industry associations should provide
regular updates on the latest sustainable practices and requirements, monitor trends in sustainable
exports, and collaborate with international organizations to support businesses in their green transition
• Certification for sustainable practices in India: To comply with international sustainability standards,
Indian textile exporters must obtain certifications such as OEKO-TEX Standard 100, which ensures
that textiles are chemical-free, Global Organic Textile Standard or GOTS, which is necessary for the
export of organic textiles, and Registration, Evaluation, Authorisation and Restriction of Chemicals or
REACH, which tests the safety conformity of textiles under EU law. These certifications are crucial for
accessing international markets, as most US and EU retailers use sustainability criteria when selecting
suppliers.
Adopting sustainable production practices is crucial to achieve long-term success. A collaborative
framework is also necessary to bring together industry stakeholders, including government, consumers,
manufacturers and investors, to promote eco-friendly practices and reduce India's environmental footprint.
Prioritising sustainability will enable India to tap into the conscious consumer market and become a reliable
and sustainable player in the global market, boosting its competitiveness.
Improving efficiency of labour in the textile sector
Recommendation – I: Improve labour productivity and welfare
The informal nature of India's textile industry creates substantial obstacles in enforcing labour rights and
limits the acquisition of skills required for advanced technologies. The industry is also under pressure from
high attrition, as migrant labourers carry out the bulk of the manufacturing.
Current initiatives
• The government has launched several key initiatives to support labour welfare in the textile sector,
including:
• The Samarth scheme: The scheme offers industry-driven training programmes aligned with the National
Skills Qualifications Framework to boost job creation in the organised textile sector.
• Pradhan Mantri Shram Yogi Maandhan (PM-SYM) Pension Scheme: The PM-SYM scheme is a
voluntary and contributory pension scheme covering unorganised workers, including handloom
136
workers, and provides a minimum assured pension of Rs 3,000 per month after the age of 60. The
scheme has a 50:50 contribution structure between the beneficiary and the central government
• Pradhan Mantri Suraksha Bima Yojana (PMSBY): Introduced in 2015, the scheme offers affordable
insurance coverage to individuals between 18 and 70 years of age. It provides coverage of Rs 2 lakhs
for accidental death or full disability, and Rs 1 lakh for partial disability, benefiting the common people,
including power loom workers
Suggestions to implement recommendations
• Certification for responsible trade practices: The apparel industry has faced criticism for its role in
exploiting workers in developing countries, where low production costs often compromise safety
conditions. In response, international brands are now proactively investigating their entire supply
chains, driving a shift towards greater transparency, due diligence and accountability. To promote
responsible business practices, the Indian government may introduce voluntary certifications for
companies that demonstrate ethical practices and prioritise labour welfare, enabling importers to
identify and partner with ethical suppliers that adhere to stringent human rights standards
• Providing hostels/dormitories to workers: The provision of hostels or dormitories is a critical
requirement in labour-intensive industries such as the garments sector, which largely relies on migrant
workers. These hostels provide shared accommodation, usually situated near the workplace, and are
essential to ensure the well-being and productivity of workers. India has made some progress in this
regard with the launch of the Affordable Rental Housing Complexes in 2020.
The proposed SAFE Accommodation Scheme for Workers is currently under development. The
scheme seeks to address the need for safe, affordable, and dignified accommodation for workers,
particularly migrant labour employed in manufacturing clusters. This scheme may be launched on
priority with the objective of facilitating labour mobility, improving workers' well-being, and enhancing
industrial productivity.
• Training and development:
To boost worker capabilities and elevate output quality, targeted skill development initiatives can be
introduced. As the industry adopts cutting-edge technologies, it is imperative that the traditional textile
workforce acquires new skills and enhances their existing ones to remain relevant. Furthermore,
education and training systems require a significant overhaul to align with evolving industry needs.
Key areas identified for skilling and upskilling include:
o Technical design: Technical designers play a vital role in translating creative concepts into
feasible, functional, and manufacturable products. They serve as liaisons between designers and
factories, ensuring a seamless transition from design to production
o Sustainable manufacturing: Workers require knowledge and expertise in sustainable
manufacturing practices to minimise environmental impact
o Digital technologies: Developing expertise in integrating digital technologies, such as digital
printing and AI-driven design, smart fabrics, and wearable technology with traditional textile
manufacturing is crucial for driving enhancements in fibre quality, production efficiency, and
automation
o Advanced fibre technologies: Developing expertise in the production of advanced fibres that are
high-performance, reliable, and eco-friendly is essential
o Artificial Intelligence and Blockchain: Developing expertise in artificial intelligence (AI) and
blockchain technologies is crucial. AI can play a pivotal role in demand forecasting, inventory
management, and improving customer experiences, while blockchain technologies can improve
traceability across the value chain
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Effective training strategies:
• Industry-academia Collaboration: Foster partnerships between industry and academic institutions to
provide real-time curriculum updates that align with industry needs
• Hands-on training through apprenticeships: Promote apprenticeships and certification programs in the
aforementioned areas through the National Apprenticeship Promotion Scheme (NAPS)
• Public-private partnerships: Collaborate on setting up training centers near manufacturing clusters,
aligning curriculum with industry requirements, and encouraging young talent to pursue textiles as a
high-growth, technology-driven career path
• Integrating industry-led upskilling initiatives with policy support and infrastructure will help build a skilled
and agile workforce capable of meeting the evolving demands of global buyers.
Recommendation on policy support for branding of Indian textiles
Recommendations - I: Support for global branding in apparel
India is a major apparel manufacturer for global brands such as Decathlon, H&M, and Zara. These retailers
sell the products at a premium, leveraging their established brand value. Despite being a significant player
in the apparel manufacturing industry, India lacks large, globally recognised brands, with a few exceptions
such as FabIndia and Peter England etc. To overcome this, Indian manufacturers must prioritise investing
in brand development in international markets. By shifting their focus to brand development, Indian
manufacturers can transition from being mere contract manufacturers to building global brands, reaping the
benefits of increased customer loyalty and premium pricing
Current Initiatives
• The Export Promotion Mission offers financial support, including interest subvention, export
factoring, collateral guarantees, credit cards, and credit enhancement for market diversification, as
well as non-financial support to enhance market readiness and competitiveness, covering areas
such as export quality and compliance, international branding, packaging, trade fairs, logistics, and
trade intelligence and capacity-building initiatives
• The government promotes “Brand India” in textiles through initiatives such as Kasturi Cotton and
Silk Mark, which ensure quality, transparency, and purity in Indian cotton and silk products
Suggestions to implement recommendations
The government may offer support for developing global apparel brands. This initiative may support Indian
apparel companies in building and promoting their global brands by providing funding for:
• Facilitating bilateral market access: The Indian government may leverage bilateral and
diplomatic channels to ease market entry for Indian apparel brands in international markets. This
could include negotiating preferential access, simplifying regulatory and certification requirements,
and creating platforms for Indian brands to establish a presence in partner countries.
• Strengthening export logistics and supply chain support: The government may assist Indian
apparel brands with logistics and supply chain infrastructure for international expansion, including
support for warehousing, distribution networks, and streamlined export-import processes, thereby
reducing the operational burden of entering and scaling in overseas markets.
• Fostering collaborations between Indian weaves and brands: The initiative may facilitate
partnerships between Indian brands and traditional Indian weaves. By leveraging India's unique
Geographical Indications (GI) tags, such as Kotpad handloom fabric, Kanchipuram Silk, Lucknow
Chikankari, and Kashmir Pashmina, Indian brands can create exclusive, fashion products. This
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collaboration will not only promote Indian weaves globally but also provide Indian brands with a
unique selling proposition.
Strengthening specific segments of the textile industry
Recommendation – I: Diversification into technical textiles
Technical textiles, comprising specialised textile products designed for applications across sectors such as
automotive, healthcare, agriculture and personal protection, constitute a rapidly expanding market. These
products offer enhanced functional properties, including high strength, durability, and resistance to
chemicals and ultraviolet radiation. Given its manufacturing capabilities and growing domestic demand,
India has considerable potential to expand its footprint in this segment and emerge as a leading global
supplier.
The domestic technical textile market has clocked a 7% CAGR, increasing to $26.8 billion in fiscal 2024
from $19 billion in fiscal 2019, according to the Ministry of Textiles. Additionally, technical textile exports
have risen to $2.59 billion in fiscal 2024 from $1.99 billion in fiscal 2019, as reported by the Directorate
General of Commercial Intelligence and Statistics.
Current initiatives
The Ministry of Textiles has set ambitious targets for India's technical textile sector, aiming for a domestic
market size of $40 billion by 2030, while also targeting total exports of $10 billion by 2030. The government
has introduced various initiatives for the growth and development of technical textiles. One such initiative
is the National Technical Textiles Mission (NTTM), which has a capital outlay of Rs 1,480 crore and aims to
establish India as a global leader in technical textiles by focusing on four key areas. The mission was
extended till fiscal 2026. Refer to annexture II for more details on this initiative.
Secondly, the government has approved a PLI scheme for textiles, with an outlay of Rs 10,683 crore. It
aims to promote the production of man-made fibre (MMF) apparel, MMF fabrics and technical textiles in the
country. This initiative is designed to enable the textile sector to achieve scale and become competitive.
The government has taken a significant step towards promoting technical textiles by identifying 116
products for mandatory use across 10 ministries and departments, with 73 products notified as of June
2025, focusing on high-impact sectors such as healthcare, agriculture, infrastructure and defence to
maximise the benefits of technical textiles.
All these initiatives have significantly strengthened India's domestic production of technical textiles.
However, despite the progress made, the technical textile industry in India still faces several challenges.
These include:
• Over-reliance on imported machinery, which hinders domestic production and increases dependence
on international suppliers, thus undermining the industry's self-sufficiency
• High dependence on the import of essential raw materials, particularly specialty fibres, which disrupts
the supply chain, increases costs and poses a significant risk to the industry's sustainability
• Limited access to cutting-edge technical expertise, which restricts innovation and competitiveness,
making it challenging for Indian technical textile manufacturers to stay ahead of the curve in the global
market
• The research-commercialisation gap, where scientific research is not translated to practical applications
and transferred to MSMEs, limiting the impact and potential of research breakthroughs
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Suggestions to implement recommendations
• Fostering international partnerships: Partnering and collaborating with foreign governments and
institutions will facilitate the transfer of world-class technical expertise and enhance the knowledge
base of the domestic technical textiles industry. Key players in the technical textiles sector have
undertaken several notable collaborations in the past, including:
o In 2019, the Indian Technical Textile Association (ITTA) signed an MoU with the Taiwan
Technical Textiles Association (TTTA) to promote the technical textile industry in the two
countries. The MoU enables joint ventures in technical textile manufacturing and technical
knowledge sharing between companies in both countries
o Messe Frankfurt India and the Austrian Fibers Institute had partnered to host the Dornbirn
Global Fiber Congress in November 2025, which had provided a unique platform for the
technical textiles industry to explore the latest advancements in fibre technology, sustainable
materials and innovative applications.
To propel the growth of India's technical textile industry, the Ministry of Textiles may prioritise strategic
partnerships with countries, renowned for their expertise and technological advancements. By adopting a
collaborative approach, the Ministry may facilitate knowledge sharing and innovation through joint ventures,
technology exchange MOUs, and other cooperative agreements. Additionally, the Ministry may actively
attract top technical textile manufacturers, proactively identifying and inviting industry leaders to establish
operations in India, and creating a conducive environment for collaborative production. This multi-pronged
approach will enable India to harness global best practices, accelerate industry growth, and emerge as a
significant player in the global technical textile market
• Transparency in R&D: India's technical textile sector can benefit from R&D, but only if the results are
disseminated to the industry. To achieve this, the replication of new developments, as well as training
and skilling related to these developments, are essential. Moreover, research institutes must provide
transparent reports, enabling the industry to adopt and implement the findings effectively. A joint effort
between the government, researchers and relevant ministries is necessary to set up knowledge-sharing
platforms for researchers and industry players to exchange research papers, best practices and new
developments. This can be achieved through collective service centres that provide shared access to
design expertise, product development facilities, testing equipment, thereby accelerating the adoption
of new technologies in the technical textile domain
Recommendation–II: Promoting Indian weaves in the global market
Indian weaves, known for their intricate designs and cultural heritage, are gaining popularity in the slow
fashion and luxury sectors. The global luxury market is showing more interest in traditional Indian textiles
and craftsmanship. One such example is khadi, a well-known Indian fabric, whose exports have increased
significantly from Rs 1.9 crore in fiscal 2017 to Rs 6.5 crore in fiscal 2019, a growth that can be attributed
to:
• Partnerships with organisations such as the Federation of Indian Export Organisations (FIEO), World
Trade Centre (WTC) and the Indian Trade Promotion Organisation (ITPO) to promote khadi in overseas
markets through exhibitions and workshops
• Collaborations with the National Institute of Fashion Technology (NIFT) and other institutions to design
innovative, export-quality khadi products
• Engagement with renowned fashion designers to enhance the competitiveness and appeal of khadi
products in domestic and international markets
• Promotion of the eco-friendly nature of khadi, which aligns with the global sustainability trend
• Positioning KHADI as a high-end and luxury fashion product
140
Current initiatives
Several initiatives have been undertaken by the government and industry to support weavers, including:
• Credit requirements: The Weaver Mudra Scheme provides credit at a concessional 6% to handloom
weavers, with margin money assistance also being provided at 20% of the loan amount, subject to a
maximum of Rs 25,000 per individual weaver
• Education and training: The Ministry of Textiles has signed memoranda of understanding (MoUs) with
the Indira Gandhi National Open University (IGNOU) and the National Institute of Open Schooling
(NIOS) to provide educational facilities for weavers and their families
• Raw material procurement: The Yarn Supply Scheme facilitates the availability of yarn to eligible
handloom weavers and organisations at mill-gate prices, with the objective of ensuring regular and
timely access to essential raw materials.
• Promoting artisans: Artisans and weavers associated with handicrafts and handlooms can register
on the Government e-Marketplace (GeM) to sell their products directly to various organisations without
incurring registration fees. Furthermore, the government has launched initiatives such as Know Your
Weaves, Shilp Didi Mahotsav 2024 and Urban Haats to promote the sale of Indian weaves
• The National Institute of Fashion Technology (NIFT), a renowned institution for design, management
and technology, has been roped in as a knowledge partner to drive design development and strategic
positioning of handlooms and handicrafts, thereby enhancing their market visibility and appeal.
Suggestions to implement recommendations:
• Supporting artisan communities: Government and industry initiatives to support artisans and
preserve traditional skills are vital for boosting exports and improving the employment landscape.
Programmes that facilitate connections between artisans and international markets, as well as establish
premium branding for Indian weaves, can significantly drive demand. A notable example of such an
initiative is Bharat Tex, which showcased sustainable textiles and highlighted traditional crafts, thereby
promoting India's rich textile heritage. Through platforms such as Bharat Tex, artisans can showcase
their skills and products, ultimately enhancing the global visibility and appeal of Indian textiles
• Sustainable production: Promoting sustainable and eco-friendly production processes for these
weaves aligns with global trends toward sustainability, further enhancing India’s appeal in the luxury
textile market
In conclusion, by addressing the challenges and implementing strategic measures, India can
successfully transform its textile industry, thereby enabling it to achieve the ambitious export target of
$100 billion by 2030. A multi-faceted approach, which includes diversification into technical textiles,
preservation of traditional weaves, resolution of structural issues in the MMF sector, addressing gap in
natural fibre and strengthening of trade agreements, will enhance India's global competitiveness and
establish it as a leading textile exporter. Moreover, the textile industry is a significant employment
generator, providing direct and indirect livelihood to a vast number of people. Transforming the textile
sector by implementing strategic measures will create new employment opportunities and also enhance
the livelihood of the current workforce.
141
Annexures
Annexure I:
Country Companies
Bangladesh Desh Garments, Hwa Well Textiles BD Ltd, Evince Textiles
China Shenzhou International Group Holdings Ltd, Luthai Textiles, Huafang Co Ltd
Vietnam Song Hong Garment, TNG Investment and Trading JSC, Viettien Garment and
Thanh Cong Textile Garment
India Arvind Ltd, Bang Overseas Ltd, Cantabil Retail India Ltd, Celebrity Fashions Ltd,
Gokaldas Exports Ltd, Indian Terrain Fashions Ltd, Kewal Kiran Clothing Ltd, Kitex
Garments Ltd, Lovable Lingerie Ltd, Monte Carlo Fashions Ltd, Page Industries
Ltd, Pearl Global Industries Ltd, Zodiac Clothing Company Ltd
Annexure II:
Ranking of high potential market for RMG exports
Rank Country CAGR in imports of
apparel (CY18-24)
Share in global
apparel imports
(CY24)
Estimated GDP
per capita growth
rate (CY25-30)
1 Poland (EU) 12% 3% 6%
2 Mexico 12% 2% 4%
3 Romania (EU) 8% 1% 6%
4 Croatia (EU) 8% 0% 5%
5
Slovak Republic
(EU) 6% 0% 5%
6 Russia* 8% 2% 3%
7 Hungary (EU) 3% 0% 6%
8
Czech Republic
(EU) 5% 1% 4%
9 Malaysia 4% 0% 5%
10 Ireland (EU) 6% 1% 3%
11 UAE 3% 1% 5%
12 Panama 3% 0% 5%
13 Israel 6% 1% 3%
142
Rank Country CAGR in imports of
apparel (CY18-24)
Share in global
apparel imports
(CY24)
Estimated GDP
per capita growth
rate (CY25-30)
14 Brazil 3% 0% 4%
15 Greece (EU) 4% 1% 4%
16 Korea 3% 3% 4%
17 Portugal (EU) 3% 1% 4%
18 Saudi Arabia 4% 1% 3%
19 Thailand 4% 0% 3%
20 Netherlands (EU) 3% 4% 3%
21 Canada 2% 2% 4%
22 Switzerland 3% 2% 3%
23 Australia 3% 2% 3%
24 Denmark (EU) 2% 1% 3%
25 Kuwait 5% 0% 2%
*Data for 2015-2021
Note: Competitiveness is based on a weighted average of two factors: 40% apparel import growth and 60% estimated per capita
GDP growth
Source: ITC Trademap, Crisil Intelligence, IMF World Economic Outlook
Annexure III:
Components of National Technical Textiles Mission
Component Particulars Mission Action Total capital
outlay allocated
under the
scheme*
1 Research,
innovation, and
development
Promote
research and
development
activities in
technical textiles
Research topics include
specialty fibres, geotextiles,
medical textiles, defence
textiles, sports textiles and
environmentally friendly
textiles, for which proposals
have been invited. Guidelines
have been established to:
• Support the indigenous
development of
machinery and equipment
for technical textiles in
India
Rs 1,000 crore
143
• Foster startups and
young scientists in
technical textiles
application areas
2 Promotion and
market
development
Enhance the
application of
technical textiles
across various
industries to
boost the
average growth
rate by
implementing
strategic market
development
initiatives
• The Ministry has
organised conferences
and workshops to
promote technical textiles,
creating awareness and
driving market
development in the
country
• To ensure quality for both
domestic consumption as
well as imports, the
ministry has issued
quality control orders for
57 items, including geo-
tech, protective, agro, and
meditech textiles as of
September 2024
Rs 50 crore
3 Export
promotion
Aims at
establishing
export
promotion
council for
technical textiles
Manmade and Technical
Textiles Export Promotion
Council has been designated
to promote the export of
technical textiles
Rs 10 crore
4 Education and
skill
development
Imparting
advanced
technical
education and
skilling in
technical
textiles, catering
to the
manufacture as
well as the
application
areas
Guidelines have been issued
to support academic institutes
in developing technical
textiles’ programmes,
including:
• New undergrad and
postgrad degree
programmes
• Update programmes
with technical textiles
courses
• Grants for lab
upgrades and faculty
training
• Internship support
through the General
Guidelines for Grant
for Internship Support
in Technical Textiles
(GIST) to enhance
education and
Rs 400 crore
144
industry exposure for
students
*Initially allocated for FY 2021 to FY2024 and extended till FY 2026
Under component I–Research, development and innovation of NTTM
Particulars Jun-23 Sep-23 Jan-24 Nov-24
Number of projects sanctioned till date 109 126 137 168
Valuation of projects sanctioned (Rs crore) 325 371 474 509
Annexure IV:
Indian companies
Arvind
Ltd
Garware
Technical
Fibres Ltd
Pearl
Global
Industries
Ltd
Vardhman
Textiles
Ltd
Filatex
India Ltd
Welspun
Living
Ltd
Raymond
Lifestyle
Ltd
Rs crore FY25 FY25 FY25 FY25 FY25 FY25 FY25
R&D
expenditure
19.2 7.5949 9.8906 8.15 1.4816 39.76 0.248
Revenue
from
operating
income
8329 1540 4,506 9,785 4252 10,697 6176
R&D
expenditure
as % of
operating
revenue
0.23 0.49 0.22 0.08 0.03 0.37 0.004
Chinese companies
Huafang
Co Ltd
Xinfengming
Group Co
Ltd
HLA
group
Corp Ltd
Zhejiang
Hangmin
Co Ltd
Jiangsu
Hongdou
Industrial
Co Ltd
Lancy Co
Ltd
Lu Thai
Textile Co
Ltd
CNY million CY24 CY24 CY24 CY24 CY24 CY24 CY24
R&D
expenditure
141.69 1,209.25 288.13 181.71 17.2 108.62 206.82
Revenue from
operating
income
2,934 67,091 20,957 11,468 1,960 5,691 6,091
R&D
expenditure
as % of
operating
revenue
5 2 1 2 1 2 3
Source: Company data, Crisil Intelligence
145
Annexure V:
Staple fibre and filament yarn production in fiscal 2023 (million kg)
Natural fibre
Silk 37
Jute and mesta 1,690
Wool 34
Cotton 5,712
Man-made fibre and filament
Filament production 1,904
Polyester filament yarn 1,769
Man-made staple fibre 2,152
Polyester staple fibre 1,506
Source: Cotton Corporation of India, Central Silk Board, Ministry of Textiles, Department of Agriculture
146
147
Table of contents
Executive Summary .................................................................................................................................. 149
Introduction to telecom and network equipment ....................................................................................... 153
The Umbrella of TANE .............................................................................................................................. 155
Global TANE industry – an overview ......................................................................................................... 157
Indian TANE industry................................................................................................................................. 158
Strategic alignment ................................................................................................................................... 162
Value chain play ........................................................................................................................................ 164
Benchmarking against competing countries ............................................................................................. 167
China ......................................................................................................................................................... 168
Hungary ..................................................................................................................................................... 171
Policy framework and industry support mechanism ................................................................................. 172
Challenges hindering India’s global competitiveness ............................................................................... 175
Success story: Reliance Jio’s partnership with Sanmina .......................................................................... 181
Success story: Nokia’s India story: leveraging local strengths for global success ................................... 182
Recommendations: Policy initiatives and reforms .................................................................................... 183
Appendix ................................................................................................................................................... 191
148
Telecom and
Network Equipment
149
Executive Summary
Sector Overview
India’s telecom and network equipment (TANE) manufacturing sector stands at a critical inflection point as
the country pursues its vision of becoming a globally competitive manufacturing hub while strengthening
digital infrastructure and technological self-reliance. As the backbone of telecommunications networks,
TANE encompasses radio access network (RAN) equipment, routers and switches, optical fibre
infrastructure, microwave apparatus, and associated networking systems that enable connectivity, digital
services, and emerging technologies such as 5G, IoT, smart cities, and future 6G applications.
India is currently the world’s second-largest telecommunications market with more than 1.2 billion
subscribers, approximately 85% telecom penetration, and nearly 75% internet usage. The telecom sector
contributes an estimated 6–6.5% to national GDP and has attracted nearly USD 40 billion in foreign
investment between 2000 and 2025. Recognizing the sector’s transformative potential, the National
Telecom Policy 2025 (NTP-25) targets doubling the sector’s contribution to GDP, doubling exports of
telecom products and services, creating one million new jobs, and significantly increasing investment and
R&D expenditure by 2030.
While telecom services have expanded rapidly, domestic manufacturing of telecom equipment remains
underdeveloped, resulting in substantial import dependence for critical network infrastructure.
Strengthening the TANE ecosystem therefore represents a key opportunity to enhance economic
resilience, generate skilled employment, deepen value addition, and improve India's position in global value
chains.
150
The growth outlook for the industry remains robust, driven primarily by India's ongoing 5G rollout, rapid
digitalisation, increasing data consumption, expansion of broadband infrastructure, emergence of smart city
applications, industrial automation, IoT adoption, cloud computing, and growing enterprise connectivity
requirements.
The Indian TANE market is estimated at approximately USD 25 billion in FY2025 and is projected to nearly
double to about USD 50 billion by FY2032, growing at a compound annual growth rate (CAGR) of 10%.
Several demand-side indicators reinforce this outlook:
• 5G subscriptions are projected to increase from 2.27 billion in 2024 to 6.35 billion by 2030.
• Mobile data traffic is expected to grow from 124 EB per month to 303 EB per month by 2030.
• IoT connections are projected to expand from 13.2 billion to 34.7 billion over the same period.
• Continued fibreisation and broadband expansion will further increase demand for network
infrastructure equipment.
Globally, the telecom equipment market is expected to grow from approximately USD 498 billion in FY2023
to USD 714 billion by FY2030, reflecting a CAGR of 5.28%. India is therefore positioned within a rapidly
expanding global industry with significant export potential.
Current Structure of the Indian TANE Industry
Despite strong domestic demand, India continues to rely heavily on imports for network infrastructure
equipment and critical components. TANE exports remain modest at USD 0.6–1.0 billion annually,
representing only about 0.2–0.3% of India’s total exports. In contrast, imports have remained elevated at
USD 4–5 billion annually.
The industry has achieved meaningful progress under the Production Linked Incentive (PLI) Scheme,
particularly in product segments such as optical fibre cables, customer premises equipment, routers, and
switches. Domestic companies including Tejas Networks, HFCL, and VVDN Technologies have emerged
as important players. Additionally, global manufacturers such as Nokia, Ericsson, Samsung, and Sanmina
have expanded manufacturing operations in India.
However, domestic value addition remains limited because much of the manufacturing activity continues to
be assembly-oriented, with high dependence on imported semiconductors, RF modules, integrated circuits,
processors, and other critical components. Localisation levels for several telecom products remain below
15%, demonstrating the need for deeper ecosystem development.
Lessons from Champion Countries
The study identifies China and Hungary as benchmark countries whose experiences provide valuable
insights for India's telecom manufacturing strategy.
151
China has emerged as the global leader in telecom equipment manufacturing, driven by the scale and
technological capabilities of companies such as Huawei and ZTE, which together have enabled Chinese
OEMs to capture more than 42% of the global base station market. The country's success is underpinned
by sustained investments in research and development, strong government support through industrial
policies, dedicated Special Economic Zones (SEZs), rapid deployment of 5G infrastructure, a deeply
integrated component manufacturing ecosystem, and extensive skilling and talent development initiatives.
These interventions have enabled China to develop a highly competitive and self-reinforcing telecom
manufacturing ecosystem spanning design, component production, assembly, and exports. By March 2026,
China had deployed approximately 4.96 million 5G base stations, representing nearly 65% of global
installations. The country has further strengthened its position through the strategic use of joint ventures,
technology transfer, localisation requirements, and cluster-based manufacturing models, which have
helped cultivate globally competitive telecom champions and establish China as a dominant player across
the telecom equipment value chain.
Hungary represents a contrasting model of telecom equipment manufacturing that is centred on high-value
production, advanced manufacturing capabilities, and strong integration with European markets. The
country has emerged as one of Europe’s leading telecom equipment export hubs and hosts Nokia’s largest
5G manufacturing facility, underscoring its importance within the regional telecom ecosystem. In 2024,
Hungary’s telecommunications equipment exports increased by 31.4% to reach approximately USD 5.5
billion, reflecting the sector’s growing competitiveness. This success has been supported by a combination
of policy and structural advantages, including one of the lowest corporate income tax rates in Europe at
9%, sustained investments in telecommunications infrastructure, supportive spectrum management
policies, the availability of a highly skilled technical workforce, and deep integration with European supply
chains. Together, these factors have enabled Hungary to attract global telecom manufacturers and
establish itself as a key production and export base for advanced telecom equipment
Key Challenges Limiting Global Competitiveness
Despite favourable demand conditions, several structural bottlenecks continue to constrain India's
competitiveness.
First, high import dependence persists across critical electronic and telecom components, resulting in
limited domestic value addition and higher production costs. Localisation levels for key telecom products
remain low, particularly in high-value technologies such as 4G and 5G radio access equipment.
Second, domestic manufacturers face limited market access. Nearly 98% of telecom equipment demand
originates from private telecom service providers, which continue to prefer established global OEMs owing
to technological maturity, scalability, and certification standards.
Third, Indian manufacturers operate with lower profitability and weaker economies of scale compared with
global competitors, limiting their ability to invest in innovation and capacity expansion.
Fourth, skill gaps and lower labour productivity continue to hinder the sector’s development. Productivity
in telecom equipment manufacturing remains substantially below both the national manufacturing average
and the electronic components sector, while employability challenges persist across technical disciplines.
152
Strategic Recommendations
The report proposes a targeted policy framework to transform India from an assembly-based
manufacturing destination into a globally competitive telecom equipment ecosystem.
i. Deepen Localisation Through Component Manufacturing
A localisation-linked incentive framework is likely to encourage manufacturers to progressively source
a greater share of bill-of-materials (BOM) components domestically. Focus may initially be placed on
non-semiconductor, plastic, insulation, and electro-mechanical components, before gradually
extending to higher-value components.
ii. Promote Joint Ventures and Technology Transfer
Drawing lessons from China's telecom industry, India may actively promote joint ventures between
global OEMs and domestic firms to facilitate technology transfer, enhance local capabilities, and
accelerate ecosystem development. Successful models such as Reliance Jio's partnership with
Sanmina demonstrate the potential of this approach.
iii. Develop Industrial Clusters
Cluster-based manufacturing ecosystems similar to those observed in China and Taiwan can generate
scale economies, facilitate supplier integration, strengthen innovation networks, and improve
competitiveness. Emerging telecom manufacturing hubs such as Madhya Pradesh's Telecom
Manufacturing Zone provide a potential template.
iv. Focus on High-Potential Export Segments
India should prioritise export promotion for radio infrastructure equipment, including antennas, remote
radio heads, baseband units, optical fibre cables, and microwave apparatus. Global imports in
antennas, RRH, and BU alone exceeded USD 219 billion in 2024, while India’s exports in these
categories were less than USD 1 billion, indicating substantial untapped potential.
v. Strengthening Testing, Certification, and Skill Development
The establishment of centralised testing facilities, internationally aligned certification systems, and
stronger industry-academia partnerships can improve product credibility, workforce readiness, and
innovation outcomes.
Conclusion
India possesses strong domestic demand, policy support, demographic advantages, and increasing
manufacturing capabilities that position it favourably to emerge as a major global telecom equipment
manufacturing hub. However, achieving this ambition will require a strategic shift from assembly-led
manufacturing towards deep localisation, component ecosystem development, technology transfer, export
orientation, and workforce strengthening. With focused implementation, the sector can significantly
contribute to employment generation, export expansion, technological self-reliance, and India's broader
objective of becoming a globally competitive manufacturing economy.
153
Introduction to telecom and network equipment
India is the second-largest telecommunications market globally with a subscriber base over 1,200 million.
With approximately 85% of the population using telecom services regularly and approximately 75%
leveraging internet services, digitalisation continues to permeate consumer-centric industries such as e-
commerce, travel and tourism. India’s relatively young population (median age of 28 years) and technology-
driven governance, social change and service delivery, present an opportunity for the telecom and network
equipment (TANE) manufacturing industry to benefit from favourable demand advantages and establish a
domestic ecosystem for growth.
Figure 53: TANE contribution to Indian economy
Source: DPIIT
Currently, the telecom sector contributes around 6-6.5% to the nation’s GDP and policies such as National
Telecom Policy 2025 aim to leverage this potential to drive growth across investments, employment and
export. The NTP-25 aims to accomplish the following strategic objectives in telecom sector by 2030:
1. Universal and Meaningful Connectivity for all.
2. Double the contribution of the sector to India’s GDP.
3. Achieve an annual investment of Rs 1,00,000 crore
4. Double the export of telecom products and services.
5. Double the number of telecommunications startups.
6. Double the sectoral R&D spending on emerging telecom technologies.
7. Create 1 million new jobs
8. Upskill/reskill 1 million workers to meet the future demand.
9. Strengthen security by adopting quantum resistant cryptography.
10. Reduce carbon footprint by 30%.
As the industry providing underlying infrastructure for these objectives, ensuring growth of TANE
becomes critical for the country.
TANE
Contributes 1-1.5% to India’s GDP
Employment:
a)Mobile phone manufacturing: 1.3L
b)TANE equipment manufacturing: 20,000-25,000
c)Tower infrastructure: 2-2.5L
d)Telecom services: 1.5-2L
e)IT/Software and digital services linked to
telecom: 10-20L
Telecom sector attracted inflows of
nearly 40 billion USD (2000-2025)
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Growth drivers
From 2018 to 2022, the Indian market was largely driven by the need to modernise legacy networks and
deploy new hardware to support the rollout of 4G services. However, from 2023 to 2027, the scale and
momentum of the 5G rollout, adoption of 5G-enabled enterprise services, including smart city initiatives,
IoT applications, mission-critical communications and other emerging use cases are expected to drive the
demand for telecom equipment. As 5G technology becomes more widespread, there is likely to be
significant demand for telecom equipment that can support innovative applications such as smart city
infrastructure, industrial automation, remote healthcare and immersive technologies such as augmented
reality (AR) and virtual reality (VR), thereby driving growth in the Indian telecom equipment market. The
Indian TANE market size is estimated at nearly $25 billion in fiscal 2025 and is expected to reach $50 billion
by 2032, growing at a CAGR of 10%.
However, the equipment required to modernise existing telecom infrastructure as well as the equipment
required for rollout of new services such as the 5G rollout in 2022 has been traditionally imported from
countries such as China, Taiwan and other countries.
Table 16: India's trade position in telecom and network equipment manufacturing
Note: All figures are in USD billion
Source: DGFT, Crisil Intelligence, E: Estimate
India's telecom and network equipment (TANE) sector stands at a pivotal juncture, poised to fuel the
National Telecom Policy 2025 (NTP-25) ambitions of universal connectivity, doubled GDP contribution, and
$1 trillion in exports by 2030. Yet stark trade imbalances underscore an urgent need for targeted
intervention: domestic TANE exports languish at a mere 0.2-0.3% share of total exports ($0.6-1.0 billion
annually from 2020-2024), while imports dominate at USD 4-5 billion yearly, constituting 0.7-1.1% of total
imports, with over 80% sourced from China for critical components like 4G/5G antennas and signal
processors. This heavy import reliance exposes the economy to supply chain vulnerabilities, geopolitical
risks, and currency fluctuations, stifling self-reliance (Atmanirbhar Bharat).
Robust government intervention will go a long way in catalysing domestic manufacturing, aligning with NTP-
25's 150% output surge and 50% import substitution goals.
The sector has benefitted from interventions such as the Production Linked Incentive (PLI) scheme and
similar supportive measures could double TANE's GDP share to 1-1.5%, generate 500,000 skilled jobs,
and position India as a $50 billion export hub by 2035, transforming vulnerabilities into global leadership.
all figures are in USD billion
2020 2021 2022 2023 2024
India total exports 275 395 453 431 442
India TANE exports 0.6 0.8 1.1 0.9 1.0
TANE share in exports 0.23% 0.20% 0.25% 0.22% 0.23%
India total imports 368 570 733 674 703
India NATE imports 4.0 4.4 5.1 4.6 3.6
TANE share in imports 1.1% 0.8% 0.7% 0.7% 0.5%
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The Umbrella of TANE
The Telecom and Network Equipment (TANE) ecosystem forms the backbone of modern global connectivity,
enabling voice, data, and video services across mobile, fixed-line, and enterprise networks. The following
illustration categorizes the wide range of products and services offered by a telecom equipment manufacturer
into three core pillars:
Figure 54: Products and services offered by telecom equipment manufacturer
Source: Crisil Intelligence
For the purposes of this study, we are focusing on the network infrastructure equipment, as handsets have
been covered in a separate analysis. Additionally, services have been excluded from this study
1. Handsets: These are end-user devices that allow individuals to access telecom networks.
Key Products:
• Smartphones: Advanced mobile devices with internet, apps, multimedia, and cellular connectivity (e.g.,
4G/5G).
• Pads/Tablets: Larger touchscreen devices used for productivity, entertainment, and mobile computing.
• Data Cards: USB or embedded modems that provide internet connectivity to laptops or IoT devices via
cellular networks.
2. Network Infrastructure Equipment: This is the physical and functional foundation of telecom networks,
responsible for signal transmission, routing, and connectivity.
Table 17: Network Infrastructure equipment and their functions
Type Equipment Function
Radio access
network (RAN)
hardware
Base Transceiver Stations
(BTS)
Traditional macro cell towers housing radio transceivers.
Antennas
Transmit and receive radio signals; include directional, omnidirectional, and MIMO
types.
156
It is noteworthy that network infrastructure equipment accounts for ~50% of total TANE market value, with
highest growth in 5G RAN and optical transport, making it a key enabler to profitability of manufacturing
companies worldwide.
3. Supporting Systems and Services: These ensure reliability, scalability, and operational efficiency of the
network.
Table 18: Key service offerings by TANE companies
Strategic focus of the study
For the purposes of this study, we are focusing on the network infrastructure equipment, as handsets have
been covered in a separate analysis. Additionally, services have been excluded from this study to keep
focus on equipment manufacturing.
Thus, the core analytical lens is on:
• Radio access network (RAN) hardware (BTS, RRH, BBU, antennas)
• Routers & Switches
• Transport Infrastructure (OFC, Microwave)
These segments are capital-intensive, technology-driven, and central to 5G rollout, edge computing, and
fibreization trends. Domestic manufacturing of network infrastructure equipment is foundational to building
a complete telecom equipment ecosystem in India. By producing core items like base stations, routers, and
antennas locally, it creates steady demand for indigenous components such as RF modules,
semiconductors, and PCBs, thereby nurturing ancillary industries and a robust supply chain. This localised
production enables seamless design integration, customization, and rapid innovation in emerging 5G and
6G technologies. It also fosters skilled workforce development, R&D clusters, and attracts startups and
global OEM partnerships, creating a self-sustaining cycle that transforms India from an import-reliant market
into a fully integrated, competitive telecom manufacturing hub.
Type Equipment Function
Remote Radio Heads (RRH)
& Baseband Units
(Bbaseband units (BU)
Modern split-architecture design: RRH near antenna handles RF; BBU processes
baseband signals centrally (enables C-RAN).
Routers and Switches
Direct data traffic within and between networks; support IP/MPLS routing and Layer 2/3
switching.
Transport Infrastructure
High-capacity backbone linking RAN to core network.
Transport
Infrastructure
Optical Fibre Cables (OFC)
High-speed, low-latency medium using light pulses; supports DWDM for massive
bandwidth.
Microwave Apparatus
Point-to-point wireless backhaul using microwave frequencies; ideal for remote or rapid
deployment areas.
Cloud Computing Infrastructure
Virtualized network functions (vRAN, SDN/NFV), servers, storage,
and orchestration platforms.
Operating Support Systems (OSS)
Software for network monitoring, fault management, performance
analytics, and automation.
Maintenance & IT Integration Services
On-site support, remote troubleshooting, system upgrades, and
integration with enterprise IT.
Telecom Power Systems
Reliable power supply solutions including rectifiers, batteries, and UPS
(Uninterruptible Power Supply).
157
Global TANE industry – an overview
The global telecom equipment manufacturing landscape is characterized by a high degree of
consolidation, with a small group of original equipment manufacturers (OEMs) holding a significant majority
of the market share. Notably, industry leaders such as Huawei, Nokia, Ericsson, ZTE, Ciena, and Cisco
collectively account for approximately 80% of the global market. The strong market presence and
comprehensive product and service offerings of these established players create a substantial barrier to
entry for Indian Telecom and Networking Equipment (TANE) manufacturers seeking to expand into
international markets.
The global telecom equipment market is expected to increase from USD 498 billion in FY23 to USD 714
billion by FY30, at a compound annual growth rate (CAGR) of 5.28% over the period
Figure 55: Global TANE market size
Source: TRAI, Frost & Sullivan, TRAI, Crisil Intelligence, E: Estimate
The manufacturing of TANE products relies on a collaborative and interconnected global supply chain,
where regions specialize in distinct high-value components, such as Taiwan’s dominance in advanced
semiconductors and South Korea’s expertise in OLED displays and memory chips.
For instance, a 5G base station assembled in India integrates Taiwanese TSMC-fabricated chipsets,
Japanese optical transceivers, and US-designed IP cores, enabling cost efficiency, rapid innovation, and
resilience through diversified sourcing.
This interdependence means any disruption in one part can lead to supply chain interruptions in other
locations. During the Covid-19 pandemic, widespread lockdowns, border closures, and social distancing
measures disrupted the global supply chain of electronics components, including semiconductors, printed
circuit boards, and other critical parts. Similarly, a severe drought in Taiwan in 2020, home to major
semiconductor manufacturers such as TSMC affected the production of chips used in electronic products
such as smartphones and laptops.
(USD bn)
CAGR 5.28%
498
529
562
590
619
649
681
714
FY23 FY24 FY25 FY26 E FY27 E FY28 E FY29 E FY30 E
158
Indian TANE industry
India’s Telecom and Networking Equipment (TANE) industry has evolved into a cornerstone of the nation’s
digital economy. This segment focuses on producing hardware like base stations, routers, optical fibre
cables, antennas, and IoT devices that power mobile networks, broadband, and 5G ecosystems. Driven by
government initiatives like “Make in India” and the Production Linked Incentive (PLI) scheme, the industry,
coupled with the rapid rollout of 5G, now covering over 90% of districts and surging data consumption, the
sector is poised to support India’s ambition of becoming a global telecom export hub.
Table 19: Increasing uptake of digital services indicates a strong demand for TANE growth
Source: TRAI, Ericsson, Crisil Intelligence
The demand for TANE is expected to sustain in the Indian market
Figure 56: Indian TANE market size
Source: Ericsson, TRAI, Crisil Intelligence, E: Estimate
The three large Indian telecom service providers have historically met their network infrastructure
equipment, including RAN hardware requirements through long-term deals with companies such as
Huawei, Ericsson, and Nokia. This is in line with the trend around the globe as these companies are the
market leaders, with sustained market dominance established by years of reliable service, product
innovation, and quality standards. Innovation is at the core of the TANE industry, and to sustain this edge
these original equipment manufacturers (OEMs) in regions such as South Korea, Europe, and the United
States are collaborating with start-ups that specialise in cutting-edge technologies such as 5G, IoT,
cybersecurity, cloud computing, AI, big data and analytics, and network functions virtualisation (NFV).
Notably, companies like SK Telecom in South Korea, Deutsche Telekom and Nokia in Europe, and T-Mobile
in the US have established their own accelerator programmes, which offer funding, product development
support, and commercialisation guidance to start-ups, fostering innovation and driving growth in the telecom
industry. Such initiatives enable start-ups to bring new ideas and solutions to market and let established
players stay at the forefront of technological advancements.
S. No. Key performance indicators 2024 2030F CAGR
1 Smartphone (million) 7,160 8,330 3%
2 Mobile data traffic (EB/month) 124 303 16%
3 Fixed broadband connections (million) 1,590 1,890 3%
4 5G subscriptions (million) 2,270 6,350 19%
5 IoT connections (billion) 13.2 34.7 18%
CAGR 10%
(USD bn)
23
25
27
30
33
37
41
45
50
FY24 FY25 FY26E FY27E FY28E FY29E FY30E FY31 E FY32E
159
Figure 57: Breakup of TANE equipment market in India
Source: DGFT, TRAI, Crisil Intelligence
Based on the nature of use, and to understand the import dependency along with the progress made by
the domestic manufacturing across telecom and networking equipment product family, we can categorise
the network infrastructure equipment (globally the most demanded as well as the key to successful 5G
deployment and going forward, 6G introduction) in four subsets:
1. Antennas, remote radio heads (RRH), and baseband units (baseband units (BU)
2. Routers and switches
3. OFC and microwave apparatus
4. Base stations
Below is a detailed description of each category and how domestic manufacturing has evolved in recent
years:
1. Antennas, RRH, and BU constitute a critical subset of network infrastructure equipment that facilitates
radio frequency (RF) signal transmission and reception in wireless communication systems. These
components collectively enable the conversion of digital signals to RF signals, amplification, and
transmission over the air interface, using technologies such as beamforming and massive Multiple-Input
Multiple-Output (MIMO).
While exports of this subset have increased, the import dependency persists with a lack of substitutes
made in India.
2. Routers and switches are fundamental components of network infrastructure, that enable efficient routing
and switching of data packets across local area networks (LANs), wide area networks (WANs) and the
Internet. They facilitate communication between devices, servers, and applications, ensuring reliable and
high-speed data transfer.
Since the inception of telecom Production Linked Incentive (PLI) scheme in 2021, imports have reduced
to 50% from 2020 levels with Indian companies such as VVDN Technologies, Tejas Networks emerging
as prominent manufacturers.
3. OFC and microwave apparatus: Companies such as Himachal Futuristic Communications Ltd (HFCL)
have developed optical fibre cable and other related transport apparatus and indigenous capabilities. India
Base stations, 1%
Antennas,
RRH and BU,
87%
Routers and
switches, 11%
Optical fibrecables and
microwave apparatus 1%
Break up by imported equipment type
Imported,
98%
Manufactured locally, 2%
Break up by origin of equipment
160
has achieved self-sufficiency in the production of common grades of optical fibre cables, particularly all-
dielectric self-supporting (ADSS) and GYTC8S cables.
4. Base stations are the most commonly known among network infrastructure equipment. Base stations
facilitate wireless communication between mobile devices and the core network. They transmit and
receive radio signals, acting as a bridge between mobile devices and the larger network
infrastructure. They are key to network deployment and were historically imported by India for all its
requirements. A ban on Chinese gear in critical infrastructure saw the telecom companies procuring base
stations manufactured in India by global OEMs such as Ericsson and Nokia. However, base stations
manufactured by Indian OEMs still aren’t competitive in terms of pricing, quality and technological
capability. Companies such as Tejas Networks have made developments in domestic manufacturing, but
a weak order book is a hurdle.
Following graphs show the import-export trend for each subcategory:
Figure 58: Antennas, RRH and BU
Source: DGFT, ITC Trade Vision
Figure 59: Routers and switches
Source: DGFT, ITC Trade Vision
3369
3873
4654
4266
3337
559
678
996
836 920
2020 2021 2022 2023 2024
$ million
ImportsExports
490
383
309
295
244
34 32
61 57 56
2020 2021 2022 2023 2024
$ million
ImportsExports
161
Figure 60: OFC and microwave apparatus
Source: DGFT, ITC Trade Vision
Figure 61: Base stations
Source: DGFT, ITC Trade Vision
Overall, the sector’s trade dynamics reflect a gradually maturing ecosystem driven by the Production-Linked
Incentive (PLI) scheme, yet persistent import dependence underscores the need for targeted assessments.
In this context, it is imperative to evaluate India’s import-export balance, its alignment with global trade
frameworks, and opportunities to export products aligned with surging international demand, while building
domestic manufacturing capabilities.
By focusing on globally demanded, domestically scaled products, India can achieve atmanirbharta with a
dedicated telecom equipment export promotion policy. This assessment is vital for navigating geopolitical
headwinds toward sustainable, geopolitically resilient growth.
41
37 36 36
28
42
68
62
43
57
2020 2021 2022 2023 2024
$ million
ImportsExports
123
77
58
6 41 2 3 2 1
2020 2021 2022 2023 2024
$ million
ImportsExports
Imports fell with Govt. putting
restrictions on Chinese gear- telcos
switched to procure Base stations from
Indian units of Ericsson
162
Strategic alignment
With this context, India’s ambition to emerge as a global hub for telecom equipment manufacturing,
encompassing 5G/6G base stations, routers, antennas, handsets, and network infrastructure must be
evaluated through the lens of strategic geopolitical alignment. This necessity arises from the industry’s
inherently fragmented and interdependent global value chain (GVC), where no single nation dominates all
stages. Unlike commoditised sectors, telecom manufacturing involves high-value, technology-intensive
processes distributed across geographies, creating vulnerabilities to supply disruptions, intellectual
property (IP) risks, export controls, and geopolitical leverage. For India, a late entrant with a USD 20+ billion
domestic market and “Make in India” incentives, misalignment with key GVC partners could derail self-
reliance goals under the Production-Linked Incentive (PLI) scheme, while over-dependence on adversarial
suppliers risks national security in critical information infrastructure (CII).
Availability of raw materials
The telecom and network equipment manufacturing industry relies heavily on a complex network of
specialised suppliers for sub-assembled units and components. These components, such as printed circuit
boards, antennas, and radio frequency (RF) modules, are crucial to make base stations, routers, and
switches, among others. As the import dependency is high for these components, domestic manufacturers
have to face 10-15% higher costs than global original equipment manufacturers (OEMs).
Indian companies making generic TANE equipment face up to 26% higher fiscal disability compared with
their global peers in high-value-added telecom manufacturing. Further, the disability rises to 29% in product
categories where buyer’s credit is available against imports for an extended period.
Table 20: Raw material availability for TANE sector
Key components required Amplifiers Mixers Oscillators RF filters
Supplier country 1 China Vietnam China China
Supplier country 2 Singapore China Singapore USA
Supplier country 3 Japan Thailand Japan Israel
Domestic availability Yes Yes Yes Yes
Import dependence High High High High
Reason for India’s high
import dependence
Indian components are expensive, and it is cheaper to import
Table 21: Major suppliers of telecom equipment and degree of India’s import dependence
Key component required Processors
Integrated
circuits
Static
converters
Diodes Transistors
Supplier country 1 China China China China China
Supplier country 2 Singapore Singapore Singapore Singapore Singapore
Supplier country 3 South Korea
South
Korea
Germany Japan Germany
Domestic availability No No Yes Yes Yes
Import dependence High High High High High
Reason for India’s high import
dependence
Not manufactured in India
Indian components are expensive, and it is
cheaper to import
Source: Crisil Intelligence
Geopolitical relationship Positive Neutral
163
Apart from taking up a substantial portion of the production cost, these sub-assembled units and
components play a critical role in determining the performance and quality of the final product. Furthermore,
the lead times for sourcing these components can be lengthy, and any disruptions to the supply chain can
have a ripple effect on the manufacturing process. As a result, telecom equipment manufacturers must
carefully manage their relationships with suppliers, monitor inventory levels and develop strategies to
mitigate risks associated with component shortages or quality issues. This is necessary to ensure a stable
and efficient production process. The Indian telecom equipment sector is dependent on imports for key
components such as integrated circuits, diodes, transistors and amplifiers.
164
Value chain play
The telecom and networking equipment industry has a complex value chain with several stages, from
conceptualisation to product delivery. The domestic industry has seen significant growth and localisation,
and the country has emerged as a major hub for assembly of telecom and networking equipment.
Figure 62: Parts of the global collaborative chain
OBM: Original Brand Manufacturers
Source: Crisil Intelligence, COAI, Ministry of Trade and Industry, government of Singapore
Focus area: The value chain illustrates that no country is self-sufficient in isolation when it comes to end-
to-end value chain. Countries have become successful by leveraging their domestic strengths for specific
parts of the value chain, gained expertise in adjacent areas and later pivoted to build scale.
Product design: The stage involves the conceptualisation and development of telecom and networking
equipment, focusing on functionality, performance and regulatory compliance. It demands expertise in radio
frequency (RF) engineering, digital signal processing, and software development, among others.
Historically, companies from the US and Israel have made significant breakthroughs in product design. That
helped them design and develop many products for global markets.
The design stage involves creating detailed technical specifications, simulations, and prototypes to test and
validate the product’s performance. Companies such as Cisco of the US, Bell Telephone Manufacturing
(BTM) of Belgium (now part of Alcatel), and Siemens of Germany were the pioneers in designing and
developing new products and telecom equipment technologies. This trend continued until Chinese and
Korean firms mastered reverse engineering, then invested heavily in R&D to develop proprietary
technologies, for instance Huawei’s breakthrough in 5G baseband chips and single RAN architecture,
evolving from imitators into global innovators and market leaders.
Component manufacturing: This critical phase involves the production of key components such as radio
frequency (RF) modules, amplifiers, filters and connectors. It demands high-precision engineering, cutting-
edge manufacturing techniques, and stringent quality control processes to guarantee that components
meet the exacting specifications required for reliable and efficient telecom systems.
165
Companies that specialise in telecom component manufacturing, such as Huawei, ZTE, Qorvo and
Broadcom, possess the expertise and capabilities to design and produce these complex components. Other
notable players in this field include Texas Instruments, STMicroelectronics and Analog Devices.
These companies offer a wide range of telecom components, including power amplifiers, low-noise
amplifiers, and switches. For instance, Huawei is a leading provider of RF modules and amplifiers, while
Qorvo is renowned for its expertise in filter and switch technology. Broadcom, on the other hand, offers a
broad portfolio of telecom components, including optical and copper connectivity solutions. These
companies, along with others, play a vital role in enabling the production of advanced telecom equipment,
such as base stations, routers and switches, which are essential for modern communication networks.
Notably, many companies that originated in China, Thailand and Taiwan hold expertise in component
manufacturing.
Board manufacturing: The board manufacturing stage is where printed circuit boards (PCBs) are
designed, fabricated, and assembled with precision. This stage demands expertise in PCB design,
fabrication, and assembly, as well as the use of advanced manufacturing techniques such as surface mount
technology (SMT) and through-hole technology (THT) to assemble components on a PCB.
Companies that specialise in telecom-related board manufacturing, such as Foxconn, Pegatron
and Wistron (all Taiwan), possess the capabilities to design and manufacture complex PCBs for telecom
and networking equipment. Foxconn has expertise in SMT and THT assembly. Pegatron specialises in
designing and manufacturing complex PCBs for telecom and networking applications, including 5G and IoT
devices. Wistron offers a range of board manufacturing services, including PCB design, fabrication and
assembly, for telecom and networking equipment.
Other notable players in this field include Jabil, Flex and Sanmina (all USA). These companies offer a range
of board manufacturing services, including PCB design, fabrication, and assembly, for telecom and
networking applications. In Asia, Uniflex, BYD (China) and Tripod Technology (Taiwan) are among the
prominent players in this space with expertise in producing high-quality PCBs. These companies leverage
their advanced manufacturing facilities, cutting-edge technologies and rigorous quality control processes to
meet the requirements of the telecom industry.
Assembly: The final stage of telecom equipment production involves the meticulous integration of
components and boards into a cohesive unit. This intricate process requires a deep understanding of
mechanical engineering, thermal management and electromagnetic compatibility (EMC), as well as the
utilisation of cutting-edge manufacturing techniques such as robotic assembly and automated testing. By
leveraging these advanced methods, manufacturers can ensure that the finished product meets the
stringent specifications required by the telecom industry.
A number of companies have established themselves as experts in telecom-related assembly, including
Foxconn, Pegatron (Taiwan), and Flex (USA). These industry leaders possess the requisite expertise and
capabilities to assemble complex telecom equipment, such as base stations, routers and switches, with
precision and accuracy. Other notable players in this field include Jabil, Sanmina and Kimball Electronics
(USA).
In the Asian region, Wistron, Inventec and Quanta Computer (Taiwan) have developed a reputation for
producing high-quality telecom equipment that meets the exacting standards of leading OEMs. By
combining advanced manufacturing facilities, cutting-edge technologies, and rigorous quality control
processes, they are able to deliver reliable and efficient telecom equipment that meets the evolving needs
of the industry.
These large global OEMs have established units in India for two primary reasons: as a China+1 production
site and to take benefit of the cheap labour in the country. Ericsson, Nokia, Sanmina, and Samsung are
companies with notable Indian presence.
In the European region, Elmatica (Norway) and Note (Sweden) provide specialised assembly services for
telecom equipment, including PCB assembly, cable assembly, and testing. These companies have shown
they can meet the exacting standards of leading OEMs, and score high on reliability, quality, and timely
delivery.
166
Packaging and testing: Here the product is packaged, software and firmware are installed, and rigorous
testing is conducted to ensure that the product meets the required specifications. This stage demands
expertise in software development, testing and validation, as well as the use of advanced testing equipment
and methodologies such as automated testing and simulation.
Companies that specialise in telecom-related packaging and testing possess the expertise and capabilities
to ensure that telecom equipment meets the required standards. The notable players are Keysight
Technologies, Spirent Communications, Ixia (USA), Anritsu (Japan), Rohde & Schwarz (Germany) and
EXFO (Canada). These players offer a range of testing and validation services, including automated testing,
simulation and certification, for telecom equipment.
India’s telecom and network equipment (TANE) manufacturing remains largely confined to low-value
assembly operations, with firms importing high-cost sub-assemblies and components to meet PLI
localisation thresholds through final integration and packaging. This model yields minimal domestic value
addition which is often below 20%, leaving critical design, R&D, and core component fabrication abroad,
as evidenced by persistent import reliance on RF modules, chipsets, and optical transceivers. Stakeholders,
including industry bodies and global OEMs, have consistently emphasised the need for ecosystem-centric
manufacturing—encompassing end-to-end capabilities from silicon design and PCB fabrication to software
integration and certification testing, to shift India from a mere assembly hub to a strategic partner in global
value chains. Only by building such integrated clusters can India ensure that multinational firms establish
deep-rooted operations driven by competitive advantage, not transient policy incentives, thereby securing
sustained investment, technology transfer, and resilience against incentive withdrawal.
167
Benchmarking against competing countries
Selection of champion countries
China and Hungary are strategically chosen as champion countries for studying the global telecom
equipment manufacturing industry due to their distinct yet complementary strengths. China, a powerhouse,
commands over 40% of the market through giants like Huawei and ZTE, leveraging unmatched scale, state-
backed R&D, and extensive supply chains exporting to 170+ countries. Its cost efficiencies and 5G
dominance offer critical lessons for India’s self-reliance goals. Conversely, Hungary, Europe’s telecom
manufacturing hub, hosts Nokia’s largest 5G factory in Komárom, producing 2.5 million units annually, and
Huawei’s key R&D center. Its skilled workforce, EU market proximity, and focus on high-tech precision
manufacturing highlight diversified, quality-driven models. Together, they provide a comprehensive
blueprint comprising China’s volume-driven approach and Hungary’s innovation-centric ecosystem for India
to enhance its ESDM sector, reduce import dependency, and boost export competitiveness under
Atmanirbhar Bharat.
Table 22: Champion countries and their share in global exports
Source: UN World Trade Statistics
Telecom equipment Country Export value ($ billion, FY25) % share in global exports
Base stations
China 1.9 53%
Hungary 0.28 8%
168
China
China is the world’s largest manufacturer of base transceiver stations (BTS), an essential component in
cellular networks to facilitate wireless communication. This dominance is driven by a combination of
advanced manufacturing capabilities, significant investment in research and development and supportive
government policies. Huawei and ZTE lead the global market, contributing to China’s manufacturing
prowess in the sector. Chinese OEMs have over 42% share of the global BTS market. These OEMs include
Huawei, ZTE Corp, Datang Telecom and FibreHome Networks.
Research and development (R&D): In 2018, R&D spending by multinational corporations in this industry
was $15 billion-$20 billion. It supported innovation and technological advancements. The R&D focus helped
Chinese firms develop proprietary technologies.
Skilling initiatives: Technology experts and foreign scientists have helped to enhance human resource
development and competitiveness. Educational programmes, training workshops and collaborations with
foreign experts have developed the skills and knowledge of domestic employees
Tax incentives: The Chinese government provides tax incentives and subsidies to domestic industries and
researchers to increase production and innovation.
Infrastructure incentives: Telecommunication Regulation of PRC-The Decree of the State Council No.
291 of 2000 states that telecom equipment connected to public networks must meet licensing system set
by the state. The licensing system, known as Network Access License (NAL), is a network access licence
agreement that applies to telecom equipment connected to the public telecom network using wired or
wireless technology. After obtaining the NAL, some devices also need to get the China Compulsory
Certification (CCC), a national security and quality mark.
Regulatory environment
The regulatory environment in China for telecom equipment manufacturing is shaped by various
government bodies and policies. These aim at technological advancement and maintaining security
standards.
• Ministry of Industry and Information Technology (MIIT): The MIIT oversees the allocation and
management of radio frequencies used by BTS. This ensures efficient use of the spectrum and
minimises interference. The ministry sets the guidelines and enforces the requirements for network
security, including the implementation of security protocols in BTS equipment to protect against cyber
threats. These standards cover aspects such as signal strength, data transmission rates and energy
efficiency.
• China Communications Standards Association (CCSA): CCSA is responsible for creating detailed
technical standards for telecommunications equipment. These standards ensure that BTS
manufactured in China meet international quality and performance benchmarks. CCSA works with
global standardisation organisations to harmonise Chinese standards with international practices,
facilitating global interoperability of Chinese-made BTS equipment.
Government policies
The Chinese government has implemented several policies to support the growth and global
competitiveness of its BTS manufacturing sector. These include:
• Made in China 2025: This strategic policy aims to upgrade manufacturing capabilities, with a focus on
high-tech industries, including telecommunications. It promotes innovation, quality improvements and
the development of advanced manufacturing technologies.
• 5G development plan: China launched its 5G technology in October 2019, significantly ahead of India,
establishing a robust digital infrastructure that fuelled domestic demand. The Chinese government
prioritised the deployment of 5G networks, which boosted demand for advanced BTSs substantially.
Significant investments have been made in infrastructure development, research and international
cooperation to establish the country as a leader in 5G technology.
169
Investment
The government’s commitment to promoting the construction of the new infrastructure as a national strategy
of China is highly valued.
The Ministry of Industry and Information Technology (MIIT) of China officially issued commercial 5G licences
in 2019, initiating a nationwide 5G rollout. Approximately a year later, the ministry unveiled measures to
accelerate the pace of construction of 5G infrastructure and to improve the capabilities to support innovation
in 5G technologies.
This approach not only created a strong domestic market for 5G services but also set the stage for China
to lead the global 5G landscape.
Infrastructure
In 2022, Chinese telcos and China tower built approximately 887,000 5G base stations, with an investment
exceeding RMB 180 billion ($26 billion).
As of March 2026, China had achieved a remarkable feat in 5G infrastructure by establishing a total of
4.958 million 5G base stations, forming 65% of the world’s total. As a result, over 70% of mobile users in
the country are now utilising 5G services, positioning the country as a global leader in this technology,
according to MIIT.
• Special Economic Zones
China started setting up special economic zones (SEZs) with the government establishing the first
four SEZs in Shenzhen, Xiamen, Zhuhai and Shantou between 1979 and 1980. Shenzhen is a
world leader in shipping and supply chain. Shenzhen was selected to set up the first SEZ in the
country primarily to facilitate international trade and investment.
Some of the policies under Shenzhen SEZ:
i. Corporate income tax rate
Corporate income tax (CIT) rate for telecom equipment manufacturers located in China's SEZs
is significantly lower than those outside. The tax rate for telecom equipment manufacturers in
these zones is 15% while that for players outside is 25%.
ii. Tax reductions
• Export enterprises: If export value is more than 70% of their total annual production, they
are offered a reduced 10% enterprise income tax rate
• Manufacturing enterprises: If established for more than 10 years, they could get two
years of income tax exemption
• High-tech enterprises: Income tax rate of 10% for an additional three years if established
for more than 10 years
• High-tech industries - integrated circuits (IC) manufacturing enterprises:
o A refund will be applied to value-added tax (VAT) exceeding 6% for sales of self-
produced IC products.
o General taxpayers will pay VAT at 17%
Refunded tax shall be used for R&D related to IC products and expanded production. It
shall not be subject to the levy of corporate income tax.
Free trade agreements – China-ASEAN Free Trade Area (CAFTA)
CAFTA is a trade agreement between China and the 10 members of the Association of Southeast Asian
Nations (Asean).
The agreement eliminated tariffs on 90% of goods traded between China and Asean countries. By
eliminating tariff on telecom equipment, CAFTA reduced cost for manufacturers, encouraging production.
170
The FTA has significantly boosted the supply chain for telecom equipment, with many components and raw
materials sourced from Asean countries.
Training, learning and development – Huawei ICT Academy:
The Huawei Information and Communications Technology (ICT) Academy was established in 2013 as part
of Huawei's commitment to developing ICT talent globally. The academy has trained over 150,000 students,
of which a significant portion is Chinese. The academy collaborates with more than 900 universities and
colleges in China and abroad to integrate the company’s courses into their curriculums. This academy
includes a wide range of specific technologies, of which 5G technology is one. There are courses on
development, architecture and applications of 5G networks.
Land policies
Export-oriented and high-tech enterprises need to pay only half the industrial land-use fees for the first five
years.
Newly purchased properties for establishing production facilities and operations for high-tech enterprises
and projects are exempt from property tax for five years starting from the date of completion of the purchase.
171
Hungary
In 2024, the country’s telecommunication equipment export increased 31.4% to $5.5 billion making it one
of the most important exporters after China.
Regulatory developments
• Spectrum auctions:
In May 2023, the Hungarian telecom regulator, National Media & Infocommunications Authority (NMHH)
auctioned the 32 GHz spectrum for HUF 970 million for 15-year entitlements until May 23, 2038, to
facilitate 5G mobile broadband services and promote competition and technological advancement in
the sector.
• Support for mobile device upgrades:
As of end-2021, 95% of mobile internet traffic and 62% of voice traffic in Hungary was 4G. NMHH
decided against phasing out 2G due to its importance for some users and critical services. To ensure a
smooth 3G phase-out, NMHH launched the "NetreFel" programme, including a subsidy for upgrading
to 4G/5G phones. By March 2023, 120,000 phones were replaced with a HUF 4.2 billion budget, leading
to a complaint-free 3G switch-off by December 2023.
Government policies
Infrastructure development
• 5G network expansion: Major telecom operators, particularly Magyar Telekom, are investing heavily in
upgrading mobile networks to 5G, including by expanding fibre-optic connections to enhance service
delivery.
• Fixed broadband growth: In 2021, the number of fixed broadband subscribers in the country increased
2.8%, supported by the wider availability of fibre network. By the end of 2022, Magyar Telekom provided
1Gb/s service to over 3.4 million premises.
• Consolidation of services: The acquisition of Vodafone Hungary by 4iG has led to a more unified service
offering, combining mobile and fixed broadband services to enhance customer experience.
Tax measures
Introduction of an additional tax on telecom revenue is aimed at bolstering state finances. It, however,
impacted operators’ profitability but also ensured continued investment in infrastructure. These reflect
Hungary's commitment to modernising its telecom infrastructure.
• Utility tax abolition
The Hungarian government abolished the utility tax payment obligation for electronic
telecommunications providers starting January 2024. Additionally, the supplementary
telecommunications tax was eliminated from January 2025. This move was aimed at boosting the
financials of telecom operators and encouraging investment in infrastructure
• Corporate income tax
Hungary has one of the lowest CIT rates in Europe at 9%. This applies to telecom companies, making
it an attractive location for investment.
• Local business tax (LBT)
Telecom companies are subject to an LBT imposed by municipalities. However, the rate has a ceiling
of 2% of the calculated LBT base.
• Other corporate tax
Telecommunications service providers in Hungary are subject to another specific tax — for private
individuals, HUF 2 per minute for calls and also per message; for other entities, HUF 3 per minute for
calls and also per message.
172
Policy framework and industry support mechanism
Production linked incentive scheme for promoting telecom and networking products
manufacturing in India
The Government of India had introduced the Production Linked Incentive (PLI) Scheme to promote the
manufacturing of telecom and networking products in India, with the objective of boosting domestic
production, attracting investments, and increasing exports of "Made in India" products. The scheme aims
to incentivize companies to set up or expand their manufacturing facilities in India, creating a robust
ecosystem for the production of telecom and networking products.
The scheme, with an overall financial outlay of 12,195 Crore came into effect from 1st April 2021 for a period
of five years. Support under the Scheme is provided to companies who manufacture specified telecom and
networking products in following 4 product categories in India:
1. Core transmission Equipment
2. 4G/5G, Next Generation RAN and Wireless Equipment
3. Access & CPE, IoT Access Devices and Other Wireless Equipment
4. Enterprise Equipment: Switch and Router
Incentive structure: The incentive is provided as a percentage of the incremental sales of manufactured
goods, net of taxes, over the base year (FY 2019-20).
The scheme has helped achieve landmark progress towards the overall “Make in India” objective across
investment, sales and employment statistics:
Figure 63: PLI for Telecom
(INR Crore)
(₹ Crore)
50,214
32,371
8,540
Sales
GlobalDomesticMSME
1295
2728
492
Investment
GlobalDomesticMSME
173
Note: Scheme performance as on July 2025
Source: PLI Dashboard
However, the domestic manufacturers face three major challenges with the current PLI scheme design-
1. A challenge for local manufacturers, particularly component manufacturers, is that they typically operate
at smaller scales compared to finished goods manufacturers, with many small and medium-sized
players in the component manufacturing ecosystem. As a result, they struggle to meet the eligibility
criteria for the Production-Linked Incentive (PLI) scheme, which requires a certain level of Global
Manufacturing Revenue during the base year and minimum new domestic investment. To support these
local manufacturers, it is essential to have more lenient eligibility criteria, tailored to their specific needs
and scale of operations.
2. Domestic manufacturers are of the opinion that the scheme lacks requirements for domestic value
addition or the development of downstream industries, allowing beneficiaries to import up to 100% of
the components, simply assemble them, and still qualify for the Production-Linked Incentive (PLI)
benefits, without contributing to the growth of the local ecosystem.
3. At present, the minimum investment threshold for all categories remains uniform. However, the
investment requirements vary significantly across categories, with core transmission equipment, 4G/5G
radio access network, and wireless equipment likely requiring substantial investments, whereas the
production of customer premises equipment (CPEs) and Internet of Things (IoT) devices may
necessitate relatively lower investments.
Other notable schemes include:
• Scheme for financial assistance to select states for skill development in ESDM sector
Overview and Impact: Approved in November 2013 with Rs 113.77 crore (Rs 100 crore grant-in-aid),
this scheme targets 90,000 candidates in 9–10th standard frameworks across states like Odisha and
Uttar Pradesh. It provides 100% funding for SC/ST/EWS and 75% for general categories via NIELIT,
ESIC, and state agencies, focusing on IoT, 5G, and robotics. By 2025, it certified 263,624 individuals,
boosting employability in manufacturing/services through industry-linked curricula in 10 key states/UTs,
per NIELIT’s ESDM-Skill portal.
Limitations and Gaps: MeitY’s HRD Division evaluations indicate uneven state implementation due
to limited private-sector tie-ups, resulting in placement rates below 60% in non-metro areas. The
scheme’s focus on entry-level skilling overlooks advanced R&D needs, with gaps in monitoring long-
term job retention. Resource constraints in select UTs have capped outreach to only 70% of targeted
90,000, per 2024 NIELIT reports, underscoring the need for broader geographic expansion and digital
tracking tools.
• Chips to startup scheme
Overview and Impact: Initiated in 2021 as an umbrella under National Policy on Electronics (NPE)
2019, C2S allocates Rs 250 crore to train 85,000 professionals in VLSI/embedded design over five
(Number of jobs)
(₹ Crore)
14601
3068
140
Export Sales
GlobalDomesticMSME
4415
19270
5432
Employment
GlobalDomesticMSME
174
years. It fosters academia-industry collaborations via C-DAC, funding IP cores, SoCs, and startups. By
July 2025, MeitY committed Rs 2.34 billion to 22 projects (total cost Rs 6.9 billion), supporting
hackathons and RFPs.
This has accelerated chip design startups, aligning with India’s semiconductor ambitions.
Limitations and Gaps: MeitY’s Detailed Project Report (2023) identifies system-level challenges like
inadequate fab access and high prototyping costs, limiting output to prototypes rather than commercial
chips. With only 22 funded projects against 100+ applications, selection biases toward established
entities exclude nascent MSMEs. Gaps in post-training incubation (e.g., funding beyond Rs 1–2 crore
per project) have slowed commercialisation, with official data showing under 30% of trainees entering
ESDM jobs, per 2025 MeitY evaluations.
• Special Manpower Development Programme (SMDP)
Overview and Impact: Building on SMDP phases (9th–10th Plans targeting 5-15% global VLSI share),
this MeitY initiative (launched ~2014) equips thousands via 60 institutions like IITs and NITs with hands-
on labs, courses, and prototypes in VLSI/embedded systems. It has broadened R&D through
networked PhDs and IP protection, fostering innovation in full-spectrum chip-to-system development,
as detailed on SMDPC2SD.gov.in and IIT implementation reports.
Limitations and Gaps: MeitY’s capacity-building reviews (2024) highlight dependency on imported
tools (e.g., Synopsys/Mentor suites), inflating costs and restricting access for non-elite institutions. Skill
gaps persist in full-spectrum deployment, with only ~70% utilization of sanctioned labs due to
maintenance funding shortfalls (Rs 1.69 crore per site often insufficient). The program’s phased
structure limits scalability, achieving under 50% of 15% market share goals by 2020, per historical MeitY
assessments, due to weak industry-academia linkages.
Overall Gaps Across Schemes
While these initiatives have certified over 300,000 professionals and spurred Rs 80,000 crore in PLI-
linked sales, MeitY’s 2025 HRD synthesis reveals systemic shortcomings: over-reliance on grants
without sustained funding for scaling (e.g., no dedicated venture capital for ESDM startups), fragmented
monitoring across states, and insufficient focus on women/non-engineering inclusion (under 20%
participation).
175
Challenges hindering India’s global competitiveness
1. High import dependence faced by TANE manufacturers for components
Figure 64: Bill of materials – BTS/Access components manufacturing
Source: TRAI, Crisil Intelligence
India's telecom equipment manufacturing sector grapples with vulnerabilities stemming from an
underdeveloped domestic ecosystem for critical components like semiconductors, PCBs, and specialty
chemicals.
A deep dive into specific telecom products and components helps us understand the status of localisation
across different products:
Table 23: Underdeveloped ecosystem limiting localization across TANE products
S. No.
Specified Telecom &
Networking Products
Total electronic BOM
as % of sales
Total Other
BOM as % of
sales
Localization
excluding
electronics
Localization
overall
1 4G/LTE RAN Base Station 55% 13% 15% 4%
2 5G RAN Base Station 64% 9% 19% 5%
3 Switches 51% 21% 9% 3%
4 GPON ONT 61% 30% 34% 12%
176
S. No.
Specified Telecom &
Networking Products
Total electronic BOM
as % of sales
Total Other
BOM as % of
sales
Localization
excluding
electronics
Localization
overall
5
Wi-Fi Access Point and
Controller
48% 29% 15% 5%
6 Internet Set Top Box 57% 25% 15% 5%
Source: Department of Telecommunication
Initiatives like the Production Linked Incentive (PLI) scheme, have boosted production, reduced overall import
dependency by 60% as of 2024 in imports of antennas, GPON (Gigabit Passive Optical Network) & CPE
(Customer Premises Equipment), and base stations. However, the import dependency for components
persists with import of Baseband unit and Remote Radio Units (key components required to manufacture
Base Stations) increasing by 24% and 36% respectively in 2024 as majority of the PLI goods are
manufactured by importing components and assembling them in India. The absence of localised sourcing
forces manufacturers into heavy reliance on component imports, predominantly from China. This gap arises
from historical neglect of indigenous R&D, insufficient infrastructure for high-precision fabrication, and skill
shortages, leaving domestic firms unable to scale component production economically.
In the current form of PLI, as on July 31, 2025, 42 beneficiary companies had invested INR 4,518 crore,
generating INR 91,125 crore in sales, including INR 17,809 crore in exports, and creating 29,117 jobs. Even
with these commendable outcomes, the scheme’ s impact remains concentrated in assembly-led
manufacturing, with comparatively limited progress on deeper localisation across the component value chain.
Localization is pivotal for three primary reasons:
1. It facilitates the progressive deepening and diversification of the domestic value chain.
2. It strengthens the global competitiveness of Indian manufacturers by enabling them to capture a
larger share of value within the supply ecosystem.
3. It serves as a strategic safeguard, mitigating risks associated with global supply chain disruptions
and geopolitical uncertainties. Nonetheless, realizing meaningful localisation necessitates the
realignment of global supply chains and the creation of targeted incentives to attract component
and sub-component manufacturing to India.
2. Limited market access for domestic TANE manufacturers
Figure 65: Telecom equipment demand is dominated by private telecom service providers
• The majority (98%) of domestic TANE demand is from private telecom service providers
• These players prefer buying from large global OEMs as their products are certified, globally tested and
economical unlike domestic manufacturers
98%
2%
Private TSPs
BSNL and Govt.
procurement
177
There exist numerous examples of private telecom service providers (TSPs) in India favoring global OEMs
over domestic TANE manufacturers. In 2022 during the initial 5G rollout phase, a major private TSP signed
multi-year supply agreements worth approximately $2.5 billion (over Rs 19,750 crore) with Ericsson (Sweden),
Nokia (Finland), and Samsung (South Korea) for radio access network (RAN) equipment, including base
stations and core infrastructure, to deploy 5G services starting in key cities like Delhi and Mumbai. These
contracts explicitly excluded domestic players like Tejas Networks or HFCL, despite their PLI-eligible 5G
offerings, due to TSPs’ emphasis on globally certified, interoperable gear with proven scalability, leaving local
firms sidelined to minor or future-proofing roles. Similarly, another TSP awarded major RAN deals to Nokia
and Ericsson for its nationwide 5G expansion, further illustrating how TSPs prioritize reliability and vendor
ecosystems from established global players, perpetuating the 98% market lockout for unproven domestic
alternatives.
3. Financial viability
Figure 66: Indian companies operating at lower profitability margins
Note: Indian companies considered are HFCL and Tejas Networks
Source: Company reports, Crisil Intelligence
Operating margin and return on capital employed (ROCE) of international players are consistently higher
than Indian players, indicating higher input costs and intense competition in India. The extensive distribution
network and strong brand recognition of international players enable them to command premium pricing.
Additionally, international firms benefit from cost efficiencies through global sourcing, optimised supply
chain, and advanced manufacturing technologies.
4. Lack of skilled workforce
Employee productivity
Employee productivity in India's telecom and network equipment (TANE) manufacturing sector, as
measured by Gross Value Added (GVA) per person engaged, lags significantly behind comparable
segments, according to the Annual Survey of Industries 2022. At Rs 6.27 lakh per person for TANE (NIC
2630, encompassing IT hardware, computers, electronics, and optical products), productivity is about 53%
13
8 8 8
31
35
34
27
FY21 FY22 FY23 FY24
ROCE
Indian companies CISCO
12%
10% 10%
12%
28% 27%
26%
24%
FY21 FY22 FY23 FY24
Operating margin
Indian companiesCISCO
178
of the national manufacturing average (Rs 11.89 lakh) and 44% of the electronic components sub-sector
(NIC 2610, at Rs 14.12 lakh). This underperformance highlights structural inefficiencies, including skill gaps
favoring semi-skilled labor, limited automation, and heavy import reliance for high-value inputs, which dilute
value capture domestically. In contrast, electronic components, earlier in the value chain benefit from higher
specialization and scale, underscoring the need for targeted upskilling and ecosystem investments in TANE
to bridge this gap and align with Atmanirbhar Bharat objectives.
Figure 67: GVA per person engaged
Notes: For telecom equipment National Industrial Classification (NIC2630) has been referred to
Telecom equipment includes IT hardware, computer, electronic and optical products
Source: Crisil Intelligence, Annual Survey of Industries 2022
Skill requirement
The telecom sector Skill Council (TSSC), jointly set up by The Cellular Operators Association of India (COAI),
Indian Cellular Association (ICA) & Telecom Centres of Excellence (TCOE) to ensure adequate availability
of skilled manpower to boost growth and productivity in the telecom sector. The ‘Telecom Talent in 5G Era’
report highlights the following challenges-
The chart below shows the skill level required in the telecom equipment sector. Semi-skilled workers are
those with some specialised training but not with extensive expertise. They can perform tasks such as
operating machinery, perform basic equipment maintenance or work with standard telecom systems. Skilled
workers possess a higher level of technical expertise and are capable of handling tasks such as installing
advanced telecom equipment, troubleshooting or managing systems. Minimally skilled workers handle tasks
like general labour, simple assembly work or play supporting roles in production and maintenance of telecom
equipment.
(Rs. Lakh)
14.12
11.89
6.27
Electronic Components (NIC
2610)
National Manufacturing average TANE (NIC 2630)
179
Figure 68: Skill-level distribution
Source: Crisil Intelligence, National Skill Development Corporation
Their talent requirement can be segregated according to the NSQF (National Skills Qualification Framework)
into levels of ranking based on knowledge, skills, and aptitude. The overall Telecom talent has been
bifurcated into Blue-Collar, and corporate talent, where the corporate talent represents the
executive/leadership workforce and Blue Collar represents support-related functions.
The growth of the sector is dependent on the way telecom talent is utilised as well as the availability across
different roles is triggered and undertaken by employers and agencies alike.
Only 40% of India's graduates in computer science, IT and telecommunication are employable in the
technology sector owing to the mismatch between academics and industry demands, as per the telecom
sector Skill Council’s 2023-24 report, Telecom Talent in 5G era.
The table below details the primary factors contributing to China’s effective cost advantage in telecom
equipment manufacturing:
Table 24: Factors that lead to cost reduction in Telecom and Network Equipment manufacturing
S. No. Factors resulting in cost reduction India China
1 Fiscal incentives based on incremental production (PLI) 4% -7% 1%-2%
2 Corporate income tax exemption/reductions 0.73% - 0.95% 2%
3 State subsidies in India for capital investments 0.6%-1.2% NA
4 R&D subsidy 0.15% 2%
5 Industrial land development support 0.40% 0.60%
6 Infrastructure development cost (Building etc.) Negligible 1%
7 Labour subsidy Negligible 2%
8 Cost of power Negligible 1%
9 Subsidy for machinery and equipment 0% 3%
10 Exemption/reduction of the land rental costs 0% 0.60%
Skill-level Distribution
180
11 Interest subvention on working capital 0% 3%-3.5%
12 Logistics 0% 1%
13 Other factors improving the "Ease of doing Business" - 2%-3%
14
Duty-free imports for creating fixed assets and inputs not available
domestically
0% -
Total 5.88% -9.7%
19.2%-
21.7%
Cost disability differential for India vs China -
12%-
13.32%
Source: TRAI, Crisil Intelligence, US-India Strategic Partnership Forum (USISPF)
Note: Percentages represent each government incentive or subsidy as a share of total manufacturer revenue, based on ICEA
estimates (2018). Each figure is calculated by applying the applicable policy benefit rate, such as a tax exemption, interest subsidy, or
direct grant to the assumed share of that cost item in a manufacturer’s total revenue. For instance, India’s R&D subsidy of 0.15%
reflects the weighted tax deduction under Section 35(2AB) of the Income Tax Act applied to an estimated R&D spend of ~1% of
revenue at prevailing corporate tax rates.
As observable from the table, TRAI assessments and industry analyses, India’s overall production costs
remain 12–13% higher than China’s even after PLI adjustments-due to persistent gaps in scale,
infrastructure reliability, and supply chain depth, though India’s labour edge and policy reforms are narrowing
the divide to potentially under 10% in targeted segments like 5G components.
Despite the numerous challenges that have hindered the growth of India's telecom equipment manufacturing
industry, a few pioneering companies have managed to navigate these obstacles and achieve success,
demonstrating that domestic manufacturing is not only possible but also profitable. By examining these
examples, we can gain valuable insights into the strategies and innovations that have enabled these
companies to thrive and explore how they can be replicated and scaled up to drive industry-wide growth.
181
Success story: Reliance Jio’s partnership with Sanmina
Reliance Jio, one of the leading players in the Indian telecom services space, has been at the forefront of
4G deployment as well as 5G rollout across the country. The telecom hardware requirements for its network
services, including MIMO antennas and RRH, were historically fulfilled by awarding multi-billion-dollar
contracts to large global OEMs such as Ericsson and Nokia.
This comprised one of the largest components of the company’s network capex spend, with overall network
capex spend estimated at nearly $3.15 billion in fiscal 2023.
In a bid to develop an in-house solution for its 5G equipment requirements as well as to lower dependence
on global vendors such as Ericsson and Nokia, Jio developed plans to deploy its own network products.
In 2022, Reliance Industries’ subsidiary, Reliance Strategic Business Ventures, entered into a joint venture
with Sanmina Corporation, a US-based integrated manufacturing solutions provider.
The joint venture aims to build a world-class electronic manufacturing hub in India, in line with the Hon’ble
Prime Minister’s “Make in India” vision. The joint venture will prioritise high technology infrastructure
hardware for growth markets and across industries such as communications networking (5G, cloud
infrastructure, hyperscale datacentres), medical and healthcare systems, industrial and cleantech, and
defence and aerospace. In addition to supporting Sanmina’s current customer base, the joint venture will
create a state-of-the-art ‘manufacturing technology centre of excellence’ that will serve as an incubation
centre to support the product development and hardware startup ecosystem in India, as well as promote
research and innovation of leading-edge technologies.
This partnership, which aims to leverage Sanmina’s advanced manufacturing experience and Reliance
Industries’ expertise and leadership in the Indian business ecosystem, has been paying off:
• In-house shift: Reliance Jio has started deploying its own 5G small cells and radio units, moving
away from foreign suppliers to reduce costs and increase control over its network infrastructure
• Local production: The new equipment is manufactured near Chennai through a joint venture
between Reliance Industries and Sanmina Corp
• Cost advantages: By using domestically produced components, Jio aims to cut 5G deployment
costs by up to 60%, driven by lower import duties, fewer licensing fees and reduced reliance on
global manufacturing
An imported small cell (a type of radio access telecom equipment) typically costs ~$4,000. By using its own
small cells, Jio could cut costs by 50-60%.
How can more such partnerships be encouraged?
The growth of TANE manufacturing on cluster model in Madhya Pradesh
• Madhya Pradesh is actively developing its telecom sector, with a focus on attracting investment and
fostering innovation. A Telecom Manufacturing Zone (TMZ) is being established in Gwalior, and Indore
is emerging as a hub for IT and telecom-related activities.
• The TMZ in Gwalior is designed to attract investments of Rs 12,000 crore and create 5,000 jobs. It will
focus on manufacturing telecom equipment, including SIM cards, chips, and antennas, as well as
research and development in 6G technologies.
• Tech Growth Conclave 2025 in Indore: This event, organized by the Department of Science and
Technology, will focus on translating investment commitments from the Global Investors Summit into
tangible projects. It will include the unveiling of new policy guidelines, and the launch of an AI-based
Centre of Excellence.
182
Success story: Nokia’s India story: leveraging local strengths
for global success
Figure 69: Telecom equipment visual
183
Recommendations: Policy initiatives and reforms
Recommendation I - Scheme for localisation of Telecom & Networking Products and
Ecosystem Development
India may adopt a phased approach to promote domestic manufacturing of components essential for telecom
equipment production. Given the current lack of robust local suppliers for semiconductors and certain electro-
mechanical components, the government can introduce localisation incentives for the procurement of plastic,
mechanical, and select electro-mechanical components that are already produced within the country
To identify scope for localisation, the Department of Telecommunications (DoT) had held stakeholder
discussions with manufacturers operating on a diverse scale- domestic and foreign OEMs (original equipment
manufacturers) and EMS (Electronics Manufacturing Service). Stakeholders expressed concerns that a
localisation requirement based on a list of specific components to be sourced from Indian suppliers may be
challenging to implement, as many of these components are not available in the local market
The optimum way forward would be evaluating manufacturers on a Bill of materials-based criteria, where
companies get certified from designated auditor/certification bodies that attest to the percentage of BoM that
has been procured locally by manufacturers of telecom equipment (final products). The manufacturers can
procure non-semiconductor components to begin with (such as plastics and insulation components), and in
a phased manner, when electro-mechanical and semiconductor component manufacturing picks up in India,
the localisation qualification for availing scheme benefits can be increased to higher localisation percentages.
This will help the current plastics and insulation component manufacturers to gain scale and attract other key
component manufacturers to set up shop as well.
Ministry of Electronics and Information Technology’s Electronic Component Manufacturing Scheme (ECMS)
already provides incentives for several components including electro-mechanicals such as connectors,
switches, heat sinks, antennas and filters, multi-layer Printed Circuit Boards, enclosures, passive
components, and supply-chain inputs used in electronics manufacturing. It also provides turnover-linked,
capex and hybrid incentives across these eligible segments, with a telecom-specific sub-assembly category
currently covering Optical Transceiver - SFP. Accordingly, the proposed localization scheme is intended to
complement ECMS by covering the remaining telecom equipment Bill of Materials from the demand side,
particularly components and materials used in final telecom/networking products such as 4G/5G RAN,
switches, GPON ONT, CPE/STB equipment, RF cables, insulation materials, plastics, mechanical parts and
other non-semiconductor inputs that may not be fully addressed through ECMS as final-equipment-level
procurement support. The proposed mechanism would therefore incentivise telecom OEMs/EMS players to
source a certified share of their BoM domestically and provide price-gap support for eligible components that
are costlier to procure locally, thereby creating assured demand for domestic component manufacturers while
avoiding duplication with ECMS.
Scheme features:
• Phased Increase in Localization: Achieving higher localisation will require companies to make
substantial investments and/or promote domestic component manufacturing. This approach
demands greater and more immediate investments towards developing component ecosystems
compared to current PLI schemes that do not mandate localisation.
• Targeted support to produce essential telecom equipment: Financial incentives should be
strategically directed toward procurement for manufacturing of high-demand products such as
4G/5G RAN, switches, GPON ONT, and CPE/STB equipment. Gradually localizing components
for these products will boost local value addition, strengthen global competitiveness, and foster the
development of a robust domestic manufacturing ecosystem.
184
Let’s take an example of providing benefits for Polytetrafluoroethylene (PTFE)
Polytetrafluoroethylene (PTFE) is a special type of plastic used in telecom equipment. In telecom networks,
PTFE is mainly used in RF cables, Connectors, and High frequency circuit boards to help signal travel
smoothly without interference
In terms of pricing, PTFE is cheaper in China and other Northeast Asian countries compared to India. The
price difference is approximately 30-35% lower in China than in India, making it more economical for
telecom components manufacturers in India to import PTFE from China rather than procure it locally.
However, if Indian equipment manufacturers are provided support of the price difference as incentive, they
will be encouraged to procure locally. After compensating the price gap, the effective price becomes
comparable to that of China’s.
Table 25: Effective PTFE pricing after price-gap support
Category Imported PTFE (China) Domestic PTFE (India)
Domestic PTFE with
Support
Base price ($/kg) 7.3 11 11
Price Difference Support - - 3.7
Final effective price ($/kg) 7.3 11 7.3
The benefit may be extended to companies that source at least 20% of their Bill of materials (BOM)
components from domestic suppliers. Price gap funding may be provided exclusively for those components
that are more expensive to procure locally yet have been sourced domestically by the company.
This benefit should be aimed at being phased out in a period of five years as the domestic component
manufacturers achieve scale
Recommendation II - Promoting joint ventures with established players to build
domestic capability
Rationale: Case study of China:
In the early 1980s, China's communication infrastructure was weak. Furthermore, the industry was not
geared to design or manufacture digital communication products, such as stored program controlled (SPC)
switches, which were at that time considered to be relatively advanced equipment. The government realised
that the only way forward was to import foreign technologies and to adapt, innovate and develop Chinese
products on the basis of these technologies. In order to achieve this, the former Ministry of Posts &
Telecommunications drew up a three-pronged strategy: to import, to establish joint ventures with foreign
counterparts and, in parallel, to conduct independent research and development (Peng 1999).
In the early stages of China's opening up to the West, the government encouraged foreign companies to
establish joint ventures in China. Shanghai Bell Co, Ltd, which was the result of a partnership between
China Posts and Telecommunications Industry Corporation and BTM of Belgium (now part of Alcatel),
became the first telecom equipment joint venture, manufacturing SPC switches. Production at Shanghai
Bell started in 1985 and, by 1998, it had produced a total of 33 million lines of its System-12 SPC switch –
about a quarter of all switches sold in China. By then, its component localisation rate had reached 74% and
software development, 90%. Total sales revenue over 1985-1998 reached $28.2 billion.
185
Opportunity for India:
India is currently positioned in a comparable situation. With a supportive government vision of ‘Atmanirbhar
Bharat’ and favourable demographics, there is an opportunity to develop domestic capability. Over time, as
India’s component ecosystem deepens, domestic firms can increasingly capitalise on anchor investments
by global OEMs, driving technology and know-how transfer, productivity spillovers, and a broader base of
local manufacturing across product categories. This evolution broadly reflects the path seen in China and
several Southeast Asian economies, where foreign OEMs first accelerated localisation, and domestic
players subsequently moved up the value chain from low-value assembly toward higher-value design,
engineering, and ultimately branding.
Figure 70: Roadmap to developing domestic capability via tech transfer and partnerships with global players
Takeaway for India
Figure 71: The cluster model followed by China and Taiwan can be replicated in India
186
This cluster in Tainan city, Taiwan, brings together companies involved in various aspects of telecom
equipment manufacturing, from design and development to packaging and testing. The presence in the
same city of multiple suppliers and buyers, who share knowledge, facilities and infrastructure, reduces
cost and provides linkage benefits.
Recommendation III - Focus on Radio infrastructure equipment to unlock the
export potential
Market Overview
Global trade in telecom infrastructure components presents a lucrative opportunity for India, with world
imports totaling USD 219 billion in 2024 (antennas, Remote Radio Heads (RRH), and Base Units (baseband
units (BU)) and USD 9 billion (Optical Fibre Cables (OFCs) and microwave apparatus). India's current
exports stand at $0.9 billion for the former and $0.5 billion for the latter, capturing less than 1% of the
market.
187
Figure 72: Trade of Antennas, RRH, and BU as of calendar year 2024
Source: ITC Trade Map
Top importers like the US, China, and EU nations dominate the global demand driven by 5G rollout, data
center expansion, and digital infrastructure investments. By targeting these high-volume markets, India can
scale exports to $5-10 billion annually within 3-five years, leveraging its manufacturing ecosystem under
the Production Linked Incentive (PLI) scheme.
188
Figure 73: Trade of OFCs and microwave apparatus
Note: Charts not to scale
Source: ITC Trade Map
Current key target markets
Table 26: Current key target markets
Category Top Importers (Share %)
Import Value (USD
billion)
Opportunity for India
Antennas, RRH &
BU ($219B)
US (20%), China (18%), Hong
Kong (8%), Netherlands (7%),
Germany (5%)
US:43.8, China:
39.4
High-volume 5G base stations; align with US
Federal Communications Commission (FCC)
specifications for duty-free access via
Generalized System of Preferences (GSP)
restoration
UK (3%), Japan (5%),
Singapore (3%), Mexico (3%)
UK: 6.6, Japan: 11
Post-Brexit UK FTA; Japan's semiconductor
ties for joint ventures.
India exports- $ 57 million
World imports- $ 9 billion
189
Category Top Importers (Share %)
Import Value (USD
billion)
Opportunity for India
OFCs & Microwave
($9B)
China (28%), US (25%), Hong
Kong (26%)
China: 2.5, US: 2.3
Fibre-optic backbone for data centers; US
CHIPS Act subsidies for suppliers.
Netherlands (10%), UAE (5%),
Mexico (5%)
Netherlands: 0.9,
UAE: 0.5
EU Green Deal for sustainable cabling; UAE's
smart city projects.
Note: CHIPS: Creating Helpful Incentives to Produce Semiconductors
The roadmap below outlines phased strategies to target $10–15 billion combined exports by 2030 (5-year)
and $40–50 billion by 2035 (10-year), capturing 5–7% global share in these categories. It focuses on policy
leverage, capacity building, innovation, and market access, assuming sustained government support (e.g.,
PLI extension) and private investments.
Figure 74: Telecom and network equipment export promotion roadmap
Manufacturing sectors like telecom equipment have significant spillover effects, including jobs in supply
chains (e.g., components, logistics, R&D), services, and ancillary industries. Based on broader electronics
manufacturing data in India, indirect job multipliers range from three to five times direct jobs. With focused
execution, India can triple exports to USD 3 billion by 2028, creating 200,000 jobs and boosting forex
reserves by $2.5 billion. This estimate assumes continued PLI incentives, supply chain localisation
(increasing value addition from ~30-40% to 50%), and ecosystem growth.
190
Recommendation IV - Establishing a centralised testing agency for all companies /
access to trial / testing beds:
Access to telecom networks for field-level test / trial of products under development remains a challenge
for Indian companies, making it difficult to get quality certifications. Accordingly, to enhance the credibility
and global acceptance of domestically manufactured TANE, the centralised testing agency should establish
partnerships with renowned international certification bodies to align domestic standards with global testing
benchmarks.
Recommendation V - Offer financial support to prestigious institute-manufacturer
partnerships to incentivise skill development of the workforce and promote
practical product development experience
• Incentivise AICTE-affiliated advanced technical institutions that are offering advanced courses in
electronics design, fabless products design and VLSI engineering
• The topic for research can be selected in consultation with industry stakeholders (TANE manufacturers
and component manufacturers). A programme for scaling research into practical products can be
facilitated via institute-industry collaboration
• Financial incentives can be given by the government as well as TANE companies; the products
developed as part of the research can be commercialised by TANE manufacturers
191
Appendix
Table 27: Tariffs relevant to Telecom and Network Equipment Manufacturing
S.
No.
Tariff item Description of goods Rate of duty Import policy
1 8517
Telephone sets, including telephones for cellular
networks or for other wireless networks; other
apparatuses for the transmission or reception of voice,
images or other data, including apparatus for
communication in a wired or wireless network (such as a
local or wide area network), other than transmission or
reception apparatus of heading 8443, 8525, 8527 or
8528
0% Free
2 85176
Other apparatus for transmission or reception of voice,
images or other data, including apparatus for
communication in a wired or wireless network (such as a
local or wide area network)
0% Free
3 851770
Other apparatus for transmission or reception of voice,
images or other data, including apparatus for
communication in a wired or wireless network (such as a
local or wide area network)
4 8518
Microphones and stands; therefore, loudspeakers,
whether or not mounted in their enclosures; headphones
and earphones, whether or not combined with a
microphone, and sets consisting of a microphone and
one or more loudspeakers; audio-frequency electric
amplifiers; electric sound amplifier sets
0% Free
5 8525
Transmission apparatus for radio broadcasting or
television, whether or not incorporating reception
apparatus or sound recording or reproducing apparatus;
television cameras, digital cameras and video camera
recorders
Free
85255030
Transmission apparatus for radio broadcasting or
television, whether or not incorporating reception
apparatus or sound recording or reproducing apparatus;
television cameras, digital cameras and video camera
recorders; Transmission apparatus; Broadcast
equipment sub-system;
7.5%
6 8535
Electrical apparatus for switching or protecting electrical
circuits, or for making connections to or in electrical
circuits (for example, switches, fuses, lightning arresters,
voltage limiters, surge suppressors, plugs and other
connectors, junction boxes), for a voltage exceeding
1,000 volts
10% Free
192
193
Table of contents
Executive summary ............................................................................................................................. 194
Introduction ......................................................................................................................................... 199
Global PV industry – An overview ........................................................................................................ 202
Indian PV manufacturing industry – A detailed profile ........................................................................... 203
Value chain .......................................................................................................................................... 204
Value chain play .................................................................................................................................. 205
Manufacturing Process (TOPCon Solar Cell) ....................................................................................... 207
Strategic Alignment .............................................................................................................................. 212
Financial Viability ................................................................................................................................. 218
Case Studies and Global best practices ............................................................................................... 220
China .................................................................................................................................................. 221
Vietnam ............................................................................................................................................... 225
India .................................................................................................................................................... 228
Basic custom duty ............................................................................................................................... 230
Anti-dumping investigation in India ....................................................................................................... 232
Production Linked Incentive (PLI) Scheme: ............................................................................................. 237
Approved List of Models and Manufacturers (ALMM) ........................................................................... 239
Challenges and recommendations ....................................................................................................... 248
194
Executive summary
Sector overview
The solar photovoltaic (PV) manufacturing sector is becoming strategically important as global renewable-
electricity demand rises and solar remains one of the key technologies supporting decarbonisation. The
report notes that the share of renewable energy in electricity is expected to increase from 30% in 2023 to
46% by 2030, largely driven by solar and wind power.
China continues to dominate global PV manufacturing, with over 85% of global supply capacity and a highly
integrated presence across polysilicon, wafers, cells and modules. Its scale advantage, early policy push,
low-cost finance, tax incentives, R&D support, skilling programmes and 23 free trade agreements have
allowed Chinese manufacturers to build cost leadership and strong export competitiveness.
India’s PV manufacturing sector has grown rapidly, especially in downstream modules and cells. Solar
module manufacturing capacity enlisted in ALMM rose to 100 GW by August 2025, from nearly 2.3 GW in
2014, while solar cell capacity increased to 25 GW by March 2025, from less than 1.2 GW in 2014. However,
the sector remains dependent on imports for upstream inputs such as polysilicon and wafers, with only
limited domestic wafer capacity.
Domestic demand is structurally strong. India had installed 106 GW of solar capacity by March 2025 and
needs to add about 174 GW to meet the 2030 target of 280 GW solar capacity. The domestic PV market,
estimated at Rs 32,400 crore / $3.7 billion, is expected to grow at a 17-20% CAGR between fiscal 2023
and fiscal 2030, supported by utility-scale solar, rooftop solar, open-access projects and green hydrogen-
linked demand.
Industry structure
The PV value chain comprises four broad stages: polysilicon production, ingot and wafer production, cell
fabrication, and module assembly. The report highlights that value-chain integration is critical because
players operating from polysilicon to module are less exposed to supply disruptions and raw-material price
volatility.
195
India’s manufacturing base is currently concentrated in cells and modules, while the upstream ecosystem
remains underdeveloped. India has domestic availability in modules, cells and limited wafers, but polysilicon
import dependence remains close to 100%, wafer import dependence is above 90%, cell import
dependence is above 60%, and module import dependence is above 40% of available supply after exports.
China’s dominance is visible across the global supply chain. In 2024, China accounted for 93-98% of
installed and new polysilicon production, 95% of wafer capacity, 91% of cell capacity and 82% of module
capacity, while India’s share was comparatively stronger only at the module stage.
India’s export profile has improved but remains concentrated. PV exports in fiscal 2025 were eight times
those in fiscal 2018, driven by higher cell-to-module capacity under the PLI scheme. However, the US
accounted for 97% of India’s PV exports in fiscal 2025, exposing Indian manufacturers to geographic
concentration risk.
Financially, domestic manufacturers have benefited from policy-driven support such as ALMM and BCD,
alongside record solar additions in India. Domestic players showed stronger resilience in fiscal 2025, while
international players faced pressure from global oversupply, lower prices and margin compression.
Global case studies and best practices
Case study Key policy / strategy levers Outcomes / evidence Implication for India
China: Long-term
industrial strategy
Identified solar PV
manufacturing as a strategic
industry in 2009; supported the
sector through low-cost debt,
subsidies, tax incentives, R&D
programmes, industrial
incentives and skilling support.
China scaled PV
manufacturing by over
18,000x between 2004 and
2024 and continues to
dominate the global PV value
chain.
India should treat PV
manufacturing as a long-term
industrial policy priority, not
only as a renewable-energy
deployment objective.
China: Trade-led
export
competitiveness
Used 23 FTAs with 30
countries / regional blocs,
including FTAs with Iceland,
Switzerland, RCEP members
and Serbia, to improve market
access and reduce trade
barriers.
China led the global PV export
basket with about 57% share
in 2024, supported by large-
scale production and
preferential market access.
India should align
manufacturing policy with
trade-market access,
especially for major importing
regions.
Jinko Solar: Tax
and R&D
incentives
Benefited from preferential
corporate income-tax rates,
including “High and New
Technology Enterprise”
incentives and other
encouraged-industry tax
benefits.
Jinko Solar’s R&D allocation
rose from RMB 461.6 million
in 2021 to RMB 911.9 million
in 2023; it achieved 11%
global market share in 2024,
with large module, cell and
wafer capacities.
India can link tax and fiscal
incentives more directly to
technology upgrading, R&D
intensity and domestic IP
creation.
Vietnam:
Emerging-market
manufacturing hub
Leveraged FTAs, tax incentives,
import-duty exemptions,
streamlined approval processes,
PPA incentives and skilling
programmes; proximity to China
reduced input-material delivery
timelines from weeks to days.
Vietnam accounted for 10% of
global PV exports in 2024
and became a key
manufacturing base for global
and Chinese PV players.
India can draw lessons on
combining policy certainty,
trade access, skilling and
logistics efficiency to build
export competitiveness.
India: Policy
foundation for
scale-up
Implemented PLI, ALMM, BCD,
domestic content requirements,
safeguard duties and
international cooperation
platforms such as the ISA.
PLI has a total outlay of Rs
24,000 crore / $2.7 billion
and awarded around 48 GW /
48.3 GW of integrated PV
India has created a strong
downstream manufacturing
base; the next phase must
deepen upstream integration,
196
Case study Key policy / strategy levers Outcomes / evidence Implication for India
manufacturing capacity across
two tranches.
R&D, skills and export-
market access.
Key challenges and recommendations
Challenge Why it matters Recommended actions Expected
strategic
outcome
Upstream
import
dependence
India has expanded module
and cell capacity, but upstream
segments remain
underdeveloped. Polysilicon
import dependence is close to
100%, wafer import
dependence is above 90%, cell
import dependence is above
60%, and module import
dependence is above 40% of
available supply after exports.
Provide long-term policy clarity;
consider future BCD on polysilicon
and wafers; extend ALMM to
wafers; incentivise polysilicon-to-
module integrated manufacturing;
encourage alternative sourcing and
strategic partnerships.
Reduces supply-
chain vulnerability,
captures more
domestic value and
improves resilience
against raw-material
price volatility.
Limited access
to machinery
and capital
goods
Capital goods for polysilicon,
wafer and cell manufacturing
are concentrated largely in
China, creating access
constraints for Indian
manufacturers and risking
delays in PLI commissioning
timelines.
Encourage JVs, acquisitions and
global partnerships; diversify
capital-goods sourcing beyond
China; support bilateral technology
engagement; develop
manufacturing clusters with shared
infrastructure.
Improves access to
critical production
technology and
accelerates upstream
capacity creation.
Low R&D
intensity
Indian players’ R&D spend is
negligible compared with
Chinese peers, where average
R&D spend is around 3% of
revenue and can reach 6% for
some players. MNRE R&D
disbursement till December
2024 was only about $19
million, compared with $1.4
billion in grants received by
Chinese players.
Create a dedicated solar R&D fund;
increase MNRE’s R&D allocation;
introduce performance-linked R&D
incentives; strengthen academia-
industry partnerships; fast-track IP
protection; encourage firms to raise
R&D spend towards global
benchmarks.
Supports technology
upgrading, domestic
IP creation and
competitiveness in
TOPCon, HJT,
perovskite and
tandem technologies.
Skilled-labour
availability
India’s employee productivity
per MW is about one-third of
global peers, partly due to
lower scale and limited process
integration. The shift from
Mono PERC to TOPCon, HJT
and tandem cells will increase
manufacturing complexity.
Establish an industry-led solar skills
development council; expand grants
beyond two institutes per year;
create curricula for polysilicon,
wafer, cell and module
manufacturing; mandate
apprenticeships; partner with global
solar leaders for advanced training.
Builds a skilled
workforce capable of
supporting advanced,
integrated PV
manufacturing.
Export
concentration
India’s PV exports have grown
sharply but remain highly
concentrated in the US. The
US accounted for 97% of
India’s PV exports in fiscal
Negotiate trade agreements and
MoUs with key importers; provide
market-development support;
extend export credit lines; organise
trade missions; support overseas
Diversifies export
markets, reduces
single-market risk
and positions India as
197
2025, while India has limited
exposure to major importers
such as Brazil, the
Netherlands, Germany and
Spain.
assembly/manufacturing bases in
target markets.
a larger global PV
manufacturing hub.
6. Ease of doing
business and
manufacturing
clusters
Scaling PV manufacturing
requires access to land,
utilities, clean power, testing
facilities, logistics and faster
approvals. India’s upstream
expansion will be capital-
intensive and needs supportive
state-level ecosystems.
Develop solar manufacturing hubs;
provide single-window clearance;
identify suitably sized land parcels;
enable affordable open-access
renewable energy; co-locate R&D
and testing facilities; classify solar
manufacturing as a priority sector.
Lowers entry barriers,
improves
manufacturing
economics and
supports multi-GW
scale hub
development.
198
Photovoltaic
manufacturing
199
Introduction
The global shift towards sustainable and renewable energy is anticipated to drive a substantial increase in
solar energy demand, presenting a significant opportunity for nations to emerge as leading manufacturers
of photovoltaic (PV) systems. India is poised to leverage this trend, given its aggressive renewable energy
goals and expanding manufacturing capabilities.
The global PV industry is dominated by China, which accounts for over 80% of the global supply capacity.
China's success in expanding its PV manufacturing base can be attributed to its early push in the industry,
strategic trade agreements, and government policies that have enabled economies of scale and cost
reduction. The country's tax incentives, research and development (R&D) initiatives, and skilling programs
have also played a crucial role in driving growth. China's dominance in the global PV industry is evident
from its large-scale manufacturing presence, and its ability to conclude 23 free trade agreements (FTAs)
which involve 30 countries (including regional blocs), which has helped the country to tap export potential.
The global PV market is expected to experience significant growth, driven by increasing demand for
renewable energy and decreasing costs. The industry is experiencing a shift towards technological
advancements, with the adoption of high-efficiency solar cells and modules. The use of TOPCon (Tunnel
Oxide Passivated Contact) cells and HJT (Heterojunction) cells are becoming increasingly popular, and the
industry is also seeing a trend towards larger wafer sizes and new geometries. Other countries such as the
United States, India, and Southeast Asian nations are emerging in the global PV market. The United States
is seeing significant growth in domestic module production, while India is emerging as a potential export
hub for PV modules. The International Solar Alliance is playing a key role in promoting solar energy
solutions and reducing global carbon emissions. The alliance has set a goal of mobilizing $1 trillion in solar
investments by 2030 and promoting low-carbon growth trajectories, particularly in underserved segments
and geographies across Africa.
Other countries such as Vietnam, Thailand, and Malaysia are also emerging as significant suppliers, driven
by the diversification of the supply chain and the imposition of anti-dumping duties on Chinese products.
These countries have increased their production capacity in recent years, with Vietnam, Thailand, and
Malaysia accounting for over 10% of global production of solar cells and modules in 2022. India has made
significant progress in advancing solar cell materials, solar inverters, and PV deployment and reliability
through research and development initiatives. The National Centre for Photovoltaic Research and
Education (NCPRE) has implemented several projects, including the development of perovskite-silicon
tandem solar cells, medium voltage direct grid connect inverters, and the study of degradation of solar
panels in hot and humid climates.
China has invested heavily in research and development, with a focus on improving the efficiency and
quality of solar photovoltaic products. The country has collaborated with renowned institutes and agencies
to improve its research and development capabilities.
Vietnam has become a hub for solar photovoltaic manufacturing, driven by its business environment,
including skilling programs, free trade agreements, tax incentives, and end-user drivers. The country has
signed several free trade agreements, such as the Comprehensive and Progressive Agreement for Trans-
Pacific Partnership (CPTPP) and the European Union-Vietnam Free Trade Agreement (EVFTA), which
have reduced tariffs and simplified trade procedures, making it an attractive destination for solar
photovoltaic manufacturers. Additionally, Vietnam offers tax incentives, such as corporate income tax
exemptions and import duty exemptions, to encourage investment in the solar photovoltaic sector. The
country has also implemented skilling programs, including government-funded training centers and
subsidized courses, to develop a skilled workforce for the industry.
200
The global PV industry is characterised by a significant trade imbalance, with China, Vietnam, Thailand,
and Malaysia dominating the export market due to their large manufacturing bases. The USA, India, and
Germany are among the major importers of PV products, driven by their renewable energy targets and
policies. The country has implemented various policies, such as trade agreements, tax exemptions, and
reductions, to support the growth of industry. China has provided various incentives to the solar photovoltaic
manufacturing industry, including tax exemptions and reduced rates, to encourage investment and
innovation. These incentives have enabled companies, such as Jinko Solar, to invest in research and
development and gain a competitive edge in the market.
India has introduced several research and development (R&D) incentives, including collaborations with
international partners, such as the United States of America (US) and Germany, to develop advanced solar
photovoltaic technologies. These initiatives aim to improve the efficiency and competitiveness of domestic
manufacturers. India has introduced several industrial incentives, including the PLI scheme, to promote the
growth of its solar photovoltaic manufacturing industry.
The Indian PV manufacturing industry has witnessed significant growth in recent years, driven by
comprehensive government initiatives and policies. The solar manufacturing capacity has increased to 100
GW by August 2025, up from less than 3 GW in 2014. However, much of this growth has occurred over the
past four fiscal years, following the introduction of Approved List of Models and Manufacturers (ALMM) and
Production Linked Incentive (PLI) scheme. Furthermore, capacity expansion has been largely concentrated
on the downstream value chain, with the upstream chain still heavily reliant on imports.
The industry is a crucial component of India's renewable energy landscape, driven by increasing demand
for clean energy, decreasing technology costs, and supportive government policies. The industry is heavily
dependent on imports for upstream components such as polysilicon and wafers due to a lack of domestic
manufacturing capacity. China is the largest supplier of these components, accounting for over 59% of
India's cell and module imports in 2024. The industry is expected to play a crucial role in achieving India's
target of 500 GW of non-fossil fuel energy capacity by 2030. However, the industry will need to address its
dependence on imports and develop domestic manufacturing capacity for upstream components to achieve
sustainable growth.
The Indian government has implemented various measures to protect the domestic solar photovoltaic
manufacturing industry, including safeguard duties and basic custom duty (BCD). Safeguard duties were
imposed in 2018 to protect the domestic industry from influx of imports, and the BCD was introduced in
2022 to bring parity between domestic and international prices. Safeguard duties were imposed in 2018 to
protect the domestic industry from cheap imports. The duties were applicable for two years, with a rate of
25% from 30th July 2018 – 29th July 2019 in the first year, 20% from 30th July 2019 – 29th January 2020
and 15% From 30th January 2020 – 29th July 2020 in the second year. SGD was further extended wherein
its rate was 14.9% from 30 July 2020 to 29 January 2021 and 14.5 from 30 January 2021 to 29 July 2021.
The purpose behind the same was to protect the domestic solar manufacturing industries.
The BCD was introduced on April 1, 2022, to bring parity between domestic and international prices. The
duty is applicable on imported solar cells and modules, with a rate of 25% for cells and 40% for modules.
Furthermore, from 2
nd
February 2025 the tariff rate for solar cells decreased from 25% to 20%, while the
tariff rate for solar modules decreased from 40% to 20%. The Agriculture Infrastructure and Development
Cess replaced the Social Welfare Surcharge from 2.5% to 7.5% for solar cells and from 10% to 20% for
solar modules.
The government introduced a PLI Scheme initiative to promote the domestic manufacturing of high-
efficiency solar PV modules in India. The scheme has two tranches, with the first tranche having an outlay
of Rs. 4,500 crore ($510 million) and the second tranche having an outlay of Rs. 19,500 crores ($2.2 billion).
In all the scheme awarded 48 GW of integrated PV capacity.
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The ALMM is a comprehensive list of approved models and manufacturers of solar PV modules, cells, and
wafers. The list is maintained by the MNRE and is updated regularly. The government has introduced
guidelines for open access projects and net-metering, which require the use of modules, cells, and wafers
from the ALMM list. The guidelines promote the use of domestically manufactured components and reduce
reliance on imported components for renewable energy projects. The government has accelerated its push
for creating domestic manufacturing capacities across the solar value chain by proposing to mandate the
use of India-made wafers under the ALMM starting June 1, 2028. The MNRE has issued a draft amendment
to the ALMM order, which proposes creating an ALMM List-III for wafers.
The International Solar Alliance (ISA), initiated by India, had a well-defined governance structure, with the
ISA Assembly serving as the supreme decision-making body. The Assembly was responsible for making
key decisions, such as selecting the Director General, overseeing the functioning of the ISA, and approving
the operating budget. The ISA launched several initiatives, including the Solar Technology Application
Resource Centre (STAR C) program, the Indian Technical and Economic Cooperation (ITEC) Scheme, and
the One Sun, One World, One Grid (OSOWOG) initiative. These initiatives aimed to promote solar energy
deployment, enhance energy access, and reduce carbon emissions. The ISA launched a fellowship
program for mid-career professionals, aiming to enhance the long-term development capabilities of its
member countries by creating a pool of skilled and qualified professionals who could effectively manage
solar energy projects, programs, and policies. The ISA worked to increase access to affordable and
sustainable energy solutions through various projects, including mini-grids, solar-powered agriculture
pumps, solar rooftop installations, and solar water heaters, among others. The ISA played a vital role in
promoting clean energy globally, with a primary objective of advancing the use of solar energy as a clean,
renewable, and sustainable source of energy. The ISA's efforts helped reduce carbon emissions, promote
energy access, and contribute to a more sustainable and equitable future for all.
India's solar manufacturing sector faces challenges due to limited access to capital goods, primarily
controlled by Chinese companies, which may delay expansion plans and hinder growth. The PLI scheme's
timelines are at risk due to slow progress in commissioning polysilicon, wafer, and cell manufacturing
facilities, with high import dependence and capital expenditure requirements. This may result in missing
renewable energy targets and perpetuating dependence on imports, ultimately impacting the nation's self-
reliance and economic growth.
India's solar industry faces challenges due to low employee productivity, with average productivity per MW
being lower than global players, mainly due to scale and integrated processes. The industry's rapid
technological evolution and need for skilled labor to drive innovation in R&D exacerbate the issue, making
labor availability crucial for scaling manufacturing technologies. Limited government support for human
resource development and training, as well as increased training hours, can raise costs and delay projects
for solar module and cell manufacturers.
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Global PV industry – An overview
The share of renewable energy in the electricity sector is expected to expand significantly, from 30% in
2023 to 46% in 2030. This growth will be largely driven by solar and wind energy. As a result, the increased
use of renewable electricity will have a positive impact on other sectors, such as industry, building heating,
and transportation, by reducing their carbon footprint. Additionally, renewable electricity will be used to
produce renewable hydrogen, which will be used in various applications, including materials, chemicals,
and power generation, accounting for nearly three-quarters of the demand for renewable hydrogen by 2030.
Solar has already emerged as the largest component of the global renewable power-capacity basket. At
the end of 2025, solar accounted for approximately 46% of installed renewable power capacity globally,
compared with around 25% each for hydropower and wind.
Figure 75: Global installed renewable power capacity by technology, 2025 (%)
Source: IRENA
Solar’s leading share of renewable capacity, together with expectations of continued capacity additions
through 2030, is likely to support sustained demand across the PV manufacturing value chain. China leads
the PV manufacturing capacity with over 85% share in the global base. However, manufacturing remains
highly geographically concentrated. China accounts for more than 85% of global PV manufacturing capacity
and has maintained a dominant position across key stages of the value chain owing to early policy support.
Infact, China has dominated the PV manufacturing market from early 2010s. The government of China
identified PV manufacturing as a strategic industry in 2009 and attempted to accelerate its growth principally
through a combination of low-cost debt and subsidy. By 2010, China accounted for nearly half of global
production of PV
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.
China’s success in expanding PV manufacturing base also enabled it to become leading exporter. Its share
in global PV exports (cell and module) in CY2024 and H1 2025 was 59% and 64%
62
respectively.
Other Asian countries such as Vietnam, Malaysia, Thailand, Cambodia, Indonesia, Laos and India
collectively contributed 28% of exports.
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C-STEP
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ITC Trademaps
Hydropower ,
25.2%
Marine
Energy, 0.0%
Wind Energy,
25.1%
Solar Energy,
46.4%
Bioenergy, 3.0%
Geothermal
Energy, 0.3%
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Indian PV manufacturing industry – A detailed profile
ALMM List-I drove module manufacturing capacity additions; solar cell capacity is
following suit
The Indian PV manufacturing industry is largely concentrated in the solar cell and module stage of the value
chain. The total solar module manufacturing capacity enlisted in ALMM increased to 100 GW in August
2025 from nearly 2.3 GW
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seen in 2014. India’s solar cell manufacturing capacity increased to 25 GW in
March 2025
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from less than 1.2 GW in 2014. Consequently, India’s share in exports of solar cells and
module was 3% and 4% in 2024 and H12025 respectively from less than 1% in 2014. The PV manufacturing
industry is crucial component of the India’s renewable energy landscape, driven by the increasing demand
for clean energy, decreasing technology costs, and supportive government policies.
Between FY2015 and FY2025, India added 103 GW of solar capacity, implying a conservative minimum
solar-module demand of 103 GW(factoring 1.1 times
65
DC overloading in solar rooftop and 1.4-1.5
66
times
DC overloading in groundmounted solar projects).
Figure 76: Fiscal 2025 sees recording breaking 24 GW of solar additions
Source: MNRE
These installations have helped the solar energy base to reach 106 GW
67
in March 2025. India is expected
to add 174 GW to achieve the target of 280 GW in 2030
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. This is expected to generate significant demand
(after factoring DC overloading).
While India’s PV module and cell capacity has grown significantly in between 2014-2025, the industry is
import dependent for upstream components such as polysilicon and wafer (2 GW) owing to lack of
manufacturing capacity.
The below section highlights major producers of the value chain and India’s dependence on nations.
63
PIB MNRE (Aug 2025)
64
PIB Energy & Environment (Aug 2025)
65
Technical specification
66
Based on player benchmarks
67
Installed capacity MNRE (Mar 23)
68
MNRE
1
3
6
10
7 7
6
13 13
15
24
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25
Solar energy installations (GW)
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Value chain
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Solar PV module
The PV module can be manufactured using multiple process – multi-crystalline, polycrystalline and thin-
film. The most commercially available PV module relies on crystalline silicon as the absorber material.
These modules have several manufacturing steps that typically occur separately from each other.
Figure 77: Crystalline PV module manufacturing value chain
Source: Industry
Polysilicon Production
Polysilicon, a highly pure and fine-grained form of silicon, is produced in various shapes, including rods and
beads, depending on the manufacturing method. The production process typically involves the use of highly
reactive gases, which are synthesized from metallurgical-grade silicon, hydrogen, and chlorine. One such
method, known as the Siemens process, involves the decomposition of a silicon-hydrogen-chlorine gas
mixture on a heated silicon filament, resulting in the formation of a large, U-shaped polysilicon rod. This
process features a closed-loop system, where the hydrogen and chlorine atoms are recycled and reused.
To prevent contamination, the filament is made of pure silicon. An alternative method involves the use of
small silicon beads in a cone-shaped vessel, where a silicon-hydrogen gas mixture is introduced, causing
the beads to float near the surface. As the vessel is heated, the silicon atoms deposit onto the beads,
increasing their weight until they sink to the bottom, where they can be collected and used.
Ingot and Wafer Production
To transform polysilicon into wafers, it is melted in a container to form a liquid mass. The Czochralski
process is one method used to create a large, cylindrical ingot of single-crystal silicon, where a small seed
crystal is introduced to the liquid surface and slowly lifted upwards, allowing the crystal to grow. Alternatively,
the directional solidification process involves gradually cooling the liquid mass from the bottom up, resulting
in a large-grained, multi-crystal silicon ingot. The ingots are then cut into extremely thin wafers using
diamond-edged saws, producing silicon dust known as kerf in the process. However, kerfless production
methods also exist, such as removing cooled silicon layers from a molten bath or depositing silicon atoms
onto a crystalline template using gaseous silicon compounds, allowing for the creation of thin wafers without
generating waste.
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US department of energy (Solar Photovoltaic Manufacturing Basics)
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Cell Fabrication
The silicon wafers are then transformed into photovoltaic cells through a series of fabrication steps. The
initial step involves chemically texturing the surface of the wafer to remove any damage caused by the
sawing process and to enhance its ability to absorb sunlight. The subsequent steps vary depending on the
specific design of the device. Typically, the wafer is exposed to a gas that contains an electrically active
dopant, and layers are deposited on the surface to improve the cell's performance. Additionally, many cell
types require the application of silver metallization through screen printing to create electrical contacts.
Solar Module Assembly
At a module assembly facility, cells are connected together using copper ribbons with solder to link the
silver busbars on the front of one cell to the back of another, a process called tabbing and stringing. The
connected cells are then arranged face-down on a glass sheet coated with a polymer encapsulant, and
another layer of encapsulant is added on top. A durable backsheet or additional glass is placed on top, and
the entire stack is sealed in an oven to make the module waterproof. The module is then framed with
aluminum, sealed with edge sealant, and equipped with a junction box that houses diodes to prevent
reverse electricity flow. Finally, electrical cables from the junction box transmit the modules’ generated
current to adjacent modules or the system's power electronics.
Value chain play
The financials of the players are closely influenced by the presence in the value chain. It is observed that
players active across all four stages of the value chain have registered better financials.
Figure 78: Importance of value chain presence in player's financials
Note: EBITDA and ROE are averages of FY24 and FY25 owing to full year of large-scale cell to module operations for Indian
players. Financials of international players are considered on Calendar Year. CY2024 is compared with FY25.
Formula used for above ratios are below
1. EBITDA = Total income – (Total expenses – interest and finance cost - depreciation and amortization)
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2. EBITDA Margin = EBITDA / total income
3. ROE = Profit after tax / total equity
Players considered for financials are below
1. India = Waaree Energies, Vikram Solar, Premier Energies, TP Solar, Emmvee Power Photovoltaic, Rayzon Solar, Adani
Mundra PV and Solex
2. International = Longi Green, Canadian Solar, Jinko Solar, Trina Solar, JA Solar and GCL Poly
Source: Crisil Intelligence, Company Reports
The above figure indicates EBITDA and ROE for integration of value chains for Indian and international
players. It is observed that the returns increase as the level of integration increases. Players operating in
all the stages of the value chain (polysilicon to module) gain cost competitiveness over those operating in
cell to module and only module segment as they are less exposed to supply chain disruptions and volatility
in the raw material prices.
While globally, a few players operate in polysilicon to module stages of the value chain, India has limited
presence in ingot-wafer to module stage.
Over CY2023 and CY2024, the returns of the international players have been impacted owing to oversupply
in the PV component market resulting in pricing pressures. The fall in prices resulted in a fall in revenue of
29% on year in CY2024 for the sample of international players considered. Consequently, absolute EBITDA
shrunk by 85% on year for the same period. The reduction in EBITDA further impacted the profit after tax,
ultimately impacting the ROE of the international players in CY2024.
On the other hand, the returns of the Indian manufacturers improved owing to implementation of domestic
tariff and non-tariff barriers in form of BCD and ALMM I. This, coupled with increasing solar additions in the
country, boosted sales. Revenue from operations for the sample set considered increased nearly 1.8 times
in fiscal 2025 as India witnessed a record breaking 24 GW of solar additions. A few players also gained
benefits with exposure to the export market as pricing of Indian make remained favourable compared to
the US make. This further amplified the returns for the Indian players.
The globally low raw material prices (solar cells for standalone module manufacturers and wafers for solar
cell manufacturers) also enabled improvement in returns. However, as Indian manufacturers’ presence
remained limited largely to cell to module stage, they are also exposed to volatility in prices.
In fiscal 2026/CY2025, the Chinese government has driven intervention to consolidate the outdated and
low competitive capacity. The result of this initiative may drive consolidation of capacity to 2 million tons
from 3.25
70
million tons resulting in upward movement in prices. Additionally, the US investigation of Foreign
Entities of Concern (FEOC) may also increase demand for non-China, Russia, North Korea and Iran
polysilicon resulting in upward movement in the prices. Therefore, any increase in raw material prices will
impact the prices of Indian made modules until backward integration is achieved.
Thus, while the current oversupply dynamics coupled with timely policy intervention by the government of
India have favoured the Indian manufacturers, the returns in the stable scenario favour integrated value
chain players that the global players exhibited. Therefore, it will be critical to expand in the polysilicon to
cell manufacturing stage in the future.
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Reuters
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Manufacturing Process (TOPCon Solar Cell)
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The TOPCon solar cell manufacturing process revolves around creating an advanced cell structure that
boasts higher efficiency and reduced degradation compared to traditional solar cells. This innovative
technology features both front and back electrical contacts, which minimizes resistance losses and
enhances current collection. As a result, TOPCon cells offer superior performance and reliability, making
them a preferred choice among photovoltaic (PV) manufacturers seeking to optimize energy output.
The key aspect of TOPCon technology lies in its unique contact configuration, which distinguishes it from
conventional cells with rear contacts only. By incorporating both front and back contacts, TOPCon cells
achieve lower resistance and increased current collection, ultimately leading to higher efficiency and
reliability. This design advancement has contributed to the growing adoption of TOPCon technology in the
solar industry, as manufacturers strive to produce high-performance solar cells that can maximize energy
generation.
Silicon Wafer Preparation
The initial stage of TOPCon solar cell production involves preparing silicon wafers, which commences with
slicing silicon ingots into thin discs using a wire saw. The resulting wafers, typically 180-200 microns thick,
then undergo a series of treatments to refine their surfaces. Chemical etching, employing solutions such as
sodium hydroxide or potassium hydroxide, is used to remove sawing damage and smooth the wafer
surfaces. An alternative acidic etching solution may also be utilized for this purpose.
Following etching, the wafers are subjected to a rigorous cleaning process to eliminate any residual
contaminants. This involves a combination of cleaning methods, including SC1 cleaning with ammonium
hydroxide, hydrogen peroxide, and water, as well as RCA cleaning using hydrochloric acid, hydrogen
peroxide, and water to remove organic impurities. The final step in wafer preparation entails surface
planarization, which can be achieved through either polishing with polyurethane pads and slurry or chemical
mechanical planarization (CMP). Upon completion of these steps, the silicon wafers are rendered extremely
flat and level, making them suitable for the subsequent stages of solar cell fabrication.
Surface Texturing
Surface texturing is a vital step in the TOPCon solar cell manufacturing process, aimed at enhancing cell
efficiency by reducing reflectivity and increasing light trapping. This is achieved by creating micrometer-
scale pyramids on the silicon wafer surface, which helps to minimize the amount of light that reflects off the
surface and instead allows it to enter the cell. The pyramid structures accomplish this through two primary
mechanisms: increasing the likelihood of light entering the wafer at an angle, rather than reflecting off, and
expanding the surface area to provide more opportunities for light absorption.
The texturing process involves anisotropic etching of the silicon wafer surface using solutions such as
potassium hydroxide (KOH) or sodium hydroxide (NaOH). By carefully controlling factors like solution
temperature, concentration, and etching time, the optimal surface structure can be achieved. The resulting
pyramids, typically 5-10 μm in height and 10 μm in base width, strike a balance between effective
antireflective properties and minimizing recombination of electron-hole pairs within the cell. Ultimately,
surface texturing plays a crucial role in boosting solar conversion efficiencies by enabling more light to enter
the cell.
The anisotropic etching process selectively etches the silicon wafer, creating pyramids with precise
dimensions. This controlled etching process is critical in achieving the desired surface texture, which is
essential for maximizing light absorption and minimizing reflectivity. By optimizing the texturing process,
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SOLARNPLUS
208
manufacturers can significantly improve the efficiency of TOPCon solar cells, making them more effective
at converting sunlight into electrical energy.
Doping
Doping is a crucial step in the manufacture of TOPCon solar cells, involving the intentional introduction of
impurities into the silicon wafer to create regions with different electrical properties. This process utilizes
dopants such as phosphorus and boron to create n-type and p-type semiconductor regions, respectively.
Phosphorus introduces excess electrons, resulting in a negatively charged n-type region, while boron
introduces electron holes, creating a positively charged p-type region.
The intersection of these n-type and p-type regions forms a p-n junction, which is essential for separating
photogenerated electrons and holes, thereby enabling the flow of current when the cell is exposed to light.
The precise control of the doping process allows manufacturers to optimize the electrical properties of the
cell, including open-circuit voltage and short-circuit current, which are directly influenced by doping profiles
and concentrations.
Advanced doping techniques, such as selective emitter doping, further enhance efficiency by heavily doping
the front emitter region while lightly doping the rear emitter. This selective approach minimizes
recombination losses, particularly near the front contacts, leading to improved overall performance. The
doping process is fundamental to creating an efficient solar cell capable of reliably converting sunlight into
electricity, and careful optimization of doping parameters is essential for maximizing the performance of
TOPCon cells.
By carefully controlling the doping process, manufacturers can create a highly efficient p-n junction that
effectively separates charge carriers and enables the generation of electrical current. This, in turn, allows
to produce high-performance TOPCon solar cells with optimized electrical properties, ultimately leading to
increased energy conversion efficiency and reliability.
While the doping step is described here prior to tunnel oxide formation, the precise sequence may vary
across TOPCon manufacturing routes. Some manufacturers may perform certain doping or dopant
activation processes after the formation of the tunnel oxide and/or polycrystalline silicon layers, depending
on the specific cell architecture and production technology employed.
Edge Isolation
Edge isolation is a crucial step in the manufacturing of TOPCon solar cells, aimed at preventing electrical
shunting between the front and back surfaces at the cell's edges. This shunting can significantly reduce the
overall efficiency of the solar cell, making edge isolation essential to minimize electrical losses and ensure
optimal performance.
The primary objective of edge isolation is to eliminate any conductive paths around the cell's perimeter,
which is achieved by creating narrow trenches that disconnect unwanted lateral conduction paths. Several
techniques are employed for edge isolation in TOPCon cells, including laser isolation, plasma etching, and
mechanical scribing.
Laser isolation involves using a laser to ablate narrow trenches around the cell edges, effectively cutting
through conductive layers to isolate the front and back surfaces. This method is fast and precise, making it
a popular choice. Plasma etching, on the other hand, utilizes an etching plasma to selectively remove
material along the cell edges, creating isolation trenches without causing collateral damage. Mechanical
scribing involves using a diamond or carbide tip to mechanically scribe isolation lines along the edges,
cutting through the layers to isolate the surfaces.
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The dimensions of the isolation trenches, including width and depth, are carefully optimized to balance
processing time and ensure the complete removal of shunting paths. Following the creation of the trenches,
a dielectric material is typically applied to fill the trenches and guarantee robust long-term isolation. Proper
edge isolation is vital for TOPCon cells to operate at maximum efficiency, and this step is usually performed
after metallization to electrically isolate the entire cell.
By implementing effective edge isolation, manufacturers can significantly reduce electrical losses and
improve the overall performance of TOPCon solar cells. The choice of edge isolation technique depends
on various factors, including the specific cell design, materials, and manufacturing requirements.
Regardless of the method used, the goal of edge isolation remains the same: to prevent electrical shunting
and ensure that the solar cell operates at its maximum potential.
Tunnel Oxide Layer Formation
The tunnel oxide layer is a vital component in the production of TOPCon solar cells, and its formation is a
critical step in the manufacturing process. This extremely thin layer of silicon dioxide (SiO2) is grown on the
surface of the silicon wafer, and its quality has a significant impact on the overall efficiency of the solar cell.
The most common method for growing the tunnel oxide layer is thermal oxidation, which involves exposing
the silicon wafers to oxygen at high temperatures, typically between 800-1200°C, to produce a uniform and
defect-free layer of SiO2.
To ensure the formation of a high-quality tunnel oxide layer, it is essential to carefully control the oxidation
conditions, including temperature, pressure, flow rates, and time. Any impurities or defects in the layer can
negatively impact the tunneling of charge carriers and ultimately affect the performance of the solar cell.
The thickness of the tunnel oxide layer is also critical, typically ranging from 10-30 nm, as it determines the
electrical properties of the interface between the silicon and the oxide layer.
The growth of the tunnel oxide layer requires meticulous attention to detail, as any imperfections or defects
can compromise the quality of the layer. Advanced analytical techniques are employed to characterize the
chemical composition and structural quality of the tunnel oxide, ensuring that it meets the required
standards. The formation of a high-quality tunnel oxide layer is essential for manufacturing highly efficient
TOPCon solar cells, and its quality has a direct impact on the overall performance and efficiency of the cell.
By carefully controlling the oxidation process and ensuring the formation of a defect-free tunnel oxide layer,
manufacturers can produce TOPCon solar cells with optimized electrical properties and improved efficiency.
The tunnel oxide layer plays a critical role in enabling the efficient tunneling of charge carriers, and its
quality is a key factor in determining the overall performance of the solar cell.
Deposition of Polycrystalline Silicon Layer
The deposition of the polycrystalline silicon layer is a crucial step in the TOPCon solar cell manufacturing
process, as it serves as the emitter layer responsible for collecting electrons generated by light absorption
in the cell. This layer is deposited using a chemical vapor deposition (CVD) process, where silane gas
(SiH4) is used as the silicon source and is mixed with hydrogen and nitrogen. The silane gas mixture is
then introduced into a CVD chamber, along with a dopant gas such as phosphine (PH3) or diborane (B2H6),
which provides the necessary phosphorus or boron atoms to create a highly doped polycrystalline silicon
layer.
The CVD chamber is equipped with heating coils that provide the energy required for the silane gas to
decompose into silicon atoms, which then deposit onto the silicon wafer surface. The dopant gas ensures
that the deposited polycrystalline silicon layer is highly doped, either n-type or p-type, depending on the
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specific requirements of the solar cell. To achieve a uniform and highly doped polycrystalline silicon layer
of the desired thickness, precise control over the silane gas flow, dopant gas flow, chamber pressure, and
temperature is essential.
The deposited polycrystalline silicon layer acts as the emitter in the finished solar cell device, playing a
critical role in extracting charge carriers efficiently. The quality and properties of this layer have a significant
impact on the overall performance and efficiency of the solar cell. By carefully controlling the CVD process
and depositing a high-quality polycrystalline silicon layer, manufacturers can produce TOPCon solar cells
with optimized electrical properties and improved efficiency.
The polycrystalline silicon layer is a critical component of the TOPCon solar cell, and its deposition requires
careful attention to detail to ensure that it meets the required standards. The use of advanced CVD
techniques and precise control over the deposition process enables the production of high-quality
polycrystalline silicon layers, which are essential for manufacturing efficient and reliable TOPCon solar cells.
Passivation and Anti-Reflective Coating
The passivation and anti-reflective coating step are a crucial stage in the TOPCon solar cell manufacturing
process, aimed at enhancing cell efficiency. Following the deposition of the polycrystalline silicon layer, the
cell surface undergoes passivation to minimize recombination of electron-hole pairs. This is achieved by
depositing a thin layer of silicon nitride using plasma-enhanced chemical vapor deposition (PECVD).
The silicon nitride layer serves a dual purpose: passivation and anti-reflection. As a passivating layer, it
reduces surface recombination velocity, resulting in higher carrier lifetimes, and provides chemical
passivation by shielding the silicon surface from impurities. Additionally, the silicon nitride layer acts as an
effective anti-reflective coating due to its lower refractive index compared to silicon, increasing the amount
of light absorbed in the cell and further boosting efficiency.
The thickness of the silicon nitride layer is carefully optimized to provide minimal reflectivity across a broad
range of wavelengths. This step is essential for reducing recombination losses and improving light trapping
in TOPCon solar cells. By incorporating a high-quality silicon nitride layer, manufacturers can significantly
enhance the performance and efficiency of their solar cells.
The passivation and anti-reflective coating process is critical for achieving high-efficiency TOPCon solar
cells. The silicon nitride layer plays a vital role in minimizing energy losses and maximizing energy
conversion. By carefully controlling the deposition process and optimizing the layer thickness,
manufacturers can produce solar cells with improved efficiency, reliability, and overall performance. The
use of silicon nitride as a passivating and anti-reflective layer has become a standard practice in the
industry, enabling the production of high-quality TOPCon solar cells that meet the demands of modern
renewable energy applications.
Metallization
Metallization is a crucial step in the TOPCon solar cell manufacturing process, involving the addition of
metal contacts to the front and back of the silicon solar cell to facilitate current collection. The metallization
process typically employs screen printing to apply a metallic paste in a grid pattern to the front of the cell
and a full-area metal contact to the back. This technique offers precise control over gridline width and
thickness, and is fast, scalable, and cost-effective.
The front contact gridlines are printed using a silver-based metallic paste, while the back contact utilizes
aluminum or silver paste. The pastes contain metal particles, glass frit, and organic binders, which are
carefully formulated to optimize the electrical and mechanical properties of the contacts. The gridlines on
the front of the cell are designed to balance current collection and minimize shading, while the back contact
ensures uniform current collection.
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Following the printing of the contacts, the cells undergo a high-temperature firing step, which serves to fuse
the contacts into the silicon wafer and remove the organic binders in the paste. This firing process forms a
strong electrical and mechanical bond between the silicon and metal contacts, with the glass frit etching
the silicon and facilitating metal diffusion into the wafer. The resulting metallic contacts exhibit excellent
current collection and low resistance losses, making them ideal for high-efficiency TOPCon solar cells.
The screen-printing metallization process is a reliable, simple, and efficient method for mass-producing
solar cells with consistent quality. The front gridlines and back contact play a critical role in extracting current
and maximizing the efficiency of the TOPCon cell, and the metallization process is carefully optimized to
ensure that these contacts meet the required standards. By using advanced screen-printing techniques and
carefully controlling the metallization process, manufacturers can produce high-quality TOPCon solar cells
with optimized electrical properties and improved efficiency.
Testing and Sorting
The final stage of the TOPCon solar cell manufacturing process involves testing and sorting the completed
cells to ensure that only the highest efficiency cells are shipped to customers. This critical quality control
step assesses several key parameters, including efficiency, open-circuit voltage (Voc), short-circuit current
(Isc), fill factor, series resistance, and shunt resistance. These tests determine the overall performance and
quality of each cell, allowing manufacturers to sort and classify them into different bins based on their
efficiency and characteristics.
The testing process involves measuring the conversion efficiency of each cell under standard test
conditions, which reveals the percentage of sunlight energy that is converted into usable electrical energy.
Cells with higher efficiency are typically sold at a premium price, while lower-grade cells are sold at reduced
prices to budget-conscious buyers. The open-circuit voltage (Voc) and short-circuit current (Isc) are also
measured, as these parameters depend on the quality of materials and interfaces used in the cell. A higher
Voc indicates that the cell can produce more power, while a higher Isc suggests that the cell can produce
more current.
The fill factor, which is a measure of cell quality, is also evaluated, as it depends on both Voc and Isc. A
higher fill factor value indicates higher cell efficiency. Additionally, the series resistance and shunt resistance
are measured, as these parameters can impact the cell's overall performance. Lower series resistance and
higher shunt resistance are generally desirable, as they can improve the cell's efficiency and reduce energy
losses.
After testing, the solar cells are sorted and classified into different bins based on their performance. The
highest-grade cells, which exhibit the highest efficiency and best characteristics, are packaged and sold at
a premium to customers who prioritize maximum efficiency. Lower-grade cells, which may have slightly
lower efficiency or other limitations, are sold at reduced prices to customers who are more budget-
conscious. By properly testing and sorting the solar cells, manufacturers can ensure that each customer
receives cells that meet their specific needs and priorities, whether it be maximum efficiency, cost-
effectiveness, or a balance between the two.
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Strategic Alignment
Raw Material Availability
Table 28: Malaysia and Vietnam emerging countries in PV value chain
Source: Crisil Intelligence
PV grade polysilicon, wafer, solar cell and glass are the key raw materials for the solar photovoltaic
manufacturing industry. The table above shows the top 3 source countries for each of the raw materials for
the global solar photovoltaic manufacturing industry.
The Indian solar photovoltaic manufacturing sector relies on imports for key raw materials such as solar
wafers, cells and modules. Imports of polysilicon are limited owing to lack of operational wafer
manufacturing capacity (2 GW as of March 2025) in the country. Furthermore, India had sufficient
production capacity of solar glass (~15 GW
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in June 2025) resulting in limited imports.
Table 29: India's presence in upstream value chain limited
Note: The above data is for fiscal 2025. * Share of imports in total available supply post exports. ^ Wafer’s Exim is excluded due to
lack of data in the public domain.
Source: Crisil Intelligence
India relies on import on solar cells and modules in the value chain while imports of wafer and polysilicon
remain limited over to lack of wafer and low capacity for cell manufacturing capacity respectively. Nearly
59% of the photovoltaic (cell and module) exports in 2024
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was attributed to China alone. This is owed to
the large-scale manufacturing presence of China with over 80% share in global supply capacity by
December 2024 set up in China. Early decadal push to the industry in form of tax and power charge
exemptions, R&D and skilling incentives and free trade (refer to section on China) agreements has enabled
economies of scale resulting in high-quality-low-priced offerings.
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Borosil Renewables
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ITC Trademap
Raw Materials
PV grade
polysilicon
Wafer Solar cells Module Solar glass
Raw material
intensity
High High High High Medium
Producer 1 China China China China China
Producer 2 Malaysia Vietnam Vietnam Vietnam India
Producer 3 Germany Malaysia Malaysia Malaysia -
Raw Materials PV grade polysilicon Wafer^ Solar cell Module
Supplier Country 1 China China China China
Supplier Country 2 Taiwan Vietnam Malaysia Vietnam
Supplier Country 3 US Other APAC nations Thailand Malaysia
Domestic availability No Yes Yes Yes
Import share ~100% >90% >60% >40%*
Geopolitical relationship Positive Neutral
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However, India has also imported from Vietnam, Thailand and Malaysia owing to diversification of supply
chain which together account for 14%
74
of the photovoltaic imports in fiscal 2025. The production in Vietnam
and Thailand has increased in recent years as major Chinese solar cell manufacturers have built production
bases in these countries to circumvent the USA antidumping duties (AD) and countervailing duties (CVD)
imposed on Chinese products. Further, increase in the domestic demand for solar installation to attain
renewable energy goals in electricity has also created demand for Chinese photovoltaic manufacturers in
these economies. Thus, the share of Vietnam, Thailand and Malaysia in global production of solar cells and
modules was over 10% in 2022 post imposition of duties on China in 2022. The production capacity in 2024
stood over 40 GW
75
for Vietnam, Thailand and Malaysia.
For eg1: Trina Solar
76
, a Chinese photovoltaic manufacturer’s unit with an investment of $203 million
became operational in August 2023 in the northern city of Thai Nguyen, Vietnam. This unit produces
industry leading 210 m-m monocrystalline silicon wafers. The factory, with 700 workers, has seen its
workforce more than double to 1,500 workers by August 2024 and commenced production of solar cells
and modules. It is steadily ramping up to its maximum annual production capacity of 6.5 GW of wafers, 4
GW of solar cells and 5 GW of modules.
Consequently, these economies also play a crucial role in global exports.
SOLAR R&D
Solar Photovoltaics
77
The Ministry of New and Renewable Energy (MNRE) has funded several Solar Photovoltaic (SPV) R&D
projects, and the highlights of the progress achieved under these projects are listed below. The National
Centre for Photovoltaic Research and Education (NCPRE) implemented Phase III of the Ministry's flagship
project in solar photovoltaics. This flagship project had several workstreams, and the main highlights of the
progress made are briefly described below.
Advancements in Solar Cell Materials: The National Centre for Photovoltaic Research and Education
(NCPRE) had been working on addressing the challenges associated with scaling up perovskite-silicon
tandem solar cells. The team had investigated new laser-cutting processes to prevent the loss of cell
efficiency and stability due to edge shunting. They demonstrated a 4T-tandem solar cell with an efficiency
of 29.2% at 17.5 mm
2
and 26.9% at 108 mm
2
, with a bottom silicon solar cell efficiency of 25%. Furthermore,
third-party laboratory testing had shown that the perovskite absorber had remained unaffected for up to 750
hours under damp-heat testing conditions. The team had also developed near-infrared (NIR) transparent
solar cells with a power conversion efficiency of approximately 18.8%.
Advancements in Solar Inverters for Grid Integration: The grid integration group at NCPRE had focused on
developing a medium voltage (MV) direct grid connect inverter using high voltage Silicon Carbide (SiC)
MOSFETS. The team had worked on developing the entire inverter indigenously at the lab, with a focus on
improving efficiency, power density, and reliability.
PV Deployment and Reliability: The National Centre for Photovoltaic Research and Education (NCPRE)
conducted field surveys to study the degradation of solar panels in hot and humid climates. The surveys
had identified the root cause of degradation as inner layer cracks in the backsheet, which led to accelerated
potential-induced degradation (PID) and corrosion. The team had designed a weather station to collect data
on the performance of solar panels and had discovered a vulnerability in commercial PV modules under
74
Ministry of Commerce
75
Taiyangnews
76
TrinaSolar
77
Annual Report MNRE 2025
214
high temperature reverse bias operation of bypass diodes. They had also developed a setup to assess this
vulnerability and had studied the effect of load applied during cleaning on the durability of anti-soiling
coatings.
Overall, the NCPRE has made significant progress in advancing solar cell materials, solar inverters, and
PV deployment and reliability, which will contribute to the growth of the solar energy sector in India.
World Trade
Figure 79: Major PV exporting nations
215
Figure 80: Major PV importing nations
Note: The above data includes Exim for Polysilicon – 280461, Solar cells and modules (2017) – 854140, Solar cells (2024 and H1
2025) – 854142 and solar modules (2024 and H1 2025) – 854143. Wafer’s Exim is excluded due to lack of data in the public
domain.
Source: Trade Map
China, Vietnam, Thailand and Malaysia dominate the PV export market due to their large manufacturing
base. China led the global export basket with a 57%
78
share in 2024 driven by players GCL Polytech,
TrinaSolar, Jinko Solar, JA solar and Longi Solar. These players cumulatively had a module and wafer
manufacturing capacity of over 300 GW
79
and over 150 GW of cell manufacturing capacity as of December
2024. The country’s tax and skilling incentives enabled savings for the players, which were then invested
in R&D over the last three decades leading to cost reduction and increased efficiency of technology.
Furthermore, the ability to conclude 23 FTAs
80
with 30 countries has also helped the country to tap export
potential. Vietnam accounted for 10%
81
of the exports in 2024. Apart from the presence of local players
such as SolarBK, Vsun, VinaSolar, the Vietnamese photovoltaic manufacturing is largely being driven by
entry of the Chinese photovoltaic manufacturers resulting in Vietnam gaining 6% share in last 7 years.
Players such as TrinaSolar, JA solar and Jinko Solar have increased their presence over the years. Lately,
TrinaSolar was awarded an investment certification for a project in the northern province of Thai Nguyen
78
ITC Trademap
79
Company filings
80
China Briefing
81
ITC Trademap
216
worth $454 million
82
to produce solar modules and batteries. This has raised the total amounted invested
in Vietnam by Chinese firms to $932 million. Similarly, Thailand and Malaysia have seen a surge in their
installed base driven by domestic and international players such as Solartron, Risen Energy, Yingli Green,
TS Solartech, JA solar, JinkoSolar and First Solar.
On the import side, the USA led with 30%, driven by Energy efficiency and Renewable Energy (EERE)
mission. The country aims to install an average 30 GW
83
of solar capacity each year till 2025 and 60
GW
per year from 2025-2030 to generate 80% energy through renewable sources by 2030. The country
imported 48.5 GW
84
of modules in 9 months 2024 with over 75%
85
coming from Vietnam, Malaysia and
Thailand. Similarly, India’s import share of 8% in global imports is driven by Panchamrit goals of 50%
86
energy requirement from renewable fuels by 2030. India’s import in 11 months of fiscal 2025 were driven
by modules and cell to the extent of Rs 322 billion/$ 3.8 billion
87
, from Rs 515 billion / $6.2 billion in fiscal
2024. Imports fell in fiscal 2025 owing to the reimposition of ALMM. On the other hand, Germany’s import
share accounted for 3% in 2024 driven a 215 GW
88
of solar energy target by 2030. The country needs to
add 22 GW of solar per annum by 2030. Annual production capacity of 3.5 GW
89
coupled with a sharp fall
in prices of PV led to imports in 2024.
Figure 81: Major Indian PV export nations
Note: The above data includes ExIm for Polysilicon – 28046100, Solar cells and modules (FY18) – 85414011, Solar cells (FY24) –
85414200 and solar modules (FY24) – 85414300. Wafer’s ExIm is excluded due to lack of data in the public domain.
Source: DGFT, Crisil Intelligence
India’s PV exports in fiscal 2025 were 8 times of those in fiscal 2018. The increase was driven by increased
capacity in the cell to module part of the value chain under the production linked incentive scheme. The
geographic concentration over the years has changed with the US accounting for 97% of exports in fiscal
82
VCCI
83
NREL
84
NREL
85
US office of energy efficiency and renewable energy
86
Ministry of Environment, Forest, and Climate Change
87
Ministry of Commerce and Industry
88
Bundeswirtschaftministerium
89
Fraunhofer
28%
21%
10%
8%
7%
6%
20%
FY18
USA Turkey DenmarkBelgium
GermanyNiger Others
$0.14 billion
99%
1%
FY25
U S AOthers
$1.2 billion
217
2025. The high concentration was driven by the USA’s ban on import of production from China’s Xinjiang
province owing to inhumane treatment of the province’s Uyghurs and other Muslim majority communities.
The ban enforced in June 2022, restricted entry of all goods and services that used materials or workers
from the Xinjiang Uyghur Autonomous Region. With over 39% of the global polysilicon manufacturing base
installed in Xinjiang province by 2022, the Chinese module supply to the USA hit a roadblock resulting in
an increased demand for modules from countries other than China, especially India. The premium offered
by the US market drove Indian manufacturers to focus on exports to the country resulting in geographic
concentration.
As of fiscal 2025, India had limited exposure to other top importing countries such as Germany, Brazil,
Netherlands owing to high traded price difference of $0.1-0.12/watt between Indian modules vis a vis
Chinese module. Further, the lack of a free trade agreement has also been a challenge to increase exports.
Increasing PV manufacturing capacity, free trade agreements and exploring new export markets will be key
to harnessing India’s export potential.
Technology Readiness
India’s readiness in the PV manufacturing value chain differs in downstream and upstream components.
While module and cell ecosystems have seen development, the polysilicon and wafer ecosystems have
been slow to pick up.
Figure 82: Technology readiness
Source: Crisil Intelligence
218
Financial Viability
Figure 83:Financial viability of domestic and international players
Note: Financials of international players FY25 denotes CY2024. Companies considered for domestic sample are Adani Solar
Mundra, Waaree Energies, Tata Power Solar Systems, Vikram solar, Renewsys and Premier Energies. They accounted for over
28% and 59% of the module and cell installed base respectively as of September 2025. International players considered include
GCL Polytech, Jinko Solar, Canadian Solar and Longi Solar that account for over 23% of the global capacity as of December 2023)
The above ratios are calculated as follows:
1. EBITDA = Total income – (Total expenses – interest and finance cost – depreciation and amortization)
2. EBITDA margin = EBITDA / Total income
3. PAT margin = Profit after tax as reported by the companies / Total income
4. ROCE = (EBITDA – depreciation and amortization) / (Total assets – total current liabilities)
5. Capex to sales = Investment in fixed assets and/or capital expenditure / total income
Source: Crisil Intelligence, Company Reports
The financial comparison between domestic and international players highlights a clear divergence in
performance over FY22–FY25. International players have experienced a material decline in profitability, as
reflected in sharply falling EBITDA and net margins in FY25. This downturn is largely attributable to
oversupply in global solar markets, which triggered intense pricing pressure, eroded realisations, and
compressed operating spreads. The impact of this margin contraction is further evident in the significant
drop in Return on Capital Employed.
In contrast, domestic players demonstrated relatively steady and resilient financial performance across all
profitability metrics. Policy-driven non-tariff measures particularly India’s Approved List of Module
Manufacturers (ALMM) created a protective market environment that limited foreign competition and
prevented aggressive price competition. Additionally, rising solar additions boost the revenue. As a result,
domestic firms were able to garner improved earnings, and returns on capital.
9%
11%
15%
22%
12% 11%
13%
3%
FY22 FY23 FY24 FY25
EBITDA Margins -International vs Domestic
DomesticInternational
1% 1%
8%
12%
6%
7% 7%
-5%
FY22 FY23 FY24 FY25
Net Margins -International vs Domestic
DomesticInternational
12%
15%
18%
28%
11%
16%
13%
-5%
FY22 FY23 FY24 FY25
ROCE -International vs Domestic
DomesticInternational
12%
17%
22%
16% 17%
12%
10%
16%
14% 13%
FY22 FY23 FY24 FY25Avg. of 4
years
Capex to sales
DomesticInternational
219
The CAPEX-to-sales ratio further reinforces this structural difference. Domestic manufacturers show
consistently higher capital expenditure intensity, reflecting expansion-led investments to cater to a rapidly
growing Indian solar market. Meanwhile, international players operating in more mature global markets
allocated relatively lower incremental capital, signaling slower industry growth and reduced expansion
appetite.
Sector Outlook
The domestic PV market size (Rs 324 bn / $3.7 billion
90
) is estimated to grow at a CAGR of 17-20% between
FY23 and FY30, supported by government policies to achieve the Panchamrit goal. Along with the utility
scale ground mounted additions, the government interventions to further other solar segments such as
rooftop solar under PM SuryaGhar Yojana scheme is also expected to boost demand. Additionally, positive
intervention by states on adoption of Green Energy Open Access rules 2022 will also drive demand for
solar photovoltaic manufacturing. Lastly, expansion of green hydrogen will also result in demand for solar
modules over 2030. In contrast the international market (Rs 12.1 tn / $137 billion) is expected to grow at a
moderate 6-8% CAGR driven by China’s domestic demand and decarbonization targets of the US, EU and
Asia pacific by 2030.
Figure 84: Photovoltaic industry growth (CY23-CY30 CAGR)
Note: Market size in USD has been arrived using an exchange of 88.3 (average of fiscal 2026).
Source: Crisil Intelligence, Company Reports Note: The number represents the market size as of CY2023. Solar module prices
considered are as of CY2023.
90
Market size in USD arrived using average exchange rate of 88.3 INR to USD in fiscal 2026.
Rs 324 billion , $ 3.7
billion
Rs 12.1 trillion , $ 137
billion
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Domestic International
CAGR
220
Case Studies and Global best practices
The global solar PV manufacturing landscape is highly concentrated, with China retaining the majority share
across all upstream segments of the value chain. By the end of 2025E, global polysilicon manufacturing
capacity expanded to 1,360 GW, adding 28 GW year over year. The chart also shows that China
controlled 67–93% of both installed and new polysilicon production, underscoring a highly skewed
production geography.
A similar pattern emerged in wafer production. Global manufacturing capacity increased to 1,189 GW in
2025E, up 79 GW from 2023. China accounted for 95% of the installed base and 94% of new additions.
This scale advantage has enabled China to maintain cost leadership, technological integration, and
uninterrupted supply-chain control. Meanwhile, India held less than 1% of wafer capacity, highlighting the
early stage of its ecosystem development.
Global solar cell capacity reached 1,212 GW, with China accounting for 87% of the global total. However,
unlike polysilicon and wafers, the cell segment shows early signs of geographic diversification, particularly
in India. This is driven by industrial policy support, import substitution, and rising domestic solar deployment.
In the module segment, global capacity reached 1,450–1,500 GW. China continued to lead with 78% of
global share, while India accounted for 12%, making it comparatively stronger at the end of the supply
chain.
Figure 85:PV manufacturing concentration across countries
Note: *Global capacity is of CY 2025, India capacity is of March 2026.
Source: IEA renewable energy outlook, Crisil Intelligence
221
China
The decades of Chinese march
The rising global demand for solar energy, coupled with the domestic push for solar manufacturing, has
elevated China to a leading position. Since 2004, China’s production march on all fronts of the solar
ecosystem began – polysilicon, wafers, cells and modules. By 2008, the growth of solar industry became
formidable as the Chinese firms started reaping economies of scale in production of purified silicon. By
then, China had become the largest PV manufacturer in the world, with 98%
91
of its product shipped
overseas. In 2009, the government identified solar manufacturing as a strategic industry and attempted to
accelerate its growth principally through combination of low-cost debt and subsidies. While this was the
beginning, over the years the government policy support has enabled a meteoric growth of over 18,000x
between 2004 to 2025E.
Years of free trade agreements with European and Asian blocs has helped the country to develop strategic
ties for exports. This couple with tax incentives enabled the players to invest in research and development,
increasing the efficiency of the existing module technologies and mass development of new technologies.
The below are measures driven the solar photovoltaic market in China.
Regulatory environment and government policies in China
Trade agreements – China currently has 23
14
FTAs with 30
14
countries and regional blocks (including
ASEAN), which include provisions for various sectors, including solar products. Notable agreements that
explicitly cover solar modules are
Table 30: China's push to PV manufacturing industry
China-Iceland 201392 & China-Switzerland 2014 Signed amid escalating tensions over EU’s
investigation into dumping of Chinese solar panels
proved crucial to improve economic diplomacy
with European countries over the years. The FTAs
enabled tariff reduction on 99.7%25 of the
Chinese exports. While the share of Switzerland
and Iceland was low in China’s photovoltaic
export basket, the partnership of these two
European nations in EFTA agreement, opened
doors for China. The share of China in Europe’s
PV imports photovoltaic was 37%93 in 2024.
Regional comprehensive economic partnership
(RCEP) 202094
Includes 14 other Asia Pacific nations other than
China. While tariff cuts varied among countries,
the FTA meant that 85% of Chinese products,
including solar products, becoming eligible for
zero tariffs. Furthermore, a substantial 98.3% of
these products would be exempt from Australian
tariffs over time, effectively eliminating trade
barrier. China accounted for 80%26 of the solar
cells and module imports for RCEP members in
2024.
91
CSTEP
92
Aqsiq
93
ITC Trademap
94
RCEP
222
China-Serbia 202395 Albeit a small market, Serbia exempts tariffs on
approximately 90% of the products traded
between the nations, while over 60% of them
enjoy zero tariffs. Inclusion of PV modules in the
zero-tariff category opened China’s door to first
central and eastern European country.
Tax Exemptions and Reductions:
200396 A tax rebate system introduced in 1985 which
refunds some of its indirect taxes paid by the local
manufacturers on production and distribution of
exports. PV products were included in list from
2003. However, lately in 2024, the export rebate
was reduced from 13% to 9%.
201197 Full exemption of corporate income tax (CIT) for
first two years, profitable years and a 50%
reduction for the subsequent three years for
qualified solar enterprises to encourage investment
and innovation
201398 Offered tax rebates to solar manufacturers, aiming
to enhance competitiveness and reduce production
costs
201399 Continued support through VAT refunds and
preferential CIT policies for advanced technology
enterprises in the solar sector
R&D incentives:
Industrial incentives:
2011-20 Objectives
1. Expand and modernize PV industry with
large scale production capacity
2. Strengthen domestic production and
supply chain of components
3. Promote technical innovations to improve
conversion efficiency and product quality
95
The State Council - The People’s Republic of China
96
Taiyangnews
97
China Briefing
98
BBC
99
AECEA
100
China Briefing
101
China Briefing
2008
100
Establishment of National High-Tech R&D Program
(863 Program), which provided significant funding
for R&D projects in high-tech sectors, including
solar
2023
101
Super deduction, which allows companies to
deduct up to 100 percent of their R&D costs.
223
4. Increase share of non-fossil energy in
total energy consumption to 25%
Outcomes
1. China on track to achieve its target of
non-fossil. It has increased its target to
30% in 2025102
2014103 Launched Solar Energy for Poverty Alleviation
Program to systematically deploy 10 GW solar
photovoltaic projects to benefit more than 2 million
citizens. This helped improve demand for
manufacturers
2015104 Preferential policy under “Made in China 2025”
initiative, focusing on technological upgrading and
quality improvement of solar manufacturing
Skilling incentives:
Vocational training programs Specifically tailored to the need of the solar PV
industry, aimed at providing technical skills and
required manufacturing, installation, and
maintenance of solar PV systems. China National
Solar Energy vocational education alliance
(CNSVEA)105 partnered collaborates with
industry partners and vocational schools to
develop curriculum and training program
specifically for solar PV.
University and research collaboration Collaboration between universities, research
institutions and industry players to develop
specialized courses, research projects and
academic programs focusing on solar PV
technology and applications. The Tsinghua
university and the Chinese academy of
sciences106 have established research centres
dedicated to Solar PV. They collaborate closely
with industry leaders and government to conduct
research on advanced PV materials, efficiency
enhancement techniques and integration of solar
PV systems with grid infrastructure.
Government sponsored training programs These include initiatives aimed at enhancing the
skills of workers and technicians involved in
various aspects of solar photovoltaic technology.
The China National Solar Energy Training and
Education Center107, established by the chinese
renewable energy industries association and
supported by government agencies conducts
training sessions and workshops across various
provinces, focusing on equipping participants with
the latest knowledge and skills required for
working in the solar PV industry
102
Down to earth
103
Institute of Development studies
104
European Chamber
105
China Briefing
106
CSTA
107
Ministry of Science and Technology – The People’s Republic of China
224
The above incentives have enabled growth stories in PV industry. One of which is highlighted in the form
of a case study below:
Case Study on incentives provided to Jinko solar by the Chinese Government
Jinko Solar Holding Co, Ltd, a Chinese PV manufacturer, has benefited from various tax incentives provided
by the Chinese government over the years. The company has received tax exemptions and reduced rates,
including a two-year exemption from corporate income tax (CIT) and a reduced CIT rate of 12.5% for the
subsequent three years, starting from 2009.
Several of Jinko Solar's subsidiaries benefit from the preferential tax rate of 15% across years under the
“High and New Technology Enterprises” incentive. Subsidiaries including Jiangxi Jinko, Zhejiang Jinko,
Haining Jinko, Yiwu Jinko, Shangrao Jinko, Zhejiang New Materials, and Anhui Jinko, were designated as
"High and New Technology Enterprises" by local authorities, making them eligible to a preferential tax rate
of 15% from 2021 to 2023. Additionally, subsidiaries such as Jiangxi Jinko, Haining Jinko, Shangrao Jinko,
and Zhejiang New Materials were designated as "High and New Technology Enterprises" in November and
December 2022 and benefited from the preferential tax rate of 15% from 2022 to 2024. Anhui Jinko was
also designated as a "High and New Technology Enterprise" in November 2023 and will benefit from the
preferential tax rate of 15% from 2023 to 2025.
Other subsidiaries, including Jinko Jinchang, Sichuan Jinko, Leshan Jinko, Qinghai Jinko, and Chuxiong
Jinko, were designated as "Enterprises in the Encouraged Industry" and are eligible for a preferential tax
rate of 15% until December 31, 2030, as per the "Announcement on Continuation of CIT Policies for Large-
scale Development in the Western Region" published on April 23, 2020.
These tax incentives have enabled Jinko Solar to invest heavily in research and development (R&D). The
company has collaborated with renowned institutes and agencies to improve its R&D capabilities. For
instance, in December 2013, it partnered with Beijing University's Solar Power Engineering Center to
construct an experimental PV power plant on campus, which was used to collect and analyze data on the
power generation capabilities of PV modules under various conditions.
In subsequent years, Jinko Solar established a long-term cooperative relationship with several institutions,
including the State Key Laboratory of Silicon Materials of Zhejiang University, the Australian National
University, Sun Yat-Sen University, and the National University of Singapore. These collaborations focus
on cutting-edge cell technologies, solar modules, and solar cells. In 2017, the company partnered with TÜV
Rheinland to develop standardized testing methods for bifacial PV technology. In 2018, it participated in
three projects with the Institute of Electrical Engineering of the Chinese Academy of Sciences, Zhejiang
University, and Nanchang University, focusing on module recycling, high-efficiency P-type poly, and N-type
bifacial cells.
In 2019, Jinko Solar signed a memorandum of understanding with the Shanghai Institute of Space Power
Sources to co-develop high-efficiency solar cell technology for space and terrestrial applications. The
company led two national key R&D programs in China, relating to the decline of the N-type multicrystalline
cell industry and the recycling of end-of-life solar products.
As a result of its R&D collaborations, Jinko Solar Holding Co., LTD increased its budget allocations over
the years, with RMB 461.6 million ($72.4 million), RMB 724.8 million ($105.1 million), RMB 911.9 million
($128.4 million), RMB 920.5 million ($126.1 million) and RMB 896.9 million ($128.3 million) allocated in
2021, 2022, 2023, 2024 and 2025 respectively. This has enabled the company to gain a competitive edge
in the market.
Source: Jinko Solar Holding Co., LTD annual report 2025
225
Vietnam
Emerging nation
Vietnam has emerged as a HubSpot for expansion of PV manufacturing. It accounted for 3% of the module
global capacity in 2024. It was responsible for 10%
108
of the global PV exports. The factors driving the share
are skilling programs which have enabled the country to gain edge over its south Asian neighbours. Further,
the country’s land border with the PRC is perceived as a significant benefit as delivery time for input
materials is reduced from weeks to days.
Free trade agreements:
Table 31: Vietnam's push to PV manufacturing industry
European Union-Vietnam
109
Eliminates tariffs on a wide range of goods,
including solar panels and components. The
agreement also encourages European companies
to invest in Vietnam, bringing advanced solar
technologies and expertise.
ASEAN-Vietnam
44
Benefits from reduced tariffs and simplified trade
procedures within the region. Players have
benefitted from duty free access to raw materials
like polysilicon from Malaysia and Thailand,
reducing production cost and ensuring a steady
supply.
Vietnam-Korea
44
Provides tariff reductions on solar PV products and
related components. The FTA has allowed Vina
solar to import cutting-edge solar manufacturing
equipment from South Korea at reduced cost,
enhancing their production capabilities and product
qualities.
Regional Comprehensive Economic
Partnership
44
Includes 14 other Asia Pacific nations other than
China. While tariff cuts varied among countries, the
harmonized standards facilitate smoother trade
and regulatory compliance making exports easy
Vietnam-Japan Economic Partnership
Agreement
44
Provides access to Japanese market for
Vietnamese solar PV products. Has helped foster
joint ventures and collaborative projects in RE,
encouraging technology sharing and innovation.
Japanese firms like Sharp have engaged in JVs
with Vietnamese companies, sharing the PV
technology and contributing to local capacity
building.
108
ITC Trademap
109
Vietnam Briefing
226
Tax incentives:
Corporate Income Tax
110
Corporate income tax (CIT) incentives for solar PV
projects, including a reduced tax rate of 10% for 15
years (extendable to 30 years) and full exemption
for the first 4 years followed by a 50% reduction for
the next 9 years. These tax incentives have helped
attract significant investment in the solar PV sector.
As of 2023, Vietnam had an installed solar PV
capacity of around 17,077 MW, up from just 134
MW in 2018
Import Duty Exemptions
45
Solar PV projects are exempt from import duty for
5 years on raw materials and components that
cannot be produced domestically. This imports duty
exemption has made it more affordable for solar
PV manufacturers to import necessary inputs,
reducing production costs and improving
competitiveness. As a result, Vietnam is home to
many major solar panel producers, including First
Solar, HT Solar, Irex Solar, Trina Solar, Vina Solar,
and Ja Solar
End user drivers:
Streamlined Approval Process Streamlined the approval process for solar PV
projects, reducing the time and bureaucracy
involved. In 2020, the Vietnamese government
approved a 450 MW solar PV project developed
by Trung Nam Group in Ninh Thuan province in
just 102 days111
Power Purchase Agreement (PPA) Incentives Offers attractive PPA incentives for solar PV
projects, including a fixed tariff of
$0.0935/kWh112 for projects connected to the
grid before June 30, 2019, and a competitive
bidding process for projects after that date. These
PPA incentives have helped drive the rapid growth
of the solar PV sector in Vietnam. As of 2023, the
country had over 17 GW of installed solar PV
capacity, making it a regional leader in solar
energy
Skilling incentives:
Government funded training centers Specialised training centers that offer courses in
Solar PV installations, maintenance, and
manufacturing techniques. The Vietnam-Germany
Renewable Energy Training Center113 provides
comprehensive training programs tailored to the
needs of the solar industry
110
VILAF
111
PV magazine
112
ADB
113
VietnamNewsMagazine
227
Subsidised courses Companies sending employees to these training
programs can benefit from subsidies covering up
of the training costs, making it affordable for firms
to upskill their workforce.
Industry Academia Collaboration Encourages collaboration between solar PV and
academia for curating specialized curricula that
include hands-on training in solar PV technology.
Boviet Solar114 has partnered with local
universities and technical schools. They offer
internships and apprenticeships to students,
providing real-world experience.
International collaboration Partnerships with international organisations and
agencies to provide training and knowledge
transfer. The German development agency
GIZ115 has partnered with the Vietnamese
Ministry of Industry and Trade to provide technical
training programs for solar PV technicians.
Additionally, Vietnam is uniquely positioned to extract benefits in PV manufacturing from trade agreements
like EVFTA and CPTPP. First, EVFTA commits to the elimination of over 99%
116
of tariffs between Vietnam
and the EU over a ten-year schedule, offering Vietnamese solar equipment (modules, hardware,
components) much lower trade barriers into one of the world’s premium markets.
These agreements also imbibe strong legal, regulatory, and institutional commitments that reduce risk for
long-term capital investment in green manufacturing. For example, EVFTA’s binding provisions on
standards and trade facilitation help ensure smoother conformity, transparent and efficient paths for solar
products. Despite this, the US accounted for 85% of the Vietnam solar cell and module exports in 2024.
However, after the US initiated an antidumping and countervailing investigation on Vietnam in 2024, the
export from the country were impact. The share of US in Vietnam’s exports basket fall to 70% in H1 2025.
The tariffs of 68% to 543%
117
on Vietnam’s manufacturers were ratified and imposed in June 2025. This is
expected to impact the exports from Vietnam to the US.
114
Boviet Solar
115
GIZ
116
Trade.ec.europa
117
FederalRegister US
228
India
The march for next decade
India’s PV chapter picked up pace in the 2010-20 decade with incorporation of Solar Energy Corporation
of India. The capacity in March 2014 touched 2,821 MW
118
and has grown to 1,05,646 GW
119
as of March
2025. However, this growth in capacity was largely fueled by imported modules as solar manufacturing
remained muted till 2014 with an operational 1,300 MW of module and 300 MW of cell capacity. This was
on account of availability of cheaper modules from China. Further, absence of upstream capacity also
exposed India to exchange rate fluctuations and diplomatic risks. Over the years, the module, cell and wafer
capacity has grown to 1,00,000 MW
4
, 25,000 MW
5
and 2000 MW
5
respectively resulting in a rise in export
opportunities. A slew of measures has enabled this growth over the period.
Regulatory environment and government policies in India
The journey of Indian solar PV manufacturing has witnessed several government interventions to protect
the domestic base and enhance the demand. While some of the measures’ relevancy remained challenged,
the journey and lessons through the years have resulted in implementation of relevant measures in the
recent period. Thus, despite the sector’s activeness since 2010, it is now truly at the cusp of multifold
expansion becoming one of the sunrise sectors in India.
Imposition of safeguard duties
120
India's solar energy sector has experienced rapid growth during fiscal 2018, with annual deployment
increasing from 3 GW in 2015-2016 to 9.4 GW in 2017-2018. Despite this growth, the country's solar
photovoltaic (PV) manufacturing industry has struggled to compete with imported modules, which
accounted for over 90% of the market share between 2015 and 2018. To address this issue, the Indian
government-imposed safeguard duties on imported cells and modules to protect the domestic industry from
foreign competition.
The imposition of safeguard duties aims to provide Indian PV manufacturers with protection against cheap
imports and facilitate structural improvements to enhance their competitiveness. However, the effectiveness
of these duties depends on their interaction with other policies and market developments. The duties are
intended to address the underlying reasons for the competitive disadvantage of the local PV industry, but
their impact on industry’s competitiveness remains to be seen.
The impact of safeguard duties on the Indian solar energy ecosystem, including the challenges faced by
the PV manufacturing industry and the effectiveness of the duties in protecting the industry. The analysis
also considers the potential negative effects of the duties on project deployment, including regulatory
uncertainty and higher module costs, which could lead to higher tariffs and resistance from distribution
companies (discoms). The study provides a comprehensive picture of the impact of safeguard duties on
the Indian solar energy sector, including the legal framework, international trade protection measures, and
the challenges facing the PV manufacturing industry.
It would be interesting to understand the circumstances under which Safeguard Duties are permitted in
order to protect the domestic industries.
118
Yearly achievements MNRE
119
Installed Capacity MNRE (Mar 25)
120
Ceew
229
The World Trade Organization (WTO) allows for several trade protection measures to be implemented
under certain circumstances. This section provides an in-depth examination of the legal framework
governing safeguard duties, a specific trade protection measure that has been utilized in India.
Table 32:Motivations for applying various trade protection measures
Anti-dumping duty Countervailing duty Safeguard duty
What strategies
does it utilize to
protect the
domestic industry?
Seeks to eliminate the
effects of dumping,
which refers to the sale
of an imported product
at a price lower than
that in its domestic
market.
Seeks to eliminate the
effects of subsidies
provided in the domestic
market for the imported
product.
Seeks to safeguard
the local industry from
an influx of imports of
a rival product.
Source: World Trade Organization
The WTO regime on safeguard duties
Under the World Trade Organization (WTO) regime, safeguard duties are governed by the WTO Agreement
on Safeguards and Article XIX of the General Agreement on Tariffs and Trade (GATT) 1994. These
emergency measures allow member countries to protect their domestic industries from a sudden surge in
imports of similar or competing products. The increase in imports that justifies the application of safeguard
measures can be either absolute or relative, such as in a shrinking market where imports gain a larger
market share without an actual increase in quantity.
To impose safeguard measures, an investigation must be conducted by the relevant authorities. The
process for initiating an investigation varies by country; in India, for example, an investigation can be started
by a petition from a domestic producer or by the authorities themselves. Safeguard measures can only be
imposed if the investigation finds that increased imports have caused or threaten to cause significant harm
to the domestic industry, as evidenced by changes in market share, profitability, sales, and production.
Moreover, safeguard measures can only be employed if the increase in imports is due to unforeseen
developments that could not have been anticipated when the import tariffs were set. The party initiating the
investigation must also submit a plan outlining the steps the domestic industry will take to become more
competitive. Safeguard measures can take the form of quantitative import restrictions, higher tariffs, or a
combination of both, but are supposed to be applied non-discriminatorily to all countries. However, imports
from developing countries that account for less than 3% of the product are exempt, as long as these
countries collectively do not account for more than 9% of imports.
If safeguard measures are imposed for more than a year, they must be gradually reduced at regular
intervals. The maximum duration of safeguard measures is four years, or six years for developing countries.
However, this period can be extended if a new investigation finds that the measures are still necessary to
prevent or remedy harm, and if the domestic industry can demonstrate evidence of structural adjustments.
The total period of application, including extensions, cannot exceed eight years for developed countries or
ten years for developing countries.
230
The Indian regime on safeguard duties
Following the withdrawal of an anti-dumping petition against solar imports from China, Taiwan, and Malaysia
in 2017, Indian solar manufacturers turned to safeguard duties as their primary trade remedy. In December
2017, they petitioned the DGTR, which recommended a provisional 70% safeguard duty in January 2018.
However, legal challenges and uncertainty around the duty's implementation and cost pass-through
delayed its notification, leading to weak developer participation in solar tenders during early 2018.
To address these concerns, the MNRE clarified in April 2018 that safeguard duties could be treated as a
"change in law" under solar PPAs, enabling cost recovery where contract provisions allowed. This reduced
uncertainty and improved market activity. On July 16, 2018, the DGTR issued its final recommendation for
a two-year safeguard duty on imported solar cells and modules. Unlike the preliminary findings, the final
ruling excluded SEZ-based manufacturers from the definition of domestic industry.
Although the safeguard duty faced further legal challenges in the Odisha High Court, the Ministry of Finance
notified the duty on July 30, 2018. After the government appealed, the Supreme Court lifted the stay on its
implementation, allowing the collection of safeguard duties and completing the process of introducing import
protection for India's domestic solar manufacturing industry.
Table 33:Directorate general of trade remedies' recommendations on safeguard duties
Period Safeguard Duty
30
th
July 2018 – 29
th
July, 2019 25%
30
th
July 2019 – 29
th
January, 2020 20%
30
th
January 2020 – 29
th
July, 2020 15%
30
th
July 2020 to 29
th
January 2021 14.9%
30
th
January 2021 to 29
th
July 2021. 14.5%
Source: CEEW
Therefore, Safeguard duty imposed on solar cells and modules to protect the domestic manufacturing
industry. While applicable on all countries, the measure impacted majorly imports from China, Malaysia and
Taiwan. A safeguard duty of 25% was imposed with progressive reduction to 20% by Jan and 15% by July
2020. While the imposition favourably enhanced the manufacturers’ cost competitiveness, the move largely
failed to address the challenge of lack of low-cost debt and R&D that plagued the industry. It also resulted
in a surge in imports from Vietnam and Thailand who were exempt from the application of duty due to virtue
of being developing countries that accounted less than 3% of imports of the product to India.
Further, extended the safeguard duty to 15% by July 2021 on imports from specific countries namely, China,
Vietnam, Thailand and other developed countries. The move helped bring parity in the cost, however, it
increased the cost of projects.
Basic custom duty
Notification on Change-in-Law: Imposition of Basic Customs Duty and GST Rate Hike on Solar PV
Cells and Modules
The imposition of Basic Customs Duty (BCD) on imported solar cells and modules, along with the increase
in the Goods and Services Tax (GST) rate on renewable energy equipment, represented a key policy
measure to support domestic solar manufacturing and reduce dependence on imports. Effective 1 April
2022, the Government of India imposed a 25% BCD on solar PV cells and a 40% BCD on solar PV modules,
while the GST rate applicable to specified renewable energy devices and components was increased from
5% to 12% with effect from 1 October 2021. These measures increased project costs for renewable energy
developers, leading to industry requests for their recognition as a Change-in-Law event under existing
power procurement frameworks.
231
Table 34:Application of basic customs duty due to change in law
Particular Basic Custom Duty
Solar PV cells 25%
Solar PV modules 40%
Source: CEEW
Subsequently, the Ministry of New and Renewable Energy (MNRE) directed Renewable Energy
Implementing Agencies (REIAs) to treat the imposition of BCD as a Change-in-Law event for solar PV and
solar-wind hybrid projects where the bid submission deadline was on or before 9 March 2021 and the
Scheduled Commissioning Date (SCD) was on or after 1 April 2022. Similarly, the increase in the GST rate
was recognized as a Change-in-Law event for renewable energy projects with bid submission dates on or
before 30 September 2021 and SCDs on or after 1 October 2021, unless explicitly excluded under the
relevant tender or contractual provisions. These provisions enabled affected developers to seek
compensation for the additional costs arising from the policy changes.
The introduction of BCD significantly reduced the pricing advantage of imported solar equipment and
contributed to improving the competitiveness of domestic manufacturers. The differential between domestic
and imported module prices declined considerably, supporting the growth of indigenous manufacturing
capacity. In conjunction with other policy measures, including the Approved List of Models and
Manufacturers (ALMM) and the Production Linked Incentive (PLI) Scheme, the BCD framework
strengthened the domestic solar manufacturing ecosystem by improving the balance between domestic
demand and supply. The customs duty structure was subsequently rationalized under the Union Budget
2025-26, with duties on solar modules restructured to 20% BCD and 20% Agriculture Infrastructure and
Development Cess (AIDC), and duties on solar cells revised to 20% BCD and 7.5% AIDC.
Budget 2025-2026: Changes in Tariff Rates for Solar Cells and Modules
The Budget 2025-2026, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, brought
significant changes to the tariff rates for solar cells and modules. These changes aim to promote the growth
of the solar industry in India, while also generating revenue for the government. The new tariff rates came
into effect on February 2, 2025, and are expected to have a significant impact on industry.
Figure 86: Custom duties for solar cells and modules
Source: Crisil Intelligence
232
Cells: The tariff rate for solar cells, covered under tariff heading 8541, has decreased from 25% to 20%.
However, this decrease is accompanied by an increase in the Agriculture Infrastructure and Development
Cess from 2.5% (Social Welfare Surcharge) to 7.5%. As a result, the effective tariff rate for solar cells
remains unchanged. This shift in the cess structure is notable, as it indicates a change in the way the
government is choosing to tax solar cells. The reduction in the basic tariff rate may make solar cells more
competitive in the market, but the increase in the cess may offset some of these gains. The impact of this
change on the solar industry will depend on various factors, including the response of manufacturers and
the demand for solar cells.
Modules: Similar to the change in the tariff rate for solar cells, this decrease is accompanied by an increase
in the Agriculture Infrastructure and Development Cess from 4% (Social Welfare Surcharge) to 20%. As a
result, the effective tariff rate for solar modules remains unchanged. This change in the tariff rate and cess
structure may have a significant impact on the solar module industry, as it could affect the competitiveness
of Indian manufacturers in the global market. The reduction in the basic tariff rate may make solar modules
more attractive to buyers, but the increase in the cess may increase the cost of production for
manufacturers. The industry will need to adapt to these changes and find ways to remain competitive in the
market.
GST Reduction on Renewable Energy Components
The 56th GST Council’s decision to reduce GST on renewable energy devices and their manufacturing
parts from 12% to 5% represents a strategic fiscal intervention aimed at strengthening India’s clean energy
industrial ecosystem. By lowering the tax burden on components such as photovoltaic cells, modules, solar
generators, and solar based devices, the reform directly improves manufacturing cost structures, project
affordability, and long-term sectoral competitiveness.
Anti-dumping investigation in India
Case 1
Anti-dumping duty on imports of “Ethylene Vinyl Acetate (EVA) Sheet for Solar Module” from China PR.
121
The Designated Authority has initiated a sunset review investigation into the anti-dumping duty imposed on
imports of Ethylene Vinyl Acetate (EVA) Sheet for Solar Module from China PR. This investigation was
prompted by an application from M/s RenewSys India Pvt. Ltd., which alleged that the expiry of the anti-
dumping duty would likely lead to the continuation or recurrence of dumping and injury to the domestic
industry.
The anti-dumping duty was initially imposed on imports of EVA Sheet for Solar Module from China,
Malaysia, Thailand, and Saudi Arabia in 2019, following an investigation that found dumping and injury to
the domestic industry. The duty was imposed for a period of five years, and the current investigation aims
to determine whether the expiry of the duty would lead to a resurgence of dumping and injury. The
domestic industry has requested that the duty be continued, but only with respect to imports from China
PR, as imports from the other countries subject to the duty have significantly declined.
EVA
Ethylene Vinyl Acetate (EVA) Sheet for Solar Module" is a crucial polymer-based component utilized in the
production of solar photovoltaic (PV) modules. Its primary function is to encapsulate solar PV cells,
providing adhesion and cushioning properties. As a vital element, the EVA sheet plays a key role in
121
DGTR (Dec 2023)
233
integrating and supporting the module's components, including the glass, cells, and backsheet, ensuring
their mechanical stability and durability throughout the module's lifespan.
The Authority has concluded its investigation into the continuation of anti-dumping duties on imports of
Ethylene Vinyl Acetate (EVA) sheets from China, Malaysia, Thailand, and Saudi Arabia. The investigation
was initiated to determine whether the cessation of existing duties would lead to a continuation or
recurrence of dumping and injury to the domestic industry.
The Authority has recommended the continuation of anti-dumping duties on imports of EVA sheets from
China, citing evidence of dumping and injury to the domestic industry. The investigation found that the
domestic industry has improved significantly since the imposition of duties, but that the cessation of duties
would likely lead to a surge in dumped imports from China. The Authority also noted that there are significant
unutilized capacities available with Chinese exporters, and that the revocation of duties would lead to further
aggravated dumping and injury to the domestic industry. The duties will be continued for an additional period
of five years to provide a level playing field to domestic producers. The Authority has recommended the
following duties:
• China PR: The existing quantum of anti-dumping duty will be continued.
• Non-cooperating producers/exporters: The duty will be imposed at the same rate as the "any
others" rate in the original investigation.
The Authority's decision is based on its findings that the domestic industry constitutes a domestic industry
under the Rules, and that the application filed by the domestic producer satisfies the criteria of standing.
The investigation also found that the product under consideration continues to be exported to India at prices
below the normal value, resulting in dumping of the subject goods. The Authority has concluded that the
continuation of duties is necessary to prevent further injury to the domestic industry.
The Indian government has imposed an antidumping duty on EVA sheets for solar modules imported from
China to protect the domestic industry from cheap imports. The duty is applicable on EVA sheets with
specific tariff items, including 3920 1011, 3920 1019, and 3920 1099, among others. The duty amount
varies depending on the producer, with a specific duty of $590 per metric ton for Changzhou Sveck
Photovoltaic New Material Co., Ltd. and a general duty of $897 per metric ton for all other producers. The
duty is intended to prevent dumping of EVA sheets from China and to promote the domestic production of
these sheets.
The imposition of the antidumping duty is expected to have a significant impact on the Indian solar industry,
as EVA sheets are a critical component of solar modules. The duty may lead to an increase in the cost of
solar modules, which could affect the competitiveness of Indian solar manufacturers in the global market.
However, it may also promote the domestic production of EVA sheets and other solar module components,
which could lead to the growth of the Indian solar industry in the long term.
Case 2
Anti-dumping investigation concerning imports of “anodized aluminium frames for solar panels/modules”
originating in or exported from China PR.
122
The Indian government has initiated an anti-dumping investigation into imports of anodized aluminum
frames for solar panels/modules from China. The investigation was initiated after Vishakha Metals Pvt. Ltd.,
a domestic manufacturer of anodized aluminum frames for solar panels/modules, filed a complaint with the
122
DGTR (June 24)
234
Designated Authority, alleging that imports from China were being dumped in India, causing injury to the
domestic industry.
The investigation will examine whether the imports from China are being sold in India at a price lower than
their normal value in China, and whether this is causing harm to the domestic industry. The investigation
will also consider factors such as the volume of imports, the price of the imports, and the impact of the
imports on the domestic industry. The investigation is being conducted under the Customs Tariff Act, 1975,
and the Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles
and for Determination of Injury) Rules, 1995. These rules provide the framework for conducting anti-
dumping investigations in India.
The Authority has investigated the dumping of solar cells and modules from China and has found that the
product has been exported to India at a price below the normal value, resulting in dumping. The Authority
has also found that the dumping has caused material injury to the domestic industry, including retarding the
establishment of the industry, underutilization of capacity, and preventing the industry from achieving a
reasonable price. The Authority has concluded that the imposition of anti-dumping duty is necessary to
offset the dumping and consequent injury, and that it will not be against the public interest.
The Authority recommends imposing an anti-dumping duty on imports of the subject goods from the
specified country to prevent harm to the domestic industry. The duty will be set at the lower of the two
calculated margins: the margin of dumping or the margin of injury. The recommended duty will be in effect
for a period of five years from the date of notification by the Central Government, with the specific duty
amounts listed in the appended table.
Table 35:Anti-dumping duty on solar panel frames from China
S.
No.
Heading/
subheading*
Description of
goods
Country
of origin
Country of
Export
Producer/ exporter
Amount
$USD/MT
1
7610 9010,
7610 9030,
7616 9990
Anodized
Aluminium
Frames for
Solar
Panels/Modules
China PR
Any Country
including
China PR
Jiangyin Tinze New
Energy Technology
Co., Ltd
433
2 China PR
Any Country
including
China PR
Jiangyin Yuanshuo
Metal Technology
Co., Ltd
505
3 China PR
Any Country
including
China PR
Jiangsu Yuejia
Metallic Technology
Co., Ltd
403
4 China PR
Any Country
including
China PR
Jiangyin Haihong
New Energy
Technology Co.,
Ltd, and Jiangyin
Haihong Solid-FSW
Co., Ltd.
418
5 China PR
Any Country
including
China PR
Zhejiang Jiaxing
Taihe New Energy
Technology Co.,
Ltd, And Jiaxing
Youjia Metal
products Co, Ltd
511
6 China PR
Any Country
including
China PR
Any other than S.
No 1-5 above
577
7
Any
Country
other than
China PR
China PR
Any other than S.
No 1-5 above
577
235
Case 3
Anti-dumping investigation concerning imports of ‘Solar Cells whether or not assembled in Modules or made
up into Panels’ originating in or exported from China PR.
123
The Indian government has launched an anti-dumping investigation into imports of solar cells and modules
from China, following a complaint from several Indian manufacturers, including FS India Solar Ventures
Private Ltd., Jupiter International Ltd., Tata Power Solar System Ltd., and TP Solar Ltd. The investigation
will examine whether the imports from China are being sold at a price lower than their normal value, causing
injury to the domestic industry. The investigation is being conducted in accordance with the Customs Tariff
Act, 1975, and the Customs Tariff (Identification, Assessment, and Collection of Anti-Dumping Duty on
Dumped Articles and for Determination of Injury) Rules, 1995.
The conclusion of the investigation is that the domestic solar photovoltaic industry has been injured by the
dumping of solar cells and modules from other countries. The investigation has found that the subject goods
have been exported to India at a price below the normal value, resulting in dumping, and that the volume
of subject imports has increased significantly over the injury period. The domestic industry has been forced
to sell at losses, and its profitability has deteriorated over the injury period. The investigation has also found
that the subject imports are threatening to cause further injury to the domestic industry, and that the
imposition of anti-dumping duty is in the larger public interest.
The Authority recommends the imposition of anti-dumping duties on imports of solar cells and modules from
certain countries to protect the domestic industry from injury caused by dumping. The duties will be imposed
for a period of 3 years and will be calculated as a percentage of the CIF value of the goods. The Authority
has followed the lesser duty rule, which means that the duty will be imposed at a level that is sufficient to
remove the injury to the domestic industry, but not higher than the margin of dumping.
Table 36:Anti-dumping duty recommended on solar cells and modules
S.
No.
Heading/
subheading*
Description
of goods
Country
of origin
Country of
Export
Producer/ exporter
Duty as
% of CIF
1
85414200
and
85414300
Solar cells or
photovoltaic
cells whether
or not
assembled in
modules or
made up into
panels,
produced
using c-Si or
thin film
technology,
including
solar
modules or
panels made
up of solar
cells
China
PR
Any country,
including China
PR
Jinko Group Nil
2
China
PR
Any country,
including China
PR
Aiko Group 23%
3
China
PR
Any country,
including China
PR
Trina Group Nil
4
China
PR
Any country,
including China
PR
Non-sampled
cooperative producers,
as per list below
23%
5
China
PR
Any country,
including China
PR
Any producer other than
1 to 4 above
30%
6
Any
country
other
than
China
PR
China PR Any 30%
123
DGTR (Sep 2025)
236
Case: 4
Multi-Country Anti-Dumping Probe: Solar Encapsulants from South Korea, Thailand, and Vietnam
124
The Directorate General of Trade Remedies has initiated an anti-dumping investigation concerning imports
of Solar Encapsulants originating in or exported from South Korea, Thailand, and Vietnam. The investigation
has been initiated based on an application filed by M/s RenewSys India Pvt. Limited, who have claimed
that the subject goods are being dumped into India, causing injury to the domestic industry. The applicant
has provided prima facie evidence that the normal value of the subject goods in the subject countries is
higher than the export price, resulting in a significant dumping margin.
The Authority has considered the applicant as the domestic industry within the meaning of Rule 2(b) of the
Rules and has satisfied the criteria of standing in terms of Rule 5(b) of the Rules. The investigation will
cover the period from 1st April 2024 to 31st March 2025, and all interested parties have been advised to
intimate their interest and file their questionnaire responses within 30 days from the date of receipt of the
notice. The subject countries for the present investigation are South Korea, Thailand, and Vietnam.
The applicant has claimed that the imports have caused material injury to the domestic industry, as the
imports are undercutting the prices of the domestic industry, depressing the prices, and preventing price
increases. This has adversely impacted on the profitability of the domestic industry, which has deteriorated
in the injury period. The capacity utilization of the domestic industry has declined, and it has underutilized
capacities. The inventories of the domestic industry have increased, and there is sufficient prima facie
evidence to justify the initiation of the anti-dumping investigation.
Case: 5
Initiation of Anti-Dumping Investigation: Solar Encapsulants from China PR
125
The Directorate General of Trade Remedies has initiated an anti-dumping investigation concerning imports
of Solar Encapsulants, excluding EVA Encapsulants, originating in or exported from China PR. The
investigation has been initiated based on an application filed by M/s RenewSys India Pvt. Limited, who
have claimed that the subject goods are being dumped into India, causing injury to the domestic industry.
The applicant has provided prima facie evidence that the normal value of the subject goods in China PR is
higher than the export price, resulting in a significant dumping margin.
The Authority has considered the applicant as the domestic industry within the meaning of Rule 2(b) of the
Rules and has satisfied the criteria of standing in terms of Rule 5(b) of the Rules. The investigation will
cover the period from 1st April 2024 to 31st March 2025, and all interested parties have been advised to
intimate their interest and file their questionnaire responses within 30 days from the date of receipt of the
notice. The applicant has claimed that the subject goods, which are being dumped into India, are identical
to the goods produced by the domestic industry, with no differences in technical specifications, functions,
or end-uses.
The Authority has noted that the applicant alone holds a major proportion in the total domestic production
in the country and has imported the subject goods from the subject countries nor is it related to any exporter
or importer of the subject goods from the subject countries. The investigation aims to determine the
existence, degree, and effect of alleged dumping and to recommend the amount of dumping duty, which if
levied would be adequate to remove the injury to the Domestic Industry.
The applicant alleges that the imported goods have harmed the domestic industry by undercutting their
prices, leading to decreased profitability and preventing price increases. As a result, the domestic industry's
capacity utilization has decreased, leaving them with underutilized capacities and increased inventories,
providing sufficient evidence to warrant an anti-dumping investigation.
124
DGTR (Sep 2025)
125
DGTR (Sep 2025)
237
Production Linked Incentive (PLI) Scheme:
National Programme on High Efficiency Solar PV Modules
126
The Ministry of New and Renewable Energy, Government of India, has launched the Production Linked
Incentive (PLI) Scheme as part of the National Programme on High Efficiency Solar PV Modules. This
initiative aims to establish a significant manufacturing capacity of high-efficiency solar photovoltaic (PV)
modules in the country, with a total outlay of Rs. 24,000 crore ($2.7 billion
127
). To achieve this goal, solar
PV manufacturers are selected through a transparent and competitive process. Once selected, these
manufacturers will be eligible for a Production Linked Incentive (PLI) for a period of five years after
commissioning, provided they manufacture and sell high-efficiency solar PV modules. This scheme is
designed to promote the domestic production of high-quality solar modules, reduce dependence on imports,
and contribute to the growth of the renewable energy sector in India.
The primary objective of the scheme is to establish a robust ecosystem for the manufacture of high-
efficiency solar photovoltaic (PV) modules in India, thereby reducing the country's dependence on imports
in the renewable energy sector. The key goals of the initiative include developing a substantial solar PV
manufacturing capacity for high-efficiency modules, introducing cutting-edge technology to India to produce
these modules, and promoting the establishment of integrated plants to ensure better quality control and
competitiveness. Additionally, the scheme aims to foster an ecosystem that supports the local sourcing of
materials for solar manufacturing, generate employment opportunities, and ultimately achieve technological
self-sufficiency in the solar energy domain.
Production Linked Incentive Scheme (Tranche I)
128
The Cabinet had approved the introduction of the Production Linked Incentive (PLI) Scheme for 10 key
sectors on November 11, 2020, to enhance India's manufacturing capabilities and exports under the
Atmanirbhar Bharat initiative. One of the 10 sectors for which the introduction of the PLI had been approved
was 'High Efficiency Solar PV Modules', with the Ministry of New & Renewable Energy (MNRE) designated
as the implementing ministry. The financial outlay for the PLI for 'High Efficiency Solar PV Modules', as
approved by the Cabinet and communicated via NITI Aayog's Order No. 13(176)/2020-I&M (I) dated
November 20, 2020, over a five-year period, was Rs 4,500 crore ($510 million
129
).
India had set an ambitious target of setting up 1,75,000 MW capacity of renewable energy by 2022 and
4,50,000 MW by 2030. Based on a techno-economic analysis, the Central Electricity Authority (CEA) had
indicated in its Optimum Energy Mix report that 2,80,000 MW capacity from solar energy would be needed
by 2029-30. To achieve the target, around 25,000 MW of solar energy capacity needed to be installed every
year until 2030. Solar capacity addition had largely depended on imported solar PV cells and modules, as
the domestic manufacturing industry had limited operational annual capacities of around 2,500 MW for solar
PV cells and 9,000-10,000 MW for solar PV modules.
Implementation
The PLI scheme was implemented by the Ministry of New and Renewable Energy (MNRE) through the
Indian Renewable Energy Development Agency (IREDA) as the Project Management Unit. IREDA was
responsible for providing secretarial, managerial, and implementation support, and carried out other
126
PLI Scheme MNRE
127
USD is arrived using an exchange rate of 88.3 (average of fiscal 2026)
128
PLI Scheme T1 MNRE
129
USD is arrived at using an exchange rate of 88.3 (average of fiscal 2026).
238
responsibilities assigned by MNRE. IREDA also examined claims for disbursement of PLI, verified and
reconciled disbursement claims, and submitted progress reports to MNRE on a quarterly basis.
The selection of beneficiaries was done through a transparent bidding process, with applications shortlisted
based on parameters such as extent of integration, manufacturing capacity, and minimum module
performance. Preference was given to manufacturers who proposed to set up fully integrated solar PV
manufacturing plants, and those who set up higher capacity plants. To qualify for the bid, applicant
manufacturers had to promise minimum integration across solar cells and modules and undertake to set
up a manufacturing plant of minimum 1,000 MW capacity.
The minimum performance parameters for manufacturers included a minimum module efficiency of 19.50%
with a temperature coefficient of Pmax better than -0.30% per degree Celsius, or a minimum module
efficiency of 20% with a temperature coefficient of Pmax equal to or better than -0.40% per degree Celsius.
IREDA was eligible to receive 1% of the PLI amount disbursed as administrative charges on an annual
basis.
Calculation of Production Linked Incentive (PLI)
64
The Production Linked Incentive (PLI) was calculated using a formula that considered the sales volume,
base PLI rate, tapering factor, and local value addition. The formula was: PLI (₹) = Sales Volume (Wp) ×
Base PLI Rate (₹/Wp) × Tapering Factor × Local Value Addition. The tapering factor varied from 1.4 to 0.6
over the five-year period, and the local value addition was expressed as a fraction of one.
The actual PLI paid to a manufacturer depended on their actual sales or maximum capacity awarded,
whichever was less, as well as their position in the Performance Matrix and actual local value addition.
However, manufacturers were not eligible for any PLI beyond what they had quoted for a particular year. If
a selected manufacturer failed to meet the promised extent of integration or manufacturing capacity, they
did not receive any PLI until they overcame these deficiencies. If they achieved the promised levels later,
they became eligible for PLI from the next month, but they could not receive PLI for the full five years.
Manufacturers who failed to meet the minimum performance parameters for their modules did not receive
any PLI for those modules. The PLI requirement for each year was calculated based on estimated values
of the parameters in the formula, and manufacturers had to submit their total PLI requirement for the five-
year period post-commissioning of the manufacturing unit at the time of bidding.
Impact of PLI Scheme (Tranche I)
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As part of the Production-Linked Incentive (PLI) Scheme's first tranche, the Indian Renewable Energy
Development Agency Limited (IREDA) released bid documents on behalf of the Ministry of New and
Renewable Energy (MNRE) to select manufacturers for setting up high-efficiency solar photovoltaic (PV)
module production facilities. Following a competitive bidding process, IREDA issued Letters of Award in
November and December 2021 to three successful bidders, who will establish fully integrated solar PV
module manufacturing units with a combined capacity of 8,737 megawatts (MW) under the PLI scheme,
which has an outlay of ₹4,500 crore ($510 million).
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Production Linked Incentive Scheme (Tranche II)
130
To further expand the manufacturing base for solar PV modules, an additional allocation of Rs 19,500
crore/$ 2.2 billion
131
(Tranche II) was announced in the Budget 2022-23 on February 1, 2022, with priority
given to fully integrated manufacturing units from polysilicon to solar PV modules.
Implementation
65
The PLI Scheme (Tranche-II) was implemented by the Ministry of New and Renewable Energy (MNRE)
with the Solar Energy Corporation of India Limited (SECI) as the Project Management Unit. SECI was
responsible for providing secretarial, managerial, and implementation support, and carried out other
responsibilities assigned by MNRE. The agency received applications, examined and appraised them,
issued acknowledgments and letters of award, examined claims for disbursement of PLI, verified and
reconciled disbursement claims, and compiled data on the scheme's progress and performance.
SECI had the right to conduct physical inspections of applicants manufacturing units and offices and could
seek help from the National Institute of Solar Energy (NISE) to verify the efficiency and temperature
coefficient of modules. If required, MNRE could also designate National Accreditation Board for Testing and
Calibration Laboratories (NABL) accredited labs for such verification. A Project Management Unit (PMU)
was established in MNRE to assist MNRE and SECI in implementing the scheme, with its expenditure met
from the administrative charges.
SECI was eligible to receive 0.50% of the PLI amount disbursed as administrative charges on an annual
basis. The agency submitted progress reports to MNRE on a quarterly basis, including details of
disbursement claims received, amounts disbursed, and reasons for any delays in disbursement.
Impact of PLI Scheme (Tranche II)
65
The Solar Energy Corporation of India (SECI), acting on behalf of the Ministry of New and Renewable
Energy (MNRE), has issued a tender for the selection of solar PV manufacturers under the second tranche
of the Production-Linked Incentive (PLI) Scheme. This initiative aims to promote the development of high-
efficiency solar PV modules. Following a competitive bidding process, SECI issued Letters of Award (LoAs)
to 11 successful bidders in April 2023, authorizing them to establish a combined 39,600 megawatts of fully
or partially integrated solar PV module manufacturing capacity.
Approved List of Models and Manufacturers (ALMM)
The Approved List of Models and Manufacturers (ALMM) is a comprehensive list compiled by the Ministry
of New and Renewable Energy (MNRE) that features approved models and manufacturers of solar
photovoltaic (PV) modules. This list plays a crucial role in regulating the solar industry in India, as it
stipulates that only the listed solar PV models and module manufacturers can be utilized for various solar
projects across the country. These projects encompass a wide range, including government-initiated
projects, government-assisted projects, and those undertaken under government schemes and programs,
as well as open access and net-metering projects. In essence, the ALMM list applies to a broad spectrum
of solar projects, including utility-scale solar projects tendered by the government, rooftop solar installations
with net metering, corporate power purchase agreements (PPA) market, and government-backed schemes
such as KUSUM, thereby ensuring that only approved and reliable solar PV modules are used in these
projects.
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PLI Scheme T2 MNRE
131
USD is arrived at using an exchange rate of 88.3 (average of fiscal 2026)
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The Approved List of Models and Manufacturers (ALMM) is a registry that allows both domestic and foreign
solar module manufacturers to have their products listed, with the primary goal of ensuring the quality and
reliability of solar panels. By introducing this list, the aim is to provide a benchmark for the industry,
guaranteeing that only high-standard products are used. Notably, as of now, the list exclusively features
domestic manufacturers, with no foreign entities included, highlighting an opportunity for international
manufacturers to explore and comply with the necessary standards to be enlisted.
To be included on the Approved List of Models and Manufacturers (ALMM), manufacturers must obtain a
product and performance certificate from the Bureau of Indian Standards (BIS). This certification is valid for
a period of two years. The BIS is responsible for ensuring the quality of the product, while the ALMM
provides certification for the manufacturing process, the manufacturer itself, and the manufacturing facility,
offering a comprehensive evaluation of the manufacturer's capabilities and adherence to standards.
ALMM consists of two lists:
• List-I (Solar PV models and manufacturers)
• List-II (Solar PV cells and manufacturers)
• List-III (Solar PV wafers and manufacturers) (proposed)
The Ministry of New and Renewable Energy (MNRE) has been regularly updating List I under the Approved
List of Models and Manufacturers (ALMM) order, with the latest update being on October 13
th
, 2025. As per
this update, a total of 93 domestic module manufacturers, collectively having a capacity of 1,16,500 MW,
have been included in the list.
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The Ministry of New and Renewable Energy (MNRE) has recently updated the Approved List of Models
and Manufacturers (ALMM) order, with the latest revision taking place on September 23rd, 2025. This
update of 11 domestic cell manufacturers to List II, bringing the total capacity of these manufacturers to
17,880 MW. This move is expected to promote the growth of the domestic solar industry and encourage
the use of locally manufactured cells in solar projects.
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Backward Integration Push
134
The government had accelerated its push for creating domestic manufacturing capacities across the solar
value chain by proposing to mandate the use of India-made wafers under the Approved List of Models and
Manufacturers (ALMM) starting June 1, 2028. The Ministry of New and Renewable Energy (MNRE) had
issued a draft amendment to the ALMM order, which proposed creating an ALMM List-III for wafers, similar
to solar modules and cells. Stakeholders were invited to submit their comments and suggestions by October
11, 2025. The amendment had proposed that all projects falling under ALMM's purview must mandatorily
source their modules from ALMM List-I, which in turn had to use solar cells from the ALMM List-II for solar
cells, and these cells had to use wafers from ALMM List-III. As part of its backward integration drive for the
manufacture of all components of the solar component ecosystem, MNRE had announced in December
that the ALMM List-II for cells would be effective from June 1, 2026. The ALMM for solar wafers was not
issued unless it contained at least three wafer manufacturing units, which had to operate independently
and not be under common ownership or control, with an aggregate wafer manufacturing capacity of 15 GW
a year. The ALMM mandate for modules had succeeded in putting in place a robust manufacturing capacity
in a little over four years, with India's module manufacturing capacity crossing 100 GW. In August, the
MNRE had released the first ALMM List-II, which included a solar cell manufacturing capacity of 13 GW.
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ALMM I MNRE
133
ALMM II MNRE
134
ALMM III MNRE
241
India previously lacked significant wafer manufacturing capacity. The enlistment in the Approved List of
Models and Manufacturers (ALMM) List-III required wafer manufacturers to also possess ingot
manufacturing capacity equivalent to their intended wafer manufacturing capacity. This meant that the
authorized wafer manufacturing capacity under ALMM List-III reflected the manufacturing capacity of both
wafers and ingots. Thin film technology-based modules listed in ALMM List-I, which were manufactured in
integrated solar module manufacturing units, were deemed compliant with the requirement of using wafers
from ALMM List-III and cells from ALMM List-II.
Projects that had submitted bids on or before the designated "cut-off date" were exempt from using ALMM-
listed wafers. The cut-off date was set as one month after the first ALMM List-III for wafers was issued, and
this exemption applied regardless of the project's commissioning date. Additionally, projects that were
exempt from using ALMM-enlisted solar cells were also automatically exempt from using ALMM-enlisted
wafers. The exemption for using ALMM-III wafers extended to projects where bids were submitted or power
purchase agreements were signed before the cut-off date, and subsequent tenders for engineering,
procurement, and construction, solar module supply, or solar cell supply were issued.
Projects covered under ALMM, with bid submission dates falling after the cut-off date, were required to
include a clause in their tender stating that the solar modules, cells, and wafers used must align with the
requirements of ALMM-I, II, and III. Only solar modules that used cells from ALMM List-II, which in turn used
wafers from ALMM List-III, were allowed to remain in ALMM List-I. Module manufacturers that failed to
comply with this condition were removed from the ALMM List-I.
From June 1, 2028, three additional lists will be maintained: ALMM List-I
(a) for solar modules using solar cells and wafers not enlisted in ALMM, ALMM List-I
(b) for solar modules using solar cells enlisted in ALMM but wafers not enlisted in ALMM, and ALMM
List-II
(c) for solar PV cells using wafers not enlisted in ALMM.
These lists contained modules and cells catering to different project categories that were exempted
from using ALMM enlisted wafers but were mandated to use either ALMM enlisted modules or cells.
Guidelines for open access projects
The Indian government has introduced new guidelines for open access projects and net-metering,
particularly with regards to the use of modules, cells, and wafers from the Approved List of Models and
Manufacturers (ALMM). For projects commissioned before June 1, 2028, there is an exemption from using
wafers from ALMM List-III, but these projects must still utilize cells and modules that are enlisted in the
ALMM. However, for projects commissioned after June 1, 2028, the rules become stricter, requiring the use
of modules, cells, and wafers from all three ALMM lists. This implies that any new net-metering or open
access projects initiated after the specified date must adhere to the more stringent criteria, promoting the
use of domestically manufactured components.
Furthermore, the amendment also addresses behind-the-meter and captive projects owned by government
entities. For these projects, if they are commissioned after June 1, 2028, they will be subject to the
requirements of ALMM List-III. This means that government-owned projects will also need to comply with
the domestic content requirements, ensuring that they use approved and locally sourced components.
Notably, there are no exemptions from the Domestic Content Requirement provisions for certain programs
initiated by the Ministry of New and Renewable Energy (MNRE), such as Components B and C of the
Pradhan Mantri-Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) scheme, the PM Surya
Ghar: Muft Bijli Yojana, and the CPSU Program Phase-II. This underscores the government's commitment
to promoting domestic manufacturing and reducing reliance on imported components for renewable energy
projects.
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The International Solar Alliance (ISA)
135
The International Solar Alliance (ISA) is a collaborative intergovernmental organization that was
inaugurated in 2015 by the Prime Minister of India and the President of France at the United Nations Climate
Change Conference in Paris. As an action-oriented and member-driven platform, the ISA aims to accelerate
the global deployment of solar energy technologies. The organization's strategic framework, known as the
'Towards 1000' strategy, outlines ambitious objectives, including mobilizing $1 trillion in investments in solar
energy solutions by 2030, providing clean energy access to 1 billion people, installing 1,000 gigawatts of
solar energy capacity, and reducing global carbon emissions by 1 billion tonnes annually. Guided by its
vision of making the sun's energy brighter for all and its mission of illuminating every home, the ISA operates
from its headquarters at the National Institute of Solar Energy (NISE) in Gurugram, India, driving global
efforts to harness the power of solar energy for a sustainable future.
The goals and key focus areas of ISA
The International Solar Alliance (ISA) has set forth several key objectives aimed at promoting the
widespread adoption of solar energy globally. By 2030, the ISA seeks to facilitate the deployment of 1000
gigawatts of solar energy capacity worldwide and mobilize over $1 trillion in investments for solar energy
projects in its member countries. To achieve these goals, the ISA aims to develop innovative financial
mechanisms that can help reduce the costs associated with solar energy deployment, as well as encourage
research and development in solar energy technologies. Ultimately, the ISA's mission is to establish solar
energy as a primary source of energy for all, making it a mainstream and accessible option globally. To
drive progress in these areas, the ISA's programs focus on four priority areas: analytics and advocacy,
capacity building, programmatic support, and readiness and enabling activities, which collectively provide
a comprehensive framework for advancing the solar energy agenda.
The governance framework of the ISA
The International Solar Alliance (ISA) has a well-defined governance structure, with the ISA Assembly
serving as the supreme decision-making body. Comprising representatives from each member country, the
Assembly is responsible for making key decisions, such as selecting the Director General, overseeing the
functioning of the ISA, and approving the operating budget. The first ISA Assembly was held in October
2018 in Greater Noida, India. The Steering Committee provides strategic guidance to the ISA and monitors
its operations, meeting regularly to review progress and make recommendations to the Assembly. The
Secretariat, headed by the Director General, is the administrative arm of the ISA, responsible for
implementing the decisions of the Assembly and the Steering Committee. The Director General leads the
ISA's operations, carries out the functions of the Secretariat, and is accountable to the ISA Assembly, with
a tenure of four years and eligibility for re-election, ensuring continuity and stability in the organization's
leadership.
How did the ISA originate and evolve over time
The International Solar Alliance (ISA) was born out of a collaborative initiative between India and France to
combat climate change by promoting the adoption of solar energy solutions. The concept of the ISA was
first introduced on the sidelines of the 2015 United Nations Climate Change Conference (COP21) in Paris,
marking a significant step towards global cooperation on renewable energy. Following the amendment of
its Framework Agreement in 2020, the ISA has become a truly global entity, with all member states of the
United Nations now eligible to join. As of now, over 110 countries have signed the ISA Framework
Agreement, with 90 countries having ratified the agreement to become full-fledged members of the alliance.
This widespread participation underscores the growing recognition of the importance of solar energy in
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ISA
243
addressing the global climate crisis and the ISA's role in facilitating international cooperation to achieve a
sustainable energy future.
The significance of ISA
India's involvement in the International Solar Alliance (ISA) presents a unique opportunity for the country to
demonstrate its leadership in the renewable energy sector. With an ambitious target of achieving 450
gigawatts of renewable energy capacity by 2030, India can leverage the ISA platform to promote solar
energy deployment not only domestically but also among its member countries, thereby accelerating its
progress towards this goal. Furthermore, by taking a leading role in the ISA, India can enhance its global
reputation as a responsible and committed player in the pursuit of sustainable development, exercising its
soft power in the international arena. Additionally, as a developing country highly vulnerable to the impacts
of climate change, India's participation in the ISA can facilitate its efforts to mitigate and adapt to the
challenges posed by climate change, ultimately contributing to a more sustainable and resilient future for
the nation.
The International Solar Alliance (ISA) plays a vital role in promoting clean energy globally, with a primary
objective of advancing the use of solar energy as a clean, renewable, and sustainable source of energy.
This endeavor is crucial for achieving climate change goals and mitigating the impacts of global warming.
Furthermore, the ISA aims to mobilize over $1 trillion in investments in solar energy by 2030, which can
create new business opportunities, stimulate economic growth, and generate employment. Additionally, the
ISA's focus on solar energy can help increase access to energy, particularly in rural and remote areas,
thereby contributing to poverty reduction and overall human development. By promoting solar energy, the
ISA can help bridge the energy gap and ensure that everyone has access to reliable, affordable, and
sustainable energy, ultimately contributing to a more equitable and sustainable future for all.
Various projects and initiatives of ISA
Solar Technology Application Resource Centre (STAR C)
The Solar Technology Application Resource Centre (STAR C) initiative is a key capacity-building and
institutional strengthening program launched by the International Solar Alliance (ISA) to support its
developing member countries. The primary objective of the STAR C initiative is to foster the development
of human capacity and skills within member countries, enabling them to undertake significant energy
transition activities, create new job opportunities, and contribute to their overall economic growth. These
centers serve as hubs of technology, knowledge, and expertise on solar energy, providing a go-to platform
for member countries at both regional and national levels. By establishing these centers, the ISA aims to
empower its member countries with the necessary resources and expertise to accelerate their transition to
solar energy, driving sustainable development and economic prosperity.
Indian Technical and Economic Cooperation (ITEC) Scheme.
The Government of India has been actively supporting the International Solar Alliance (ISA) through the
Indian Technical and Economic Cooperation (ITEC) Scheme, which provides training to master trainers in
the field of solar energy. Under this initiative, the Government of India bears all costs for a 21-day training
program, aimed at enhancing the skills and knowledge of participants in solar energy technologies. In the
2018-2019 period, the ITEC program facilitated the training of 133 candidates from 25 countries at the
National Institute of Solar Energy in Gurugram, India. This capacity-building effort not only contributes to
the global dissemination of solar energy expertise but also underscores India's commitment to supporting
the ISA's mission of promoting solar energy deployment worldwide.
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ISA solar fellowship for mid-career professionals
The International Solar Alliance (ISA) offers a fellowship program designed for mid-career professionals,
aiming to enhance the long-term development capabilities of its member countries by creating a pool of
skilled and qualified professionals who can effectively manage solar energy projects, programs, and
policies. The fellowship is awarded to mid-career professionals from ISA member countries, with the
expectation that they will contribute to policy development in their home countries upon completion of the
program, thereby supporting the ISA's objectives. The inaugural batch of the fellowship program, which
commenced on July 22, 2019, comprises 21 candidates from 18 ISA member countries, who are pursuing
master's degrees in Renewable Energy Management and Economics. This initiative not only fosters
capacity building and knowledge sharing among member countries but also plays a crucial role in achieving
the ISA's mission of promoting solar energy globally.
One Sun, One World, One Grid (OSOWOG) initiative.
The concept of One Sun, One World, One Grid (OSOWOG) was first proposed by India in 2018, with the
ambitious goal of creating a global network that connects energy supplies across international borders. The
underlying vision of OSOWOG is rooted in the idea that "the sun never sets," symbolizing the constant
availability of solar energy somewhere in the world. By establishing a common grid that interlinks regional
grids, the OSOWOG initiative aims to facilitate the transfer of renewable energy, particularly solar power,
across the globe. This innovative approach seeks to harness the full potential of renewable energy sources,
promoting a more sustainable and interconnected energy landscape worldwide.
The International Solar Alliance (ISA) is working to increase access to affordable and sustainable energy
solutions through various initiatives. One key area of focus is on providing affordable finance on a scale,
leveraging innovative financing mechanisms such as the Green Climate Fund and the World Bank's
International Finance Corporation to make solar power more accessible and affordable for all. Additionally,
the ISA is promoting the development of mini-grids powered by solar energy, which can provide electricity
to communities that are off-grid or have limited access to electricity, thereby enhancing energy access and
promoting economic development. The ISA is also involved in a range of other projects, including the
promotion of solar-powered agriculture pumps, solar rooftop installations, solar water heaters, and solar
street lighting, among others, aiming to harness the potential of solar energy to transform lives and
communities worldwide.
The challenges and limitations of the ISA
Despite the significant strides made by the International Solar Alliance (ISA) since its establishment, the
organization faces several challenges that hinder its progress and effectiveness. One of the primary
concerns is funding, as the ISA requires substantial financial resources to achieve its ambitious objectives
of promoting solar energy in developing countries, and while it has received support from countries like
France and India, more funding is needed. Another challenge is the limited participation of countries, with
only over 100 nations having signed the ISA Framework Agreement, which restricts the organization's ability
to achieve its goals and expand its impact globally. Furthermore, the diverse energy policies and regulations
among countries create a hurdle in harmonizing them and establishing a level playing field for solar energy,
making policy coordination a significant challenge. Lastly, the implementation of solar energy projects is
often hindered by factors such as inadequate infrastructure, political instability, and insufficient financing,
leading to a lack of successful project implementation and undermining the ISA's overall impact.
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How can ISA effectively guide its future direction
To chart a successful future course, the International Solar Alliance (ISA) can consider several strategic
approaches. Firstly, enhancing collaboration with international organizations, governments, and private
sector entities can help the ISA leverage a broader range of resources and expertise in the solar energy
sector, thereby amplifying its impact. Secondly, expanding its membership by engaging with more countries,
particularly those with significant potential for solar energy adoption, can increase the organization's reach
and influence. Implementing policy reforms in member countries is also crucial, as this can involve providing
incentives for solar energy adoption and reducing subsidies for fossil fuels, thereby creating a more
favorable environment for solar energy growth. Furthermore, the ISA can play a pivotal role in facilitating
financing for solar energy projects in member countries, potentially by establishing a dedicated fund or
collaborating with international financial institutions. Lastly, fostering innovation in the solar energy sector
is essential, and the ISA can achieve this by supporting research and development activities, as well as
providing a platform for the sharing of best practices and knowledge, which can help drive the development
of more efficient and affordable solar energy technologies.
R&D incentives:
SERIIUS (2012)
136
Was a collaborative effort between India and the
US aimed at foresting high impact research on
development of next-generation solar
photovoltaics, specially focusing on advanced
materials and novel device architectures. The
partnership includes several leading research
institutes and universities such as Indian Institute
of Science, National Renewable Energy
Laboratory and others.
Indo-German Partnership
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Established to foster cooperation between India
and Germany in the field of solar energy, including
PV manufacturing. It included focus on developing
advanced PV technologies, improving efficiencies
and reducing cost.
Industrial incentives:
Domestic content requirement (2010-2016 and
2024 onwards)
138
Introduced as a part of JNNSM to protect
domestic Solar PV manufacturing by mandating
use of domestically manufactured solar cells and
modules. The move, however, faced several
challenges as it led to increased costs in the
absence of a large manufacturing base. A 2016
WTO ruling resulted in progressive phase out of
the measure. However, the announced PM Surya
Ghar Yojana mandates use of DCR modules to
solarise 1 crore
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households in India
Modified – Special Incentive Package scheme
(2012)
140
Notified with the objective of incentivizing
investments in the electronic systems design and
manufacturing (ESDM) industries. Solar PV
136
US-India Partnership to Advance Clean Energy
137
Bundesverband Solarwirtschaft e.V.
138
MNRE
139
PM Surya Ghar MNRE (June 2024)
140
Special incentive Package MEITY (Feb 2016)
246
manufacturing constituted one of the eligible
verticals. The scheme provided 25% capex
subsidy for solar PV plants (polysilicon, ingot,
wafer, or cells) set up outside SEZs, and a 20%
subsidy in the case of plants with SEZs. It also
reimbursed excise or countervailing duty on
imports of capital equipment for non-SEZ plants. A
10% subsidy was also provided on production
turnover for both SEZ and non-SEZ facilities. The
scheme had an approved incentive outlay of Rs
10,000 crore, applications till 31st Dec 2018.
However, only Rs 1,781 crore ($202 million
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)
was till Dec 2022. Though the M-SIPs received
applications from Solar PV developers, it was not
effective in providing significant support as it was
not particularly targeted towards solar PV and
applicants had to compete with applicants from
the broader ESDM sector for incentives.
Approved List of Models and Manufacturers
(FY20 to present)
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Introduced by MNRE to mandate usage of only
listed models and manufacturers for the
government utility-scale, net metering and open
access projects from April 2022. The measure,
while in abeyance for years, was aimed to provide
a demand boost to domestic manufacturing
industry which was at the cusp of witnessing an
exponential demand of 38-42 GW per annum by
the end of the decade. The measure was
reimposed from April 2024 onward. Over the
years. MNRE has frequently aimed at updating
the list by improving the minimum efficiency of
listed modules and increasing enlisted capacity.
The capacity doubled by April 2024 to 44 GW
from 22 GW in September 2022, providing
comfort for the developers. Despite 4 years of
announcement, the list has only restricted to
domestic players thereby limiting foreign
competition and has touched 100 GW
4
in August
2025. The ministry also rolled out ALMM II in July
2025 with 13 GW
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enlistment to develop cell
manufacturing capacity
Production linked incentive scheme (2021 –
Present)
144
Introduced in an effort to improve localisation in
the manufacturing industry, the MNRE allocated
Rs 24,000 crore ($2.7 billion) performance-based
incentive to install high efficiency solar capacities
of 48.3 GW in two tranches. The scheme targets
expansion across various levels of P-M (24.1
GW), W-M (40.9 GW) and C-M (48.3 GW). The
move is expected to reduce import reliance on
downstream components and act as a kickstarter
to the capex intensive upstream value chain of
polysilicon and wafers.
141
USD arrived using an exchange rate of 88.3 (average of fiscal 2026)
142
ALMM MNRE (Mar 2021)
143
ALMM II MNRE (July 2025)
144
PLI Scheme MNRE (Apr 2021)
247
Skilling incentives:
Skill development initiative under NSM (2009)
145
The National Institute of Solar Energy under
MNRE launched various training programs for
solar PV technicians and engineers that helped
train a significant workforce in solar PV
installations, maintenance, and manufacturing
process, supporting the growing solar energy
Skill council for green jobs (2015)
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The skill council for green jobs (SCGJ)
collaborated with the industry stakeholders to
develop national occupational standards and
certifications programs for solar PV installers and
technicians.
Green skill development program (2017)
147
It collaborated with training institutes to develop
courses on environmental sustainability and green
technologies, including solar.
International cooperation and platforms
India also co-founded and hosts the International Solar Alliance (ISA) a 107-member
148
, treaty-based body
driving global solar deployment - which gives India both convening power and practical toolkits that Indian
PV firms can already use. ISA has moved from dialogue to execution through PV-centric programs like
Scaling Solar Rooftops and Scaling Solar Mini-grids, plus the Global Solar Facility (GSF)- a blended-finance
platform. ISA is operationalising with the World Bank’s Multilateral Investment Agency (MIGA). On the
finance side- India tied ISA cooperation to concessional Lines of Credit - $1.4 billion announced at the
founding conference for 27 solar projects in 15 countries
149
, and a further USD 2 billion set aside for solar
in Africa- implemented via EXIM Bank
150
in coordination with ISA member countries. In December 2024,
India signed an agreement with ISA to implement solar energy project in Fiji. This initiative was valued at
$2 million and was funded by India as part of its commitments under the Quad Climate Working Group
145
Ministry of Skill Development and Entrepreneurship
146
Skill India
147
Ministry of Environment, Forest & Climate Change
148
ISA
149
PIB (Feb 2019)
150
ISA MNRE (Oct 19)
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Challenges and Recommendations
Overall Landscape
India's solar manufacturing sector has witnessed significant growth, driven by comprehensive government
initiatives and policies. The solar module manufacturing capacity has increased to 100 GW by August 2025,
up from less than 3 GW in 2014. To boost local manufacturing, the government has implemented several
monetary and non-monetary benefits across capital expenditures (capex) and operating expenses (opex)
for the entire value chain. However, much of this growth has occurred over the past four fiscal years,
following the introduction of the Production Linked Incentive scheme and the Approved List of Models and
Manufacturers. Furthermore, capacity expansion has been largely concentrated on the downstream value
chain, with the upstream chain still heavily reliant on imports. Furthermore, as per CEA’s NEP Transmission
Plan 2024, the country's solar installations are expected to reach 365 GW by fiscal 2032, resulting in
demand of 283 GW between fiscals 2025 and 2032. Thus, increasing upstream capacity will be crucial to
reducing import dependence. In addition to expanding upstream capacities, the value chain will require
timely protection to maintain a level playing field, as more than 80% of the value, along with the necessary
capital goods, is currently concentrated in China.
While the growth in domestic solar manufacturing capacity represents a significant milestone, the sector is
now entering a phase where the focus extends beyond capacity creation alone. The development of a
competitive and resilient solar PV manufacturing ecosystem will depend on several interconnected factors
across the value chain. These include access to specialised manufacturing equipment, continued
investment in research and development, availability of skilled manpower, a supportive industrial and
regulatory environment, and access to diversified export markets. The following sections examine these
areas and outline opportunities to strengthen domestic value addition, support upstream manufacturing,
and enhance the long-term competitiveness of India's solar PV sector.
Figure 87: Need to focus on ancillary parameters after incentivising the production
Source: Crisil Intelligence Land and utility identification
Desi gn and construction
Setting up of
capital go ods
for production
Labou r
and sta ff
Production of
domestic cells and
module s
Do mestic
demand
Exports
Finance
Power
and
utilities
Ra w
materials
Re search and
development
Land and utility procurement
Low exposure of central and
state entities in outst andin g
loan book
Sta te driven in centives.
Central single window
clearance syste m can be
considered.
Sh ortage of skilledlabour
High import of critical capital
goods for wafers and
polysilicon
Minimal research and
development
PLI for expansion of
polysilicon to modules.
Imports of cells to module
protected by BCD of 25%
and 40%. BCD is also
applicable on glass
Domestic dema nd protected
by ALMM and ALCM
Exports concentrated to the
US
Ce ntralisedsupport can be
considered
Ne eds focus
Strong su pport protects d eman d
Ce ntral suppo rt exists; imports
continue
249
1. Access to machinery and equipment:
Access to capital goods for the manufacturing of polysilicon, wafers, and solar cells is crucial for the long-
term growth and competitiveness of India's solar manufacturing sector. Without these critical inputs,
domestic manufacturers remain heavily reliant on imports, leaving them vulnerable to supply chain
disruptions, price fluctuations, and geopolitical risks. To mitigate this challenge, the Indian government has
introduced the Production Linked Incentive (PLI) scheme for High-Efficiency Solar PV Modules, with a total
outlay of Rs 24,000 crore ($2.7 billion). The scheme aims to establish a comprehensive, end-to-end solar
manufacturing ecosystem in India. However, while the PLI scheme provides essential financial support, its
ultimate success depends on manufacturers' ability to access the necessary capital goods to produce
polysilicon, wafers, and cells on a large scale.
As the industry seeks to deepen domestic value addition and expand into upstream segments such as
polysilicon, ingots, and wafers, the availability of specialised manufacturing equipment assumes increasing
importance. Unlike module assembly, upstream manufacturing requires highly sophisticated production
lines, specialised engineering expertise, and access to advanced process technologies. Consequently, the
pace at which India can expand its upstream manufacturing base will depend not only on policy support
and investment appetite, but also on the industry's ability to procure, install, and operationalise the
necessary capital goods in a timely manner.
Challenges:
Majority of the capital goods market for the solar value chain is concentrated in China, which has resulted
in restricted access to these essential goods for Indian manufacturers. Prominent industry players have
expressed concerns about the access to the supply of W-C-M equipment by Chinese companies. Further,
industry leaders have also voiced similar concerns in the stakeholder consultation round. Limited access
to capital goods could lead to a shortfall in capacity expansion in the upstream segments, creating
bottlenecks for self-reliance and potentially delaying the nation's renewable energy targets. Furthermore,
this could perpetuate the dependence of manufacturers on imports. The consequences of continuing this
could further impact the commissioning timelines under the PLI scheme, potentially hindering the growth of
India's solar manufacturing sector. It should be noted that developments in global supply chains, evolving
trade relationships, and ongoing investments by industry participants may have improved the availability of
certain categories of equipment since this challenge was first identified. In parallel, policy measures aimed
at strengthening domestic manufacturing capabilities continue to evolve. Nevertheless, procurement of
specialised capital goods for upstream solar manufacturing remains an important consideration for the long-
term development of a fully integrated domestic solar PV value chain.
Recommendations
1. Industry players may look to expand their global presence to identify alternative sources for procuring
capital goods and reduce dependence on a limited supplier base.
To bridge gaps in the domestic supply chain, Indian companies may adopt a collaborative approach by
forming joint ventures and strategic partnerships for upstream manufacturing, particularly in polysilicon,
ingots, and wafers.
This is especially important given India’s currently limited upstream manufacturing capacity and constrained
access to specialised capital goods, both of which hinder the development of a self-reliant solar PV
ecosystem. Given that upstream production is highly capital-intensive and requires specialised technical
expertise, joint ventures can help mitigate financial risk, accelerate technology transfer, and support the
creation of a sustainable indigenous manufacturing base.
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Such partnerships would not only help address critical supply bottlenecks but also enhance the
competitiveness of India’s domestic solar PV industry by fostering innovation, resilience, and scale. Over
time, this could position India as a more significant player in the global renewable energy manufacturing
landscape.
The countries listed below present promising opportunities for diversifying capital goods procurement and
strengthening supply-chain resilience:
Table 37: India shares positive relations with most countries that possess capital goods
Source: Crisil Intelligence
Figure 88: Players can increase their presence through multiple strategies below
Source: Company filings
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2. Indian companies may also selectively explore partnerships with established Chinese firms, particularly
where such collaborations can provide access to advanced technology, process know-how, equipment
integration capabilities, and operational expertise. While supply-chain diversification remains a strategic
priority, carefully structured partnerships could help shorten the learning curve and build domestic
capabilities more efficiently, subject to regulatory, geopolitical, and commercial considerations.
The industry has already witnessed the emergence of joint ventures and acquisitions as a means to expand
strategic presence. However, to further accelerate growth, this strategy needs to be scaled up and
replicated in alternative geographies, enabling access to critical capital goods and research and
development (R&D) capabilities.
While access to machinery and equipment forms the foundation for manufacturing capacity creation, long-
term competitiveness increasingly depends on technological capabilities and continuous innovation. As
global solar manufacturers continue to improve cell efficiencies, optimise production processes, and reduce
manufacturing costs, technology development has become an increasingly important differentiator.
Consequently, alongside investments in physical infrastructure, sustained focus on research and
development will be critical to strengthening India's position across the solar PV value chain and supporting
the transition towards higher-value manufacturing activities.
2. R&D spending:
R&D has been pivotal in advancing solar cell technology, leading to significant improvements in efficiency,
cost-effectiveness, and environmental impact. Initially, solar cells were primarily composed of silicon,
offering limited efficiency. Through dedicated R&D, alternative materials such as perovskite have been
explored, resulting in higher efficiency rates. For instance, Qcells (South Korea) achieved a world record
by developing a large-area silicon solar cell with a perovskite top layer that reached 28.6% efficiency. These
advancements not only enhance energy output but also reduce the space required for installation, making
solar power more accessible and practical. The Chinese players have applied this principle over the value
chain by reinvesting the cost savings from government grants into R&D. This has resulted in a significant
fall in module prices over the years.
As India seeks to strengthen its position across the solar PV value chain, technological leadership is
becoming an increasingly important source of competitive advantage. Improvements in manufacturing
processes, cell efficiencies, material utilisation, and product reliability have enabled leading manufacturers
globally to reduce costs while improving performance. Consequently, sustained investment in research and
development is emerging as a key factor in determining long-term competitiveness across the solar PV
value chain, particularly as manufacturers’ transition towards more advanced technologies.
Challenges:
The R&D spend as a share of revenue by Indian players was negligible compared to their Chinese
counterparts, which, on average, has been 3% of revenue and extends to 6% for some players. High in-
house R&D spending has enabled significant evolution in technology and a reduction in costs over the
period. Over the past six years, the prices of solar modules have fallen by 61% to $0.11/Wp in 2024,
compared to 2018. Consequently, the number of patents filed by Indian players is minimal compared to
their Chinese counterparts.
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Figure 89: R&D investments critical to reduce cost of production
Note: Players considered for global analysis are LONGi Solar, Jinko Solar, and Canadian Solar. The above information is on CY
basis while that for Indian players is on fiscal year basis
The government has attempted to foster academia-industry partnerships. However, the spending on R&D
has been low. Between FY2021-22 and FY2026-27, MNRE’s dedicated Research and Development budget
remained a very small component of the Ministry’s overall expenditure, averaging approximately 0.28% of
its revenue budget over the period. The total funds disbursed for R&D by the MNRE till March 2026 were
$14 million, as opposed to the $2.7 billion in total grants disbursed by the Chinese government.
It is important to note that efforts to strengthen domestic innovation capabilities have evolved over recent
years. Both government and industry stakeholders have increasingly recognised the importance of
research, technology development, and academia-industry collaboration in supporting the growth of the
solar manufacturing sector. While some of the challenges identified in this section may be gradually
addressed through ongoing initiatives and future policy interventions, continued focus on R&D will remain
important as solar technologies, manufacturing processes, and industry requirements continue to evolve.
Figure 90: Government subsidies enable more R&D investments
253
Notes: Players considered for global analysis are LONGi Solar and Jinko Solar. The above information is on a CY basis.
Exchange rate of INR 84/USD used for MNRE R&D funds released.
The grant subsidies received by Chinese players is total grants. India’s grants released are for R&D. Beyond R&D, India has also
announced $2.9 billion incentive under the production linked incentive scheme. Incentives are yet to be disbursed as of March 2026.
Source: MNRE, Annual filings
Recommendations
1. A performance-based R&D incentive may be considered to encourage R&D among domestic players.
The MNRE can expand financial support under the Renewable Energy Research and Technology
Development (RE-RTD) Programme, which received a cumulative allocation of only $17 million over
FY2021-22 to FY2026-27—equivalent to just 0.28% of the Ministry’s total budgetary allocation for the
entire six-year period.
A mechanism suggested below could be followed:
• Increase budgetary allocation for solar R&D:
MNRE could consider increasing its budgetary allocation for solar R&D in line with global best
practices. The focus could be on developing advanced cell technologies such as TOPCon, HJT,
and Perovskite, as well as promoting innovation to reduce the production cost of existing
technologies such as mono-crystalline and thin-film solar PV.
• Leverage ANRF funding for solar technology commercialisation:
MNRE could facilitate access for domestic solar manufacturers and technology developers to the
₹1 lakh crore Research, Development and Innovation Fund under ANRF. Eligible projects—
particularly those involving next-generation solar cells, indigenous materials and equipment,
higher-efficiency technologies, and process innovations at Technology Readiness Level 4 or
above—could receive long-term, concessional financing through approved fund managers, helping
bridge the gap between laboratory research, pilot-scale validation and commercial deployment.
• Introduce a production-linked R&D mandate:
While the PLI scheme aims to incentivize higher-efficiency solar PV manufacturing, the R&D-linked
component could be enhanced to reward manufacturers that actively invest in research and
innovation. In addition, a milestone-based incentive programme could be introduced to encourage
manufacturers to invest in R&D and capacity building. Under this model, manufacturers could
receive incentives upon achieving pre-defined outcomes such as setting up pilot production lines,
developing indigenous process technologies, filing patents, improving module efficiency, localising
capital equipment, or collaborating with academic and research institutions. This would encourage
private-sector investment, support the creation of domestic intellectual property, and help India
move beyond assembly-led manufacturing towards technology-led competitiveness.
• Facilitate public-private partnerships in R&D:
Collaboration between government laboratories, academic institutions, and private manufacturers
could be strengthened by incentivizing a larger number of R&D projects annually, beyond the recent
list of five projects announced up to December 2024.
• Establish a dedicated solar R&D fund:
A dedicated fund could be considered to finance cutting-edge solar research, with a focus on
scaling up indigenous capabilities in polysilicon, wafer, and cell production.
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• Fast-track intellectual property protection:
Intellectual property protection could be fast-tracked to encourage innovation, reduce uncertainty
for investors, and promote greater private-sector participation in solar R&D.
• Establish an industry-led Solar PV Manufacturing R&D Consortium:
MNRE may facilitate a consortium of domestic solar manufacturers, equipment and material
suppliers, NISE, NCPRE, IITs and other relevant research institutions to undertake mission-
oriented R&D aimed at commercial manufacturing outcomes. The consortium may focus on
production-line challenges such as improving cell efficiency and yield, reducing critical-material
consumption, developing indigenous equipment and process technologies, improving module
reliability under Indian climatic conditions, and advancing TOPCon, HJT and tandem technologies
to pilot-manufacturing readiness. Projects would require participation and co-funding from at least
one domestic manufacturer, access to a production line for validation, and clearly defined
commercialisation milestones. Government may provide support against measurable outcomes—
laboratory validation, pilot-line demonstration, reliability certification and commercial-line
deployment—rather than research expenditure alone.
2. While the government strengthens mechanisms to incentivize R&D, players may consider
increasing their R&D spend as a percentage of revenue to keep up with their Chinese counterparts.
This will ensure innovation and safeguard the industry from any potential patent wars in the future.
To do so, the players can exercise:
• Strategic ties with global players to bring in in-house R&D programs.
• Increase R&D spending to an average of 3% of revenue, as seen in the global market.
While investments in research and development are critical to advancing technology and improving
manufacturing competitiveness, the successful adoption of these innovations ultimately depends on the
availability of a suitably skilled workforce. As solar manufacturing technologies continue to evolve from
conventional cell architectures towards advanced technologies such as TOPCon, HJT, and future tandem
configurations, the demand for specialised technical capabilities is expected to increase. Accordingly,
workforce development becomes an important complement to technology development and will play a key
role in supporting the long-term growth of India's solar PV manufacturing sector.
3. Availability of skilled labour:
India’s solar photovoltaic industry employs approximately 3.2 lakh people, across grid-connected and off-
grid applications. As per IRENA (International Renewable Energy Agency), 1 GW of solar module
generation creates anywhere between 1,085 to 2,020 jobs. With India set to expand its cell-to-module
capacity base by 48.3 GW under the PLI, the next few years will result in at least 1 lakh direct and indirect
jobs. Thus, the availability of skilled labour will be crucial. This is because manufacturers are expected to
focus on evolving technologies, such as Mono PERC, TOPCon, and HJT, to maximise efficiencies. As
technology evolves, the manufacturing process becomes complex. This is because the fabrication of solar
cells relies on a multitude of high-purity, semiconductor-grade gases and chemicals, which are critical inputs
at each stage of the manufacturing process. To ensure safe, efficient, and high-yielding solar cell production,
the effective management of utilities is paramount.
As manufacturing facilities become larger and technologies become more sophisticated, workforce
capabilities assume increasing importance across production, quality control, equipment maintenance,
process optimisation, and research functions. The transition towards advanced cell technologies is
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expected to increase demand for specialised technical expertise, making skill development an important
enabler of both manufacturing scale-up and operational efficiency across the solar PV value chain.
Table 38: PV technologies - Complexities and efficiency
Technology Mono PERC TOPCon HJT Tandem
Manufacturing
complexity
Least complex.
Leverages mature
technology with
minimal additional
process like
passivation layers
and rear side
contact
More complex than
PERC, requires
precise deposition
of ultra-thin tunnel
oxide and
polysilicon layers
High complexity due
to the integration of
both crystalline
silicon and
amorphous silicon
layers, requiring
advanced
deposition and
curing equipment
Most complex,
involving stacked
cells, e.g.
perovskite-silicon,
with precise
material engineering
to optimise
efficiency and
bandgap alignment.
Losses and
damages
p-type MONO
PERC cells are
prone to LID and
PID losses. Such
losses are high
compared to peers
PID and LID losses
in TOPCon are
lower compared to
MONO PERC
Not prone to PID
and LID losses,
since general cell
construction is n-
type
Affected by LID and
PIC moderately
Temperature Co-
efficient of Power
-0.35% / °C
PERC cells
experience a more
noticeable power
decline at elevated
temperatures
-0.29% / °C
Offers a significant
power improvement
over PERC cells at
elevated
temperatures
-0.24% to -0.26% /
°C
Lowest temperature
coefficient – HJT
cells experience
minimal power loss
even at high
temperatures
Limited data
Efficiency 23-24% 24.5-25% 25-25.5% 26-28%
Note: LID – Light-induced degradation. PID – Potential-induced degradation
Source: ITRPV, Industry
Challenges:
• The challenge of complexity could be further exacerbated by low productivity. The average productivity
of an employee per MW in India is lower than that of major global players. The productivity of an
employee per MW (measured by dividing total capacity by the number of employees) for major global
players has increased between 2020 to 2023 by ~3 times owing to increase in scale where the PV
capacity (P-W-C-M) of three major global players (LONGi solar, Jinko Solar and Canadian Solar has
increased ~5 times between 2020 to 2023 to 803 GW. While India’s cumulative PV capacity (W-C-M)
has too grown at a sharp pace, estimated over 100 GW by August 2025 productivity levels are only a
about a third presently compared to global peers mainly due to scale effect and integrated processes.
• The industry witnesses a continuous evolution in technology, where cells have evolved from
Polycrystalline to HJT. The availability of skilled labour thus becomes a critical parameter to drive
innovation in R&D. Hence, availability of labour will be crucial to scale manufacturing technologies in
the future.
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While the government offers a grant-in-aid of up to Rs 50 lakh ($56,625
151
) to educational institutions for
upgrading laboratory facilities, the same is limited to 2 institutes per annum.
It should be noted that workforce development has received increasing attention from both industry
participants and government agencies in recent years. Various training, skilling, and vocational initiatives
have been introduced or expanded to support emerging manufacturing sectors. In parallel, several
manufacturers have strengthened internal training programmes to support evolving operational
requirements. While skill availability continues to be an important consideration as the industry scales, these
ongoing efforts may help address some of the capability gaps identified in this section over time.
Recommendations:
1. An increase in the budgetary allocation to training and increase the limit on the recipients for grants
in aid beyond 2 institutes per annum could be considered.
a. The government could consider establishing a dedicated fund, with the allocation determined
based on sectoral needs, alongside a routine oversight mechanism to monitor implementation.
Participating institutes may be required to submit quarterly financial and performance reports
to ensure alignment with grant objectives. Accountability could be further strengthened through
third-party independent audits, similar to practices adopted by the National Skills Development
Corporation. An outcome-based funding model may also be adopted, similar to the PM-
KUSUM scheme, where fund disbursement is linked to clearly defined milestones such as
training targets achieved, industry collaborations established, publications, patents filed,
prototypes developed, and technology commercialisation outcomes.
b. Training may be provided to institute personnel in project management, curriculum design,
and industry engagement. Curricula should be developed in collaboration with industry to
ensure practical relevance, with higher weightage assigned to hands-on training, internships,
apprenticeships, and industry-based projects.
c. A combination of data-backed decision-making, milestone-linked incentives, and strong
accountability mechanisms can help MNRE bridge skill gaps, promote domestic innovation,
encourage manufacturers to invest in capability development, and ensure the judicious use of
grant-in-aid funding.
2. The industry stakeholders could consider setting up an industry-led solar skills development council.
The following framework can be used:
a. Setting up of dedicated council under Skill India Mission and MNRE, led by key industry
players to ensure collaboration with ITIs, polytechnic institutes and engineering colleges to
create industry-relevant curricula with frequent revision as per evolution in the industry.
b. Introducing structured training programs for key manufacturing roles such as polysilicon and
wafer processing, solar cell and module assembly and quality control and automation in solar
factories with government backed certifications
c. The proposed council could collaborate with MSDE, NSDC and MNRE to deliver solar-
manufacturing courses under PMKVY 4.0, using “Short-Term Training and Special Projects”
for new entrants and “Recognition of Prior Learning” to upskill and certify the existing
workforce. These interventions could be complemented by on -the-job training and
apprenticeships under the National Apprenticeship Promotion Scheme.
151
USD arrived at using an exchange rate of 88.3 (average of fiscal 2026)
257
d. Partner with global solar leaders (Germany, USA, South Korea) to train Indian workers in
cutting-edge manufacturing techniques. A precedent is seen in automobiles sector with Japan
and Germany for EV skilling. Partnerships could also be explored with China to access solar-
manufacturing know-how and accelerate technology transfer for workforce training.
e. Develop e-learning platforms and certifications.
Access to capital goods, investment in innovation, and the availability of skilled manpower collectively form
the foundational building blocks of a competitive manufacturing ecosystem. However, the pace at which
manufacturing capacity is established and expanded also depends on the broader business environment.
Factors such as land availability, infrastructure readiness, regulatory approvals, power access, and policy
clarity can influence investment decisions and project execution timelines. Consequently, ease of doing
business remains an important consideration in supporting the continued growth of India's solar PV
manufacturing sector.
4. Ease of doing business:
While the ease of doing business varies across states, the thrust from government initiatives such as PLI,
BCD, and ALMM I and II has created a conducive policy landscape for Indian manufacturers to scale up
their operations rapidly. In addition to the above, the regulators could consider taking two additional steps
to support Indian manufacturers in setting and scaling up their factories.
As the industry moves towards larger and more integrated manufacturing facilities, the importance of
supporting industrial infrastructure and efficient regulatory processes is expected to increase. In addition to
policy incentives, factors such as land availability, utility access, connectivity, approval timelines, and
infrastructure readiness can influence the speed and scale of manufacturing investments. Strengthening
these enablers can help improve project execution, support capacity expansion, and enhance the overall
competitiveness of India's solar PV manufacturing ecosystem.
i. Identifying manufacturing clusters
Need: Manufacturing hubs concentrate manufacturers and suppliers in the same location, driving cost
reduction, subsidy utilities, improve supplier options and innovation.
Recommendation:
A precedent has been established in the China for the same. Infrastructure on these lines was set up in
China (Pearl River Delta) and Malaysia (Kulim and Penang) for solar. In India, the cluster-based
manufacturing model has already delivered significant benefits across sectors such as automobiles,
electronics and chemicals, providing a strong domestic precedent for establishing a similar integrated
manufacturing ecosystem for the solar industry.
State governments could consider attracting investments from solar manufacturers and their suppliers by
developing manufacturing hubs. Given the scale of anticipated investment, multiple states have an
opportunity to attract manufacturers and create multi-gigawatt scale hubs.
a. Deemed approval of open-access renewable energy and removal of net metering limits:
States could consider providing deemed approval for open-access renewable energy projects and
reviewing net metering limits. This may help manufacturers access affordable and reliable clean
power, potentially supporting operational efficiency and sustainability goals.
b. Identification of suitably sized land parcels: By identifying and aggregating land parcels with
competitive leasing rates and ensuring connectivity to road, port, and air infrastructure, states might
lower entry barriers for investors. Such steps could enhance the attractiveness of the state for
potential manufacturers.
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c. Including solar manufacturing as a thrust/priority sector: States could explore designating
solar manufacturing as a thrust or priority sector in their industrial policies. This could unlock
targeted incentives and signal policy intent, potentially encouraging both anchor investments and
the development of supporting supply chains.
d. Support for labour requirements: Labour availability may be enhanced through skill-training
initiatives tailored to the solar manufacturing sector, and by developing residential facilities for
workers, particularly in underdeveloped regions. Such measures might help ensure a steady supply
of skilled labour and support wider community development.
e. Long-term tie-ups and anchoring hubs to solar parks: As state-owned utilities account for a
significant share of power procurement and distribution, they could evaluate the possibility of long-
term tie-ups with developers and manufacturers in the state to secure solar module supplies,
possibly at favourable costs. States might also consider anchoring manufacturing hub development
to large-scale upcoming solar parks, which could provide integrated infrastructure and shared
benefits.
f. Co-located common R&D facility: Establish co-located common R&D and testing facilities within
each manufacturing hub, anchored by India’s National Institute of Solar Energy (NISE) – which
already operates solar PV module test laboratories, reliability and performance test rigs, and
certification, standardization and skill development capabilities at its 200-acre Gurugram campus.
Replicating these shared facilities at hub level would compress certification turnaround times, lower
per unit testing costs for small and mid-sized manufacturers, and provide a platform for
collaborative innovation in cells, modules and capital BoS components as Indian manufacturers
deepen their presence in the upstream value chain.
While infrastructure and industrial ecosystem development can support the establishment of manufacturing
facilities, long-term investments across the solar value chain are also influenced by policy visibility and
market certainty. Given the capital-intensive nature of solar manufacturing, particularly in upstream
segments such as polysilicon and wafers, investors typically require clarity on the regulatory and trade
environment over an extended period. Accordingly, the predictability of measures relating to import
protection and domestic manufacturing support can play an important role in facilitating investment
decisions, particularly in capital-intensive upstream segments of the value chain.
Transitioning from market protection to long-term competitiveness
ii. Balancing industry support with competitive market development
Recommendation:
The implementation of ALMM I has facilitated the scaling of downstream components and is likely to yield
benefits for upstream segments. However, its effects should be monitored closely to guard against potential
oversupply and to sustain market competitiveness. Accordingly, it is recommended that policymakers
consider including a sunset clause or a conditional phase-down mechanism for ALMM I once pre-defined
market indicators are met. Such an approach would allow the policy to be relaxed when appropriate—
thereby incentivizing competition and preventing market complacency—while retaining the ability to extend
or reintroduce support if market conditions warrant.
Supporting Grid and Storage Infrastructure
Focus on grid storage and infrastructure development is also critical. India’s installed solar capacity, and
the additional capacity planned through 2030 and beyond, will generate power that is concentrated in
259
daylight hours and subject to seasonal and weather-related variation. The ability to utilise this power reliably
across demand cycles depends on the availability of adequate transmission infrastructure to evacuate
power from generation-rich states to load centres, and storage infrastructure to shift surplus generation to
periods of peak demand. Without continued and scaled focus on both, additions to generation capacity
alone will not translate into grid reliability or energy security.
The consequences of an infrastructure deficit with India’s renewable energy growth outpacing its
transmission infrastructure, the impact may be witnessed in form of curtailments and underutilised capacity,
especially in renewable-rich states. The lack of evacuation infrastructure may also delay the commissioning
of new projects as they await grid connection. Continued and scaled focus on grid storage and transmission
is therefore not a downstream policy concern — it is a prerequisite for the effective utilisation of every
megawatt of solar capacity that is or will be installed.
While strengthening domestic manufacturing capabilities and supporting infrastructure remain important
priorities, the long-term sustainability of the sector will also depend on access to sufficiently large and
diversified markets. As manufacturing capacities continue to expand across the value chain, exports can
play an important role in supporting capacity utilisation, diversifying revenue streams, reducing dependence
on individual markets, and improving the resilience of the domestic manufacturing ecosystem.
Consequently, alongside domestic demand growth, the development of diversified export opportunities
assumes increasing importance for India's solar PV manufacturing sector.
5. Export agreements:
Exports are crucial for solar module manufacturers as they support premium revenue growth, improve
capacity utilisation, and expand market reach beyond domestic demand. The increase in India’s module
manufacturing capacity to 173 GW by March 2026 created a stronger platform for export-led growth.
However, India’s solar module exports remain highly concentrated in a single destination market—the US.
Overall, the US accounted for 97% of India’s solar module exports between fiscal 2020 to 2026,
underscoring the sector’s heavy dependence on one geography. In contrast, India’s share in other key
regions such as Europe, Asia, and the rest of the world remains negligible, limiting its ability to diversify
revenue streams and reduce exposure to market-specific risks. This high concentration exposes Indian
manufacturers to demand fluctuations, trade policy changes, tariff actions, and procurement shifts in the
US market.
As India’s manufacturing capacity continues to expand, maintaining access to multiple export destinations
will become increasingly important for sustaining capacity utilisation and reducing market concentration
risks. Diversified export markets can provide greater resilience against changes in trade policies, demand
cycles, and geopolitical developments in any single geography. Consequently, the ability to establish a
broader international presence and diversify export destinations is likely to become an important factor in
supporting the long-term competitiveness and stability of India's solar PV manufacturing sector.
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Figure 91: Trade sanctions by US on China opens door for Indian exports; results in geographic concentration
Note: UFLPA stands for Uyghur Forced Labor Prevention Act. CVD and ADD refer to countervailing duties and anti-dumping duties,
respectively. Green indicates favourable outcomes, while red indicates unfavourable outcomes.
Source: Ministry of Commerce
While exports have supported capacity utilisation and revenue growth, the concentration of exports in a
limited number of markets creates exposure to evolving trade and policy developments.
Challenges:
1. As of the current date, India lacks an export agreement with the US for the supply of solar
technologies, including cells and modules. This is significant as the US remained the largest global
importer of solar cells and modules in CY2025, accounting for nearly 21% of global imports. At the
same time, the US has adopted an increasingly protectionist trade stance, imposing anti-dumping
duties (ADD), countervailing duties (CVD), and reciprocal tariffs on several exporting nations. It has
imposed ADD and CVD in the range of 15% to 3,404% on Cambodia, Vietnam, Thailand, and
Malaysia, while also proposing duties of 103% to 249% on India, Laos, and Indonesia over the
reciprocal tariff. These measures have raised the landed cost of imported solar cells and modules
in the US, contributing to a decline in exports from India and other affected markets.
2. Against this backdrop, India’s rapidly expanding manufacturing base faces heightened market-
access risk. With 90-100 GW of cell-to-module capacity additions announced, the industry could
face oversupply pressures at the module stage of the value chain if export channels remain
constrained. As the domestic capacity base rises, diversification of export markets beyond the US
becomes critical to reduce policy-driven demand shocks, protect capacity utilization, and support
the long-term viability of India’s solar manufacturing ecosystem.
Furthermore, barring the US, India’s supply to top importers such as Netherland, Brazil and Spain remain
negligible.
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Figure 92: India’s share is limited in top importer’s basket
Note: Above trade statistics are for CY 2025
Source: ITC Trademap
It should be noted that trade relationships, market access discussions, and international cooperation
frameworks continue to evolve. In recent years, both the Government of India and industry participants
have increased their engagement with global markets through trade dialogues, commercial partnerships,
and investment initiatives. While some of the market-access challenges identified in this section may be
addressed gradually through ongoing negotiations and evolving trade arrangements, continued efforts
towards export diversification remain important for reducing concentration risks and supporting long-term
growth in the solar PV manufacturing sector.
Recommendations:
1. The government could consider helping trade and market expansion through bilateral and
multilateral trade agreements. Negotiate favourable trade agreements to reduce tariffs and trade
barriers with the key importers.
2. Focus on signing MoUs with key importers. A precedent has been established in the green
hydrogen sector where the government has signed an MoU with Saudi Arabia in electrical
interconnections, green/clean hydrogen and supply chains in October 2024.
3. Diversifying Export destinations: The global solar market is poised for significant growth, with an
expected addition of 5 TW of solar capacity by 2030. Excluding China, India, and some advanced
economies, the rest of the world is anticipated to add approximately 624 GW of solar capacity over
the next six years, starting from 2025. This translates to a substantial annual addition of around
104 GW. India, which already contributes 3% to the US solar PV export basket, can tap into this
growing market. India can potentially extend Lines of Credit to developing countries. This can be
done in line of Export-Import Bank of India (EXIM Bank), entering into agreement with government
of Guyana to provide a Line of Credit worth $2.5 million
152
for installation of a solar photo voltaic
powerplant at Cheddi Jagan International Airport.
4. The industry stakeholders could consider the recommendations provided in point 1 of
recommendations (enhancing their presence in the global market through JV and acquisitions) for
the key importing nations. Apart from this, industry stakeholders are also encouraged to expand in
the global market by setting up assembling/manufacturing plants to increase their presence. A
precedent has been established by Premier Energies and Waaree Energies to improve their
presence in the US market.
152
India-Guyana
262
5. Apart from this, both the government and industry stakeholders could focus on organising trade
missions and expos to form export and strategic alliances with not only the top importers but also
countries with solar power targets. With the capacity expansion planned in India, the country can
be become the second largest PV manufacturer with the required upstream value chain, after
China. India is already the second largest module manufacturer in the world with an enlisted
capacity of 183 GW in ALMM release dated May 1
st
2026.
6. The India-EU free trade agreement, whose negotiations were concluded on January 27, 2026,
against the backdrop of EUR 120 billion
153
in bilateral goods trade in 2024, eliminates or reduces
tariffs on over 96% of EU goods exports and reciprocal Indian exports, and contains explicit
commitments on cooperation in renewable energy, low carbon goods, and the easing of trade and
environmental goods and services. Industry stakeholders could therefore consider routing module
and cells exports to UK and EU offtakers under the preferential tariffs once both agreements enter
into force. They could also form joint ventures with European project developers, given that EU’s
required annual solar deployment may continue to outstrip the European solar PV industry.
Conclusion
India's solar PV manufacturing sector has made significant progress over the past decade, supported by
targeted policy interventions, increasing domestic demand, and substantial capacity additions across the
downstream value chain. The rapid expansion in module and cell manufacturing demonstrates the sector's
ability to scale and support the country's renewable energy ambitions.
At the same time, the next phase of growth is likely to depend on the continued development of upstream
manufacturing capabilities, technology leadership, workforce readiness, industrial infrastructure, and
diversified export markets. While considerable progress has been made across several of these areas,
many of the challenges identified in this report remain interconnected and require coordinated action from
policymakers, industry participants, research institutions, and other stakeholders.
It is also important to recognise that policy and market developments continue to evolve. In several areas,
measures introduced by central and state governments, as well as strategic initiatives undertaken by
industry participants, may already be contributing towards addressing some of the challenges highlighted
in this assessment. Nevertheless, continued focus on strengthening domestic value addition, improving
competitiveness, and enhancing ecosystem resilience will remain important as India advances towards its
renewable energy and manufacturing objectives.
Taken together, the challenges and recommendations presented in this report should be viewed not as
isolated interventions, but as complementary elements of a broader effort to establish a competitive,
integrated, and globally competitive solar PV manufacturing ecosystem in India.
153
EU Europa
263
Conclusion
India’s aspiration of becoming a global manufacturing hub by 2047 will require a focused strategy that
combines scale, competitiveness, innovation, and integration into global value chains. The analysis
presented in this volume demonstrates that Chemicals, Textiles, Telecom & Network Equipment, and Solar
PV Manufacturing represent four distinct yet complementary pathways through which India can accelerate
industrial growth, generate employment, enhance technological capabilities, strengthen self-reliance, and
expand its presence in international markets. Together, these sectors capture the breadth of India’s
manufacturing opportunity: from employment-intensive industries and foundational industrial inputs to
advanced technology products and strategic sectors of the future.
A common theme emerging across all four sectors is that India possesses significant inherent advantages,
including a large domestic market, a favourable demographic profile, an improving policy environment,
growing infrastructure investments, and increasing global interest in supply-chain diversification. However,
these strengths alone will not be sufficient to secure global leadership. Across sectors, challenges such as
import dependence on critical inputs, fragmented supply chains, infrastructure and logistics gaps, limited
domestic value addition, technology constraints, and skill shortages continue to constrain competitiveness.
Addressing these bottlenecks will require a coordinated approach involving the Union and State
Governments, industry, academia, financial institutions, and the broader innovation ecosystem.
The sectoral analyses also reinforce the importance of moving beyond assembly-led or low-value
manufacturing towards deeper and more resilient value-chain participation. In chemicals, the priority lies in
strengthening domestic feedstock availability, developing integrated manufacturing clusters, and increasing
downstream value addition. In textiles, enhancing competitiveness in man-made fibres, improving
productivity, modernising MSMEs, and expanding market access will be critical. In telecom equipment, the
focus must shift towards localisation of components, technology development, and export-oriented
manufacturing ecosystems. In solar PV, scaling upstream capabilities, strengthening research and
development, and reducing dependence on imported inputs will be essential to building a globally
competitive industry.
The experiences of global manufacturing leaders examined in this report further highlight that sustained
success is rarely the result of a single policy intervention. Rather, it is achieved through long-term policy
consistency, industrial clustering, infrastructure readiness, targeted incentives, investment in technology
and skills, and strong linkages between domestic firms and global markets. The lessons drawn from
countries such as China, Vietnam, South Korea, Singapore, and others underscore the importance of
execution, institutional coordination, and the creation of complete industrial ecosystems rather than isolated
manufacturing capacities.
As India seeks to increase the contribution of manufacturing to economic growth, exports, and employment,
the recommendations outlined in this volume provide a practical roadmap for action. If implemented in a
coordinated and time-bound manner, they can help strengthen domestic capabilities, attract investments,
enhance productivity, improve export competitiveness, and create quality employment at scale. More
importantly, they can enable India to secure stronger positions in global value chains while building the
resilience and technological depth necessary for long-term industrial leadership.
This volume marks the first step in a broader effort to identify and develop the sectors that can drive India’s
manufacturing transformation. The opportunities presented by Chemicals, Textiles, Telecom & Network
Equipment, and Solar PV Manufacturing are substantial, but equally significant is the broader message that
emerges from the study: India has the potential to become a globally competitive manufacturing
powerhouse, provided it combines ambition with sustained reforms, targeted investments, and disciplined
execution. The subsequent volumes will extend this analysis to the remaining priority sectors, completing
a comprehensive roadmap to support India’s journey towards becoming a leading global manufacturing
hub and realizing the vision of Viksit Bharat@2047.
report. While due care has been exercised to prepare this report using data from various sources, NITI
Aayog does not confirm the authenticity of data and accuracy of the methodology to prepare the report.
NITI Aayog shall not be held responsible for findings or opinions expressed in the document.
That responsibility rests completely with Crisil.
GMH Report
Volume - I
3
Message from the Vice Chairman
Ashok Kumar Lahiri
Vice Chairman, NITI Aayog
“India stands at a defining moment in its economic and industrial journey. As the nation moves forward with the vision of
Viksit Bharat @2047, manufacturing will play a central role in shaping the country's future growth trajectory. Across the
world, the experience of every major industrial economy has demonstrated that sustained economic transformation is built
on a strong and globally competitive manufacturing base. Manufacturing not only drives investment, innovation and
exports, but also creates quality employment, raises productivity and strengthens linkages across multiple sectors of the
economy. For a country like India, with a young workforce and a median age of around 28 years, a vibrant manufacturing
sector offers the most effective pathway to harnessing its demographic dividend and translating it into broad-based and
inclusive prosperity.
At the same time, the experience of recent decades reminds us that considerable work remains ahead. India's
manufacturing sector today accounts for nearly 17 percent of Gross Value Added, a share that has remained broadly
stable over the past two decades. During the same period, several economies have significantly expanded their
manufacturing capabilities and strengthened their integration with global value chains. China's share in global
manufacturing value added increased from about 5 percent in 1995 to nearly 32 percent in 2023, while India's share
increased from about 1.5 percent to 3.2 percent. Likewise, countries such as the Republic of Korea and Vietnam have
demonstrated how sustained policy support, technological advancement, investment in industrial capabilities and deeper
integration with global production networks can transform national competitiveness. These experiences should not be
viewed as a measure of India's limitations, but rather as a reminder of the scale of opportunity before us and the importance
of pursuing long-term, coordinated and consistent reforms.
This report, prepared in collaboration with Crisil Intelligence, represents a structured endeavour to convert national
ambition into a disciplined, evidence-based roadmap. From an initial universe of 62 sectors, a transparent relative-
attractiveness methodology has identified twelve in which India can realistically aspire to global leadership: Electronics,
Telecom Equipment, Solar PV, Pharmaceuticals, Chemicals, Automobiles, Defence and Drones, Steel, Capital Goods,
Textiles, Food Processing, and Leather and Footwear. Each has been examined through the lenses of strategic alignment,
financial viability, and value-chain positioning, and benchmarked against the nations that have achieved demonstrable
excellence in the respective domain. The intent throughout has been to ground aspiration in analytical rigor, so that the
choices before us rest on evidence rather than on assertion.
The common thread running through all twelve sectors is the recognition that India's manufacturing ambitions must extend
beyond expanding production alone. The country must progressively move up the value chain, build globally competitive
enterprises, strengthen domestic capabilities in advanced manufacturing, and integrate more deeply into global production
networks. Self-reliance, export competitiveness, technological leadership and employment generation are not competing
priorities; rather, they reinforce one another and together form the foundation of a resilient, competitive and future-ready
manufacturing economy.
Realising this vision will require sustained collaboration between the Union and State Governments, industry, academia,
financial institutions and the wider innovation ecosystem. It will also require policy continuity, institutional coordination and
a shared commitment to strengthening India's manufacturing capabilities over the long term. I am confident that this study
will serve as a valuable resource for policymakers, industry leaders, investors and researchers, and will contribute
meaningfully to informed policy formulation and effective decision-making. I trust that the analysis and recommendations
presented in this report will support informed policymaking and contribute to strengthening India's manufacturing
competitiveness and enhancing its participation in global value chains.”
4
Message from the CEO
Nidhi Chhibber
CEO, NITI Aayog
“A strategic roadmap is meaningful only if it provides a basis for informed decision-making and effective implementation.
This report has therefore been prepared not merely as an assessment of India's manufacturing landscape, but as a
framework for identifying the sectors that should receive strategic attention and the interventions required to strengthen
their competitiveness. It examines each sector through the lens of India's comparative advantages, emerging global
opportunities and existing structural constraints. The objective is to support evidence-based prioritisation, so that policy
efforts, public investment and private capital are directed towards areas that offer the greatest potential for enhancing
productivity, expanding manufacturing capabilities, creating employment and increasing India's participation in global
value chains. In doing so, the report seeks to move the discussion from broad strategic intent to a more focused and
implementable sectoral roadmap.
The report is underpinned by a rigorous and evidence-based methodology. Rather than beginning with a predetermined
set of priority sectors, it adopts a systematic approach to sectoral assessment, evaluating a broad universe of
manufacturing sectors before identifying those with the greatest strategic potential. The shortlisted sectors are
subsequently examined through the lens of strategic relevance, competitiveness and value chain opportunities, with the
findings further validated through benchmarking against global best practices and extensive stakeholder consultations.
This integrated approach ensures that the recommendations are grounded in robust analysis, informed by international
experience and aligned with industry realities.
The report also recognizes that India's manufacturing ambitions will depend not only on leveraging its strengths but also
on addressing persistent structural constraints. High logistics costs, gaps in infrastructure and power reliability, the
predominance of MSMEs with limited access to technology and finance, and an export basket concentrated in relatively
low value-added products continue to affect the competitiveness of Indian manufacturing. While significant progress has
been made through initiatives such as the Goods and Services Tax (GST), Make in India, the Production Linked Incentive
(PLD Schemes, PM Gati Shakti and the India Semiconductor Mission, the next phase of reforms will require more targeted,
sector-specific interventions. This report seeks to identify those priorities and provide a roadmap for the actions needed
across different sectors.
Given the breadth and diversity of India's manufacturing landscape, the study has been structured as a series of sectoral
volumes to allow for a more detailed examination of each priority area. The present volume marks the beginning of this
effort. I would like to place on record my appreciation for the team at NITI Aayog and our knowledge partner, Crisil
Intelligence, for the analytical rigor and commitment that have gone into the preparation of this report. I hope that the
analysis and recommendations presented here will contribute meaningfully to informed policy discussions and support
the decisions needed to strengthen India's manufacturing competitiveness in the years ahead.”
5
Message from the Programme Director
Ishtiyaque Ahmed
Programme Director – Industry and
Foreign Investment, NITI Aayog
“The global manufacturing landscape is undergoing a period of rapid transformation as firms diversify their supply chains,
reduce dependence on any single geography, and seek stable and competitive manufacturing locations to serve global
markets. These developments have created a significant opportunity for countries that are able to strengthen their
manufacturing capabilities and integrate more deeply into global value chains. For India, this opportunity coincides with a
period of strong policy momentum, a maturing industrial base, and a demographic profile well suited to expanding
manufacturing employment.
A study of this nature is therefore both timely and necessary. This report is the outcome of extensive work by NITI Aayog,
in collaboration with Crisil Intelligence, to identify the manufacturing sectors that offer the maximum potential to drive
India's manufacturing growth, strengthen its participation in global value chains, and generate employment. It seeks to
support informed policy choices by identifying sectors where focused interventions can have the significant impact.
The study followed a structured four-phase approach. Phase 1 narrowed the field from an initial 62 sectors to twelve
through a four-parameter relative attractiveness framework comprising domestic and global market size, together with
domestic and global growth projections up to FY30, mapped on a market size-growth matrix. Phase 2 involved a detailed
assessment of each shortlisted sector across three dimensions: strategic alignment, operational and financial viability, and
value chain play. The analysis examined raw material dependencies, geopolitical considerations, profitability, capital
intensity, and India's current position within global value chains. Phase 3 benchmarked each sector against two leading
manufacturing nations to identify relevant lessons on policy, technology and industrial development. Phase 4 integrated
these findings with extensive industry consultations, combining insights from secondary research, international best
practices and stakeholder feedback to develop recommendations centred on identified challenges, targeted interventions
and implementation strategies.
Twelve sectors have been identified. The analysis has been tailored to reflect the specific requirements and growth drivers
of each sector. For every sector, the objective has remained consistent: to move beyond assessing the current situation
and develop practical, evidence-based recommendations for strengthening India's manufacturing competitiveness. The
recommendations seek to address the underlying structural constraints affecting each sector while identifying the policy
measures, institutional reforms, infrastructure requirements and investment incentives necessary to unlock future growth.
The report will be released in three volumes. This volume presents a sectoral analysis along with detailed reports on the
Chemicals, Textiles, Solar PV Manufacturing, and Telecom & Networking Products sectors.
I hope that the depth of analysis presented in this report will serve as a valuable resource for policymakers, industry
leaders, researchers, and other stakeholders working towards advancing India's manufacturing ambitions.”
6
Acknowledgements
The Report on Key Sectors to Position India as a Global Manufacturing Hub represents the culmination of a
collaborative effort involving CRISIL, the knowledge partner, and the team of the Industry & Foreign Investment
Division, NITI Aayog. The report has been shaped through extensive research, stakeholder consultations and
deliberations, with the objective of identifying opportunities and addressing key constraints to strengthen India’s
manufacturing capabilities and global competitiveness.
I express my sincere gratitude to the Hon’ble Vice Chairman, NITI Aayog, for his leadership and valuable guidance,
and to Dr. Arvind Virmani, Hon’ble former Member, NITI Aayog, for his insightful suggestions. I also acknowledge the
valuable guidance and direction provided by the CEO, NITI Aayog, throughout the course of this exercise.
The report has drawn considerably from the expertise and active engagement of the concerned Ministries and
Departments of the Government of India. I gratefully acknowledge the valuable inputs received from the Ministry of
Textiles, Ministry of Steel, Ministry of New and Renewable Energy, Ministry of Heavy Industries, Ministry of Electronics
and Information Technology, Ministry of Defence, Ministry of Communications, Ministry of Chemicals and Fertilizers,
Department of Pharmaceuticals, Department for Promotion of Industry and Internal Trade (DPIIT), and Ministry of
Food Processing Industries. Their sectoral perspectives and constructive feedback have been important in
strengthening the analysis and ensuring that the recommendations remain relevant to the evolving needs of Indian
industry.
I also place on record my appreciation for the industry representatives, experts and practitioners who participated in
the consultations undertaken as part of this exercise. Their first-hand understanding of market developments, global
trends, emerging opportunities and implementation challenges has added significant depth to the report and helped
bring an industry perspective to the recommendations.
I would particularly like to acknowledge the contribution of the CRISIL team, especially Mr. Pushan Sharma, Mr. Mohit
Adnani, Mr. Jyotish Menon, and the sectoral experts associated with the study. Their analytical rigour and technical
expertise have been valuable in undertaking the sectoral assessment and developing a comprehensive understanding
of the opportunities for India to strengthen its presence across global manufacturing value chains.
I sincerely appreciate the dedicated efforts of the Industry & Foreign Investment Division, NITI Aayog. The team led
by Shri Upendra Kumar Gupta, Deputy Adviser, comprising Shri Abhishek Mukherjee, Research Officer, and Ms.
Pragya Bajpai, Young Professional, has contributed through sustained research, analysis, stakeholder coordination
and consultations throughout the project.
For Volume I, covering the Chemicals, Textiles, Solar PV and Telecom sectors, I would also like to acknowledge the
valuable contributions of Ms. Vamakshi, Shri Bhadraksh Bhargava and Ms. Vrushali Lokhande, young professionals
of the Division. Their sector-specific research, analytical inputs and sustained efforts have played an important role in
shaping this volume and bringing together the insights and recommendations presented herein.
I hope that this Report will serve as a useful reference for policymakers, industry and other stakeholders in
strengthening India’s manufacturing ecosystem, enhancing competitiveness and enabling greater integration with
global value chains.
Ishtiyaque Ahmed
Programme Director (Industry & Foreign Investment)
NITI Aayog
List of abbreviations
ADD Anti-Dumping Duty
API Active Pharmaceutical Ingredient
ASEAN Association of Southeast Asian Nations
BCD Basic Customs Duty
BIS Bureau of Indian Standards
BOM Bill of Materials
CAGR Compound Annual Growth Rate
CEPA Comprehensive Economic Partnership Agreement
CPDS Chemical Promotion Development Scheme
CPVC Chlorinated Polyvinyl Chloride
DGFT Directorate General of Foreign Trade
DoT Department of Telecommunications
EBITDA Earnings Before Interest, Tax, Depreciation and Amortisation
EPZ Export Processing Zone
FDI Foreign Direct Investment
FTA Free Trade Agreement
GDP Gross Domestic Product
GPON Gigabit Passive Optical Network
GVA Gross Value Added
GVC Global Value Chain
HJT Heterojunction Technology
HSN Harmonised System of Nomenclature
IC Integrated Circuit
IoT Internet of Things
KTPA Kilo Tonnes Per Annum
MEG Mono Ethylene Glycol
MMF Man-Made Fibre
MMTA Million Metric Tonnes Per Annum
MSME Micro, Small and Medium Enterprise
OEM Original Equipment Manufacturer
OFC Optical Fibre Cable
PCPIR Petroleum, Chemicals and Petrochemicals Investment Region
PE Polyethylene
PET Polyethylene Terephthalate
PLI Production Linked Incentive
PP Polypropylene
8
PTA Purified Terephthalic Acid
PVC Polyvinyl Chloride
PV Photovoltaic
QCO Quality Control Order
R&D Research and Development
RAN Radio Access Network
RCEP Regional Comprehensive Economic Partnership
RMG Ready-Made Garments
ROCE Return on Capital Employed
SEZ Special Economic Zone
SME Small and Medium Enterprise
SPV Special Purpose Vehicle
T&A Textile and Apparel
TANE Telecom and Network Equipment
TOPCon Tunnel Oxide Passivated Contact
VGF Viability Gap Funding
WTO World Trade Organization
9
List of tables
Table 1: Key components of chemicals segments .................................................................................................. 44
Table 2: Chemical sector exports target by 2030: ................................................................................................... 49
Table 3: Key raw materials used in specialty chemicals manufacturing and leading producer countries ............... 52
Table 4: Geopolitical relation with major raw material supplier countries ................................................................ 53
Table 5: Key government initiatives supporting the chemicals sector ..................................................................... 61
Table 6: Selection of top chemical manufacturing countries ................................................................................... 62
Table 7: Priority chemicals for enhancing domestic manufacturing capabilities ...................................................... 83
Table 8: Key RMG raw materials and major producing countries .......................................................................... 100
Table 9: Countries from where India procures raw materials ................................................................................. 101
Table 10: Top raw material sources for global textile industry ............................................................................... 102
Table 11: Countries from where India procures raw materials ............................................................................... 102
Table 12: Share of key exporting countries in the global RMG trade .................................................................... 116
Table 13: India’s key FTAs and country-wise RMG export growth rate ................................................................. 133
Table 14: Share of key FTA countries in India’s RMG export basket (volume-wise) ............................................. 133
Table 15: Duty-free access for RMG ...................................................................................................................... 134
Table 16: India's trade position in telecom and network equipment manufacturing .............................................. 154
Table 17: Network Infrastructure equipment and their functions ........................................................................... 155
Table 18: Key service offerings by TANE companies ............................................................................................ 156
Table 19: Increasing uptake of digital services indicates a strong demand for TANE growth ............................... 158
Table 20: Raw material availability for TANE sector .............................................................................................. 162
Table 21: Major suppliers of telecom equipment and degree of India’s import dependence ................................. 162
Table 22: Champion countries and their share in global exports ........................................................................... 167
Table 23: Underdeveloped ecosystem limiting localization across TANE products ............................................... 175
Table 24: Factors that lead to cost reduction in Telecom and Network Equipment manufacturing ....................... 179
Table 25: Effective PTFE pricing after price-gap support ...................................................................................... 184
Table 26: Current key target markets ..................................................................................................................... 188
Table 27: Tariffs relevant to Telecom and Network Equipment Manufacturing ...................................................... 191
Table 28: Malaysia and Vietnam emerging countries in PV value chain ............................................................... 212
Table 29: India's presence in upstream value chain limited ................................................................................... 212
Table 30: China's push to PV manufacturing industry ........................................................................................... 221
Table 31: Vietnam's push to PV manufacturing industry ....................................................................................... 225
Table 32:Motivations for applying various trade protection measures .................................................................. 229
Table 33:Directorate general of trade remedies' recommendations on safeguard duties ..................................... 230
Table 34:Application of basic customs duty due to change in law......................................................................... 231
Table 35:Anti-dumping duty on solar panel frames from China ............................................................................. 234
Table 36:Anti-dumping duty recommended on solar cells and modules ............................................................... 235
Table 37: India shares positive relations with most countries that possess capital goods .................................... 250
Table 38: PV technologies - Complexities and efficiency ...................................................................................... 255
Chemicals
Textiles
Telecom & network
Solar PV
10
Contents
01 Introduction 11
02 Chemicals 35
03 Textiles 84
04 Telecom and Network Equipment 146
05 Solar Photovoltaic 192
06 Conclusion 263
11
Objective of the study
India's journey towards becoming a USD 30 trillion economy by 2047 will require the manufacturing sector to
play a critical role in this transformation. Currently, manufacturing accounts for 17.5% of the country's gross value
added (GVA), with the Indian government having set out a target to increase this share. As a major employment
generator, the sector supported 1.85 crore jobs in fiscal 2022, making it crucial for a youthful India where the
average age is currently ~28 years. To translate this demographic profile into broad-based prosperity, the share
of manufacturing in gross domestic product (GDP) needs to rise. Manufacturing can absorb labour at scale
across diverse skill levels, create stable and formal jobs, and lift productivity through better processes and
technologies.
Manufacturing expands employment by establishing large, formal operations and deep supplier networks that
create roles across production, quality, maintenance, logistics, and business services; capacity additions bring
structured hiring and skilling pathways that move workers into higher‑productivity positions. By standardizing
processes, investing in equipment and automation, and achieving scale efficiencies, firms raise value added per
worker—broadening income through export participation and stronger domestic linkages, and thereby supporting
gains in per capita GDP. Continuous product and process development on the shop floor—underpinned by
advances in design, tooling, and digital and advanced manufacturing technologies—and supplier development
within clusters foster R&D and innovation, accelerating technology diffusion and capability building across the
ecosystem. In India, a robust manufacturing sector is essential for enhancing the country’s competitiveness in
global markets. It plays a vital role in increasing exports and reducing reliance on imports, thereby contributing
to a favorable trade balance. The Indian government has recognized the importance of manufacturing and aimed
to improve India’s manufacturing competitiveness with a host of measures outlined in the later section, with the
aim to transform the country into a global manufacturing hub. By strengthening manufacturing capabilities, India
can achieve sustainable economic growth and improve its position in the global supply chain.
This study aimed to identify key sectors that can elevate India to the status of a global manufacturing hub by
2047, focusing on domestic and global market opportunities, future growth outlook, as well as competitiveness
and employment intensity, all in alignment with national growth priorities. The objective of the analysis was to
provide a strategic roadmap, offering actionable recommendations to position India at the forefront of global
manufacturing in the identified sectors. Before delving into the shortlisted 12 manufacturing sectors, it is essential
to understand the evolution of manufacturing through the ages. The first industrial revolution marked a significant
shift with the introduction of mechanization and steam power, fundamentally changing production processes.
This was followed by the second industrial revolution, characterized by mass production and the advent of
electricity, which further transformed manufacturing capabilities. While the third and fourth industrial revolutions
have introduced digital technologies and automation, respectively, it is crucial to analyze how these historical
developments have shaped contemporary manufacturing landscapes. Additionally, we will examine case studies
of manufacturing booms in countries like Vietnam, China, and Japan, which provide valuable insights into
successful strategies and practices that can inform India’s potential as a global manufacturing hub.
12
Manufacturing through the ages – a global perspective
The First Industrial Revolution
The First Industrial Revolution, which began in Great Britain around 1760, marked a fundamental turning point
in the history of manufacturing. It represented the shift from small-scale, manual craftsmanship to mechanized,
factory-based production. For the first time, goods could be produced on a mass scale, drastically reducing costs
and increasing availability. This also led to a reorganization of labor: skilled artisans gave way to a growing
workforce of semi-skilled factory workers, laying the foundation for the modern factory system. Importantly, this
era established key principles—like mechanization, centralized production, and specialization of labor—that still
define manufacturing processes today. This process began in Britain in the 18th century and from there spread
to other parts of the world.
The technological advancements included the following:
• The introduction of new raw materials, primarily iron and steel
• The utilization of novel energy sources, including coal and steam power
• The development of innovative machinery, such as the spinning jenny and power loom, which enhanced
productivity while reducing manual labor
• The establishment of the factory system, marked by increased division of labor and specialization
• The growing application of scientific principles to industrial practices.
The period also witnessed significant developments in the non-industrial sphere:
• Improved agricultural techniques increased food production, supporting a larger non-agricultural population
• Industrial production overtook landownership as the primary source of wealth, leading to a broader
distribution of wealth and growth in international trade
• Shifts in economic power led to political changes and new state policies suited to an industrialized society
• Urbanization accelerated, working-class movements emerged, and new social structures and power
dynamics developed
• Workers transitioned from skilled handcraft to machine operation, adapting to the discipline and routines of
factory life
A new psychological outlook took hold, marked by growing confidence in the ability to utilize resources efficiently.
The Second Industrial Revolution
Although there was significant overlap with earlier industrial developments, the late 19th and 20th centuries
marked the emergence of a distinctly new phase of the Industrial Revolution.
The innovations of the Second Industrial Revolution brought about profound changes in manufacturing,
transportation, communications, and ways of life and leisure. Some of the most significant inventions include:
Internal combustion engine: Developed by German engineer Nicolaus Otto in 1876, this engine utilized
gasoline fuel derived from petroleum, leading to the invention of automobiles and airplanes.
Automobile: Karl Benz incorporated the internal combustion engine into the first automobile in 1886. This
innovation was further perfected by Henry Ford with the launch of the Ford Model T in 1908, making automobiles
accessible to the masses.
Airplane: The Wright brothers achieved the first sustained flight with a powered aircraft in 1903, revolutionizing
air travel and transportation.
13
Telegraph: Although invented earlier, the telegraph became widely used for transmitting coded messages over
long distances, thanks to Samuel Morse's system, which gained popularity in the late 19th century.
Radio: The discovery of electromagnetic waves by Heinrich Hertz in 1887 led to the wireless telegraph and the
development of radio by Guillermo Marconi in the early 20th century.
Telephone: Patented by Alexander Graham Bell in 1876, the telephone revolutionized communication and
became widely used in the 20th century.
Electric light bulb: Thomas Edison invented a carbon-filament incandescent lamp in 1879, which proved
essential for public and domestic lighting, replacing kerosene lamps.
There was a significant shift in the ownership of means of production. Initially, ownership was concentrated
among a small elite in the 19th century, but later, it became more dispersed as individuals and institutions, such
as insurance companies, began to purchase common stocks. In the first half of the 20th century, many European
countries nationalized key sectors of their economies. Additionally, there was a change in political ideologies,
with governments moving away from laissez-faire policies (free market policy) and becoming more involved in
addressing the social and economic needs of their increasingly complex industrial societies. However, this trend
was reversed in the US and UK starting in the 1980s, with a shift back towards more free-
market oriented policies.
Japan’s miraculous industrial boom
Since World War II, Japan's economic growth has been characterized by the remarkable development of its
manufacturing sector, marked by significant advancements in quantity, quality, variety, and efficiency. The
country's industrial focus has shifted from light to heavy industries, with a greater emphasis on processing,
leading to a decline in the relative importance of traditional industries such as lumber and wood processing,
textiles, and food.
Japan has established itself as a leading global manufacturer, with a strong presence in shipbuilding and
automotive production, as well as the production of essential materials like crude steel, synthetic rubber,
aluminium, and plastics. The country is home to some of the world's most advanced and largest industrial
facilities and has experienced rapid growth in the production of motor vehicles, iron and steel, machinery, and
precision equipment, including cameras. In recent decades, Japan has also become renowned for its production
of advanced electronic products, including computers, microelectronics, telecommunications equipment, and
consumer goods.
The driving force behind Japan's post-war industrial success has been the high level of capital investment,
particularly during the 1960s and 1970s. A surge in equipment investment created a rapidly expanding domestic
market for the iron and steel, and machine-building industries, enabling a significant increase in productive
capacity and scale of operations. This, in turn, led to the rapid replacement of outdated machinery, resulting in
substantial improvements in productivity across the economy. Despite facing challenges such as a shortage of
skilled labor and rising wages, Japan's manufacturing sector has continued to thrive, thanks in part to the
widespread adoption of technological innovations and superior production systems. The country's exports have
experienced significant growth, and the establishment of overseas facilities in Asia, North America, and Europe
has helped to reduce trade friction and cut costs, particularly for manufacturers of automobiles and advanced
electronic products.
14
China’s manufacturing surge
China's remarkable rise as a global manufacturing leader has been swift and unprecedented. Having ranked
seventh in the world, behind Italy, as recently as 1980, China surpassed the United States in 2011 to become
the world's largest manufacturer of goods. This significant growth has had a profound impact on the country's
economy, with GDP per capita doubling over the decade from 2000-2010, a feat that took the UK 150 years to
achieve during its own industrialization process.
Between 2000 and 2007, China's export sector experienced rapid growth, with the value of exports increasing
more than fourfold. As a result, exports as a percentage of GDP rose significantly, from 20% to 35%. As China
transformed into a factory for the world, the Chinese economy was aided by its export-driven focus. This strong
focus on manufacturing driven exports is reflected in the current account surplus, which surged from less than
2% of GDP to a peak of 10%, closely mirroring the expansion of the trade surplus.
A number of policies and incentives with a focus on state-owned enterprises (SOEs) and labour specific policies
drove China’s manufacturing boom in the 2000s. The government provided subsidies to manufacturing firms,
especially for entry into new capacity, for production, and for investment. Further, governments (central +
provincial) provided indirect subsidies (e.g., cheap land, favorable financing) that reduced the cost of setting up
manufacturing capacity.
The Chinese government did not privatize all SOEs; rather, it followed a strategy of “grasping the large, letting
go of the small” — keeping big SOEs in strategic sectors but letting small uncompetitive SOEs go or be privatized.
SOEs received direct fiscal support: many loss-making SOEs continued to get budgetary transfers, particularly
during the early 2000s. There was a shift from requiring SOEs to hand over all profits (“profits remittance”) to a
more profit- and tax-based regime: SOEs started to pay income tax instead of just being forced to remit profits
to the state (“substituting taxes for profits”). On the financing side, SOEs benefited from low-cost capital via state-
owned banks, subsidized lending, and preferred access to credit. (Implicit in broader SOE-state relationship.)
SOEs were also used by the state as “national champions” in strategic industries (heavy manufacturing,
infrastructure, energy), leveraging their scale and access to finance to build capacity.
As a testament to its manufacturing prowess, China currently accounts for over 50% of global manufacturing
output in many sectors. This dominance in various sectors underscores China's critical role in global supply
chains and its status as a leading manufacturing hub.
Figure 1: China’s exports over the years
Source: World Bank
14%
18%
36%
25%
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
500
1000
1500
2000
2500
3000
3500
4000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Percentage
USD (Billion)
Exports (in USD Bn) Exports (% of GDP)
15
During the period from 2000 to 2010, China's exports as a percentage of GDP peaked at around 36%. However,
in the following years, this percentage began to decline gradually driven by the Chinese government shifting its
focus towards promoting domestic consumption and sustainable economic growth, aiming to reduce reliance on
exports. Rising per capita incomes in China also led to a consumption boom improving the share of domestic
consumption in China. Additionally, rising labor costs, increasing competition from other emerging markets, and
trade tensions with key partners led to a reevaluation of China's export-driven model. As a result, the economy
began to transition towards a more balanced approach, emphasizing domestic demand and innovation while still
maintaining a significant role in global trade.
The surge in exports was driven by the country's rapid integration into the global economy, competitive
manufacturing capabilities, and a strong focus on export-oriented growth. The increase in exports significantly
benefited China's local economy by driving job creation and increasing income levels, which, in turn, fueled
domestic consumption. Higher exports also contributed to the country's trade surplus, providing the government
with additional resources for infrastructure development and social programs.
Since its liberalization in 1978, China has experienced an extraordinary period of sustained economic growth,
with its real GDP increasing 23-fold since 1977. However, the drivers of this growth have undergone significant
changes over time. Notably, the contribution of household consumption to GDP has decreased, falling from
approximately 50% in the early 1980s to around 35% by the mid-2000s. This decline was accompanied by a
surge in investment and a growing reliance on exports. The early 2000s marked a significant acceleration of this
trend, with China's exports expanding rapidly to become the largest in the world by 2009, surpassing those of
the United States, Japan, and Germany. By 2009, China’s export growth was largely concentrated in a few key
sectors. The machinery sector was the primary driver, accounting for approximately 45% of total exports. The
textiles and apparel and furniture sectors together contributed around 7% to total exports.
Figure 2: Sector-wise contribution to China's exports, CY2009 (%)
Source: ITC Trade Map
Machinery, 45%
Apparel,
4%
Furnit
ure,
3%
Metals and articles therof,
11%
Other products, 37%
16
This section delves into the underlying factors that contributed to China's remarkable export growth over the past
decade. While an undervalued exchange rate may have played a role, the concentration of export growth in
select industries suggests that other factors were also at play. The apparel, textiles, and furniture industries
benefited significantly from China's accession to the World Trade Organization (WTO), as well as the expiration
of multilateral agreements that had previously limited China's exports. The elimination of quotas under the
Multifiber Arrangement (MFA) allowed Chinese textile products to flood international markets without restrictions,
resulting in a dramatic increase in exports. Similarly, the furniture industry benefited from enhanced market
access, enabling manufacturers to reach global consumers more effectively. The influx of foreign investment in
both sectors modernized production processes and improved product quality through the adoption of advanced
technologies. Additionally, increased production capacity allowed for economies of scale, further reducing costs
and enhancing competitiveness. Together, these developments positioned China as a leading supplier in both
the textile and furniture industries on the global stage.
Capital and energy-intensive industries such as iron and steel benefited from government subsidies and reforms
that led to increased profitability of state-owned enterprises (SOEs). The retained profits of these SOEs were
then reinvested in expanding capacity and production, which ultimately exceeded domestic demand. Key
initiatives included providing substantial energy and capital subsidies to boost production capabilities. These
reforms allowed SOEs to operate more efficiently and compete effectively in global markets. Additionally, labor
policies were introduced to ensure a steady supply of skilled workers, including vocational training programs and
incentives for companies to invest in employee development.
However, a significant portion of China's export growth can be attributed to the "machinery" categories, indicating
that a deeper assessment is required to fully understand this aspect of its economic expansion. A more detailed
analysis of Chinese trade data reveals that this growth was heavily concentrated in a few specific high-tech
products, including cell phones, laptops, liquid crystal displays, and integrated electronic circuits. China's ability
to rapidly increase exports of these products can be attributed to a combination of factors, including:
1. Strong FDI inflows from global tech majors (e.g., Intel, Motorola, HP), turning China into the world’s
electronics assembly hub and rapidly transferring technology and production know-how
2. Rising global demand for consumer electronics, fueled by technological advancements and increased
connectivity created a robust market for these products.
3. Large-scale investment in industrial parks and SEZs dedicated to electronics, telecom equipment,
semiconductors packaging/testing, and ICT manufacturing.
4. Government-led subsidies and incentives for R&D, high-tech zones, export rebates, and credit support
that lowered production costs and scaled capabilities fast.
5. Aggressive technology acquisition—both formal and informal—through JVs, licensing, MNC
partnerships, and global talent return programs (like Thousand Talents Program).
6. A decline in U.S. high-tech fixed investment, which created an opportunity for China to dominate these
new technologies.
17
Vietnam: Asia’s new manufacturing powerhouse
Vietnam’s manufacturing sector lies at the heart of its economy, serving as the primary driver of national growth.
In 2023, it accounted for 24% of the country’s GDP. Looking ahead, Vietnam aims to increase this contribution
to 30% by 2030, with high-tech products expected to make up a majority of the sector’s output.
Figure 3: Manufacturing as a % of Vietnam’s GDP
Figure 4: Sectoral contribution to Vietnam’s GDP, CY 2014 vs CY2024 (%)
Source: World Bank
In Vietnam, the distribution of economic contributions from industry, services, and agriculture has undergone
notable changes in the last decade (2014-2024). The share of industry, increased from 37% to 40%, reflecting
the country's ongoing industrialization and significant growth in manufacturing sectors. Similarly, the services
sector saw a rise from 46% to 48%, highlighting the expansion of service-oriented industries such as finance,
tourism, and technology. In contrast, agriculture's contribution to GDP decreased from 17% to 12%, indicating
a shift away from traditional farming practices as the economy diversifies and urbanizes. This transition
illustrates Vietnam's evolving economic landscape, with a growing emphasis on manufacturing and industrial
activities as key drivers of economic growth.
17
21
21
24
25
2010 2013 2016 2019 2022
Year
18
The manufacturing sector has significantly benefited from the global shift triggered by the China Plus One
strategy, which gained momentum following the Covid-19 pandemic. As part of its growing strategic alignment
with the United States, Vietnam recently entered into a partnership aimed at developing a strong
semiconductor supply chain to support U.S. industry needs.
Vietnam’s cost-competitive labor market has also been a key advantage. The labour cost per month in Vietnam
is approximately USD 188, compared to USD 521 in China —making it one of the most affordable
manufacturing destinations in Southeast Asia.
In addition, Vietnam’s extensive network of free trade agreements (FTAs) has played a critical role in bolstering
industrial growth. As a member of the World Trade Organization (WTO) and the Association of Southeast
Asian Nations (ASEAN), Vietnam has signed 15 FTAs with partners across multiple continents. These
agreements provide domestic and foreign enterprises operating in the country with preferential tariff access
and lower operational costs, reinforcing Vietnam’s position as a key global manufacturing hub.
Another reason for this surge in manufacturing is due to several government initiatives that have been
promulgated to boost industrial growth, digital transformation, and sustainability, namely the National Industrial
Development Policy (2030-2045), the Socio-Economic Development Plan (2021-2025), and the National
Green Growth Strategy (2021-2030, Vision 2050). Additionally, the government has implemented vocational
education and training programs aimed at upskilling the workforce.
Figure 5: Composition of Vietnam’s merchandise exports by product category, CY2024 (%)
Source: ITC Trade Map
Electrical
machinery and
equipment and
parts thereof
38%
Nuclear reactors,
boilers, machinery
and mechanical
appliances; parts
thereof
15%
Footwear, gaiters
and the like; parts
of such articles
7%
Furniture
4%
Articles of apparel
and clothing
accessories
8%
Plastics and
articles thereof
2%
Iron and steel
2%
Others
24%
19
Thriving manufacturing sectors
Some of Vietnam’s key manufacturing sectors:
a) Electrical machinery and equipment & parts thereof
This sector is the cornerstone of Vietnam’s export economy, driven by global electronics giants like
Samsung, Foxconn, and LG, who have made Vietnam their regional manufacturing base. The country is
now a critical player in assembling smartphones, components, and consumer electronics for export. Over
the years, this industry has also been gradually upgrading its capabilities from basic assembly to higher-
value activities such as chip packaging, testing, and smart device integration. The strong FDI inflows and
supply chain realignments post-China Plus One have further solidified its position
b) Nuclear reactors, boilers, machinery & mechanical appliances
This broad category reflects Vietnam’s growing capabilities in industrial equipment, engines, and
mechanical components. This category includes machinery for agriculture, manufacturing lines, and
construction. The growth of this sector ties in closely with Vietnam’s broader industrialization strategy—
enabling local businesses to scale up productivity and supporting the needs of other domestic industries.
Investment from Japan, South Korea, and Germany has brought in technology transfer and machinery
upgrades.
c) Footwear/ Gaiters
Footwear manufacturing is a long-established strength of Vietnam, employing millions and contributing
heavily to both exports and rural employment. Vietnam is a leading global supplier of shoes, particularly
for brands like Nike, Adidas, and Puma. The sector thrives due to low labor costs, skilled craftsmanship,
and robust production clusters around the southern provinces. In recent years, there’s also been a push
to integrate sustainability and move up the value chain with design and branding efforts
d) Furniture
Vietnam has emerged as one of the world’s top furniture exporters, especially for wooden indoor and
outdoor furniture. The industry benefits from abundant timber resources (both local and imported), skilled
labor, and modern processing facilities. Vietnam’s rise has been accelerated by global buyers shifting
orders from China due to tariffs and rising costs. Most of the production is based in southern provinces
like Binh Duong and Dong Nai. The sector is increasingly moving toward green certifications and eco-
friendly manufacturing to meet Western market demands.
e) Apparel and clothing articles
The textile and garment industry is one of Vietnam’s oldest and largest manufacturing employers. It caters
to global fast-fashion and sportswear brands, offering cost-efficient production and a skilled workforce.
The country has benefited significantly from free trade agreements, which allow tariff-free access to key
markets like the EU and Japan. There is also growing investment in sustainable textiles and automation,
helping factories meet global ESG standards and rising labor challenges.
20
India’s manufacturing journey
The manufacturing sector in India has a few success stories and a lot of runway for improvement as its share of
GDP has been stagnant between 15-17% over the past two decades. The importance of the manufacturing
sector as explained above was recognized by the Government and a host of initiatives have been taken to
improve the share of manufacturing in India’s GDP. The sector is also a significant source of employment,
providing 11.4% of jobs in India, helping to absorb the growing workforce.
In contrast, agriculture, while employing the largest share of the population at 46.1%, contributes only about
14.7% to GVA, highlighting a disparity in productivity. This situation underscores the need to transition workers
from agriculture to more productive avenues in manufacturing and services, thereby enhancing overall economic
output and improving living standards. By focusing on increasing the share of manufacturing in GDP, India can
create more sustainable employment opportunities and drive inclusive growth.
A robust manufacturing base is essential for promoting self-reliance, reducing import dependence, and
increasing value addition, particularly in critical sectors such as electronics, defense, and renewable energy. As
India strives to become a USD 30 trillion economy by 2047, the manufacturing sector is expected to play a pivotal
role in achieving this vision, driving both industrial growth and social progress .
As the Indian manufacturing sector continues to evolve, it is increasingly adopting automated and process-driven
manufacturing practices, which are expected to yield significant improvements in efficiency and productivity. The
shift towards Industry 4.0 has the potential to enhance the sector by allowing manufacturers to optimize their
operations, manage costs more effectively, and improve product quality, which could contribute to their
competitiveness in the global market.
Figure 6: An overview of manufacturing in India
Source: DPIIT, RBI, MoSPI, Crisil Intelligence
21
Peer benchmarking
Among Asian economies, China boasts the highest share of manufacturing in its GDP, standing at 26.7% as of
2019. The country's manufacturing sector has experienced robust growth, driven by strategic policy initiatives
such as trade liberalization and the establishment of Special Economic Zones (SEZs). These measures have
not only improved the incomes of the Chinese population but also propelled the country to become a dominant
global exporter, significantly contributing to its GDP growth. Additionally, China's status as a dominant economic
force globally provides it with substantial leverage in trade negotiations and enhances its geopolitical influence.
In recent years, Vietnam has made notable strides in its manufacturing sector, with government-led policy
initiatives playing a pivotal role in driving this growth. In contrast, India's manufacturing sector, although growing,
lags behind its Asian peers (Japan, South Korea, China and Vietnam), in terms of its contribution to GDP.
The chart below outlines the top 20 countries by percentage share of global manufacturing value added. Of the
top 20 countries contributing to manufacturing as of 1995, only 4, China, India, South Korea and Indonesia have
managed to gain share as of 2023 while 3 have dropped off the top 20 list. The USA that accounted for nearly a
quarter of the world manufacturing GVA in 1995 is down to about one sixth as of 2023 with a shift away from
manufacturing to a service and technology driven economy. This is in contrast with China which accounted for
only 5% of the manufacturing GVA share in 1995 accounted for ~32% in 2023 while India has improved from
1.5% to 3.2%.
Figure 7: Top 20 countries by share of global manufacturing value added, 1995 vs 2023 (%)
Note: Green text denotes the new entrants to the list and the red text represents countries that no longer appear in the list
Source: Deutsche Bank, UNIDO
22
Trends in India's manufacturing GDP contribution
Figure 8: Manufacturing as a share of India’s GVA, fiscals 2005–2024 (%)
Source: MoSPI
India’s Manufacturing as a % of GVA has been rangebound over the past two decades. India’s manufacturing
sector has long been seen as a potential engine for job creation and economic growth, yet its share in GVA has
remained stubbornly stagnant, hovering around 16-18% over the two decades. Few of the factors that are
contributing to this stagnation are as follows:
Structural focus on services over manufacturing
India leapfrogged from an agrarian economy to a service-dominated economy, skipping the typical
industrialization phase that countries like China followed.
• IT, finance, and telecom grew rapidly and attracted talent, capital, and policy focus.
• This shift meant that manufacturing didn’t receive the optimal amount of attention and investment it
needed.
Complex regulatory environment (before reforms)
Prior to the economic reforms, India operated within a regulatory framework that was often perceived as complex
and challenging for businesses. This environment, characterized by stringent regulations and approvals,
sometimes hindered the growth and dynamism of the manufacturing sector.
Underdeveloped supply chains and infrastructure
India’s manufacturing potential remained under-realised largely due to persistent infrastructure bottlenecks—
both in logistics and in power supply—that raise operating costs and limit competitiveness. India’s logistics costs
estimated at around 8% of GDP – continue to weigh on supply chain efficiency and constrain manufacturing
competitiveness. Freight movement is still dominated by slower, costlier road transport, while gaps in multimodal
connectivity, warehousing quality and port efficiency increase transit times and inventory costs for manufacturers.
Equally important, India’s power infrastructure continues to face reliability issues: firms and households
17.4
18.9
18.4
17.1
16.2
12
13
14
15
16
17
18
19
20
2005200620072008200920102011201220132014201520162017201820192020202120222023202420252026
Mnaufacturing as % of GVA
23
experience far more frequent outages and voltage fluctuations compared to developed manufacturing
economies, where annual interruptions are typically limited to just a few hours. This forces Indian factories to
invest in costly backup power systems and build higher contingency buffers, pushing up production costs.
Together, these transport and power constraints weaken India’s ability to support large-scale, time-sensitive, and
globally competitive manufacturing, preventing the country from fully realising its industrial potential.
Lack of global scale in exports
India has not built globally dominant manufacturing clusters the way China has with electronics or Vietnam with
garments. Export baskets are still dominated by low-value added products (e.g., textiles, gems & jewelry), India
has only recently made headway in electronics, defense manufacturing, and semiconductors—and scale is still
emerging.
Fragmented MSME sector
A significant portion of the Indian manufacturing sector is dominated by micro, small, and medium enterprises
(MSMEs), which account for over 95% of manufacturing units. Many of these enterprises operate with outdated
technology and limited capital, facing challenges in scaling up, digitizing, and integrating into global supply
chains. Issues such as access to credit and compliance burdens further hinder their growth potential.
Government reforms
In the context of analyzing India’s manufacturing sector trajectory, it becomes critical to understand not just which
policies exist, but how they functionally contribute to the development of the manufacturing ecosystem. To do
this effectively, the initiatives have been categorized under Manufacturing- focused initiatives, Infrastructure
focused initiatives and overarching initiatives. This tripartite classification serves multiple objectives within the
report:
• It helps stakeholders understand how different policies influence manufacturing through distinct levers—
whether by directly boosting production, supporting inputs and infrastructure, or improving systemic
conditions.
• Infrastructure-focused reforms are critical for manufacturing efficiency. Improved transportation networks,
logistics facilities, and energy supply are essential for reducing operational costs and enhancing supply
chain efficiency. Understanding these reforms allows for an assessment of how infrastructure
improvements can directly impact manufacturing productivity and competitiveness.
• Targeted manufacturing focused reforms are critical to expanding domestic capacity, attracting investment,
and deepening India’s integration into global value chains.
• Overarching policy changes are crucial to simplifying compliance, reducing structural frictions, and
enabling businesses to scale more competitively.
24
Figure 9: Reform push by the Indian Government
Source: Crisil Intelligence
The Indian manufacturing and allied sectors have seen a host of reforms to aid in improving the competitiveness
compared to peers. Overarching reforms such as Startup India, Goods and Service Tax have aided in
formalisation of the economy and attracting capital. Infrastructure focused reforms have helped in building out
infrastructure to aid in bringing down power cost, improving connectivity via roads, ports, airports aiding reduction
in logistics cost. Manufacturing reforms have helped in seeding new-age sectors while providing a boost to
existing manufacturing sectors while helping in employment generation and catering to the export market.
India’s export basket
As of fiscal 2025, India's merchandise exports are reported to be USD 437 billion, 1.8 % of the world’s trade,
illustrating the country's active role in global trade. This figure reflects a diverse range of products and
commodities that India exports to various international markets.
Though India’s export basket has diversified in recent years, it remains more concentrated than that of major
export-driven economies. A significant share of India’s goods exports is still dominated by a few categories—
petroleum products, gems and jewellery, pharmaceuticals, engineering goods, chemicals, and textiles and now
increasingly electronics driven by mobile phones. While this mix spans both low- and medium-technology
segments, the overall structure is less broad-based compared to countries like China, South Korea, or even
Vietnam, which have a much larger proportion of high-technology and electronics exports. This relative
concentration leaves India more exposed to commodity price swings and sector-specific downturns,
underscoring the need to deepen capabilities in emerging, higher-value export categories to reduce vulnerability
and enhance competitiveness.
25
Figure 10: Share of top commodities in India’s export basket, FY25 (%)
Source: DGFT
Note: Commodities have been classifed at the HS 4-digit level
Petroleum Oils and Oils Obtained from Bituminous Minerals stand out as the highest exported commodity,
accounting for 14% of India's export value. Export values for this category have increased substantially, rising from
USD 31,137 million in fiscal 2017 to USD 62,550 million in fiscal 2025. This significant leap has been driven by
advanced refining infrastructure, increased production capacity, and adherence to international standards,
solidifying India's reputation as a dependable energy supplier worldwide.
As of fiscal 2025, Diamond and Jewellery exports from India reached a value of USD 26,319 million, 6% of the
fiscal 2025 exports, making it the second highest exported commodity by value for the country. This sector is a
vital component of India's export economy, reflecting the nation’s rich heritage in craftsmanship and design. The
global demand for high-quality diamonds and intricately crafted jewellery has contributed to this significant export
figure, positioning India as a key player in the international market for luxury goods. The industry's growth is
supported by a well-established supply chain and a reputation for quality, further enhancing India's status as a
leading exporter in this domain.
Electronics is the third highest exported commodity by value, driven by technological advancements, the ramp up
in manufacturing of mobile phones driven by the PLI scheme coupled with the supply chain diversification pursued
by companies. Exports of electronics surged from USD 1,043 million in fiscal 2016 to USD 25,874 million in fiscal
2025, accounting for approximately 6% of India’s export basket as of fiscal 2025. The primary destinations for
these exports include the USA, UAE, and the Netherlands.
As of fiscal 2025, Medicaments emerged as the fourth largest export commodity from India, with an export value
of USD 22,026 million, accounting for 5% of the export basket. This sector plays a crucial role in India’s
pharmaceutical industry, which is recognized globally for its capacity to produce a wide range of affordable and
high-quality medicines. The growth in medicament exports can be attributed to India's strong manufacturing
capabilities, adherence to international quality standards, strong manufacturing capability in generics and a robust
regulatory framework. Additionally, the increasing global demand for healthcare solutions, particularly in developing
countries, has further bolstered India's position as a significant supplier of pharmaceutical products. The country's
1.7%
5.0%
5.9%
6.0%
14.3%
Auto Components
Medicaments
Telecommunication
Equipment
Diamonds and Jewellery
Petroleum Oils and Oils
Obtained from Bituminous
Minerals
% share
26
commitment to providing accessible healthcare options has solidified its reputation as a reliable source of
medicaments in the international market.
Although rice ranks as India’s fifth-largest export by value, it is excluded from the chart above as the report focuses
specifically on manufactured goods. Accordingly, the next largest manufactured export, automotive components,
is highlighted. Auto components recorded exports worth USD 7,508.87 million in fiscal 2025. The sector’s export
performance reflects the rising global competitiveness of India’s automotive component players driven by
localization efforts, close collaboration with OEMs, JVs with global auto-component players and focus on quality.
Indian component manufacturers are increasingly integrated into global value chains, supplying major OEMs
across Europe, North America, and Asia.
In addition to the top exported commodities, several other sectors have demonstrated remarkable growth and are
noteworthy in India's export landscape.
India has achieved notable success in the agrochemical sector, particularly in insecticides and fungicides. With
exports reaching USD 2,436 million in fiscal 2025, capturing a sizeable share globally. Investments in research
and development, coupled with compliance with international agricultural standards, have positioned India as the
third-largest exporter globally, underscoring its pivotal role in supporting sustainable agriculture.
The capital goods sector has shown significant advancements, reflected in the exports of electrical transformers
and related components, which grew from USD 1,188mn in fiscal 2017 to USD 3,146mn in fiscal 2026. Government
initiatives such as "Make in India" and production-linked incentive schemes have bolstered this progress, creating
a robust manufacturing ecosystem.
India's export basket reflects a blend of both primary goods and manufactured products. While the share of value-
added exports such as petroleum, machinery, transport equipment, chemicals, and electronic items has grown
over the years, a significant portion of export earnings still comes from primary goods and raw materials.
Approximately, 70% of India’s exports are manufactured products, with the remaining 30% comprising primarily or
minimally processed goods. Sectors such as agricultural and allied products, base metals, and even gems in uncut
or semi-processed form highlight this continued reliance on less processed exports. This indicates that despite
strides toward industrialization and higher value manufacturing, India remains partly dependent on commodity-
based exports. The challenge ahead lies in moving further up the value chain—shifting from raw material exports
to more refined, processed, or technologically sophisticated goods that can generate better margins and long-term
economic resilience.
Background of the study
The study is intended to identify manufacturing sectors in India that can support the country’s ambition of becoming
a global manufacturing hub. The assessment focuses on understanding India’s manufacturing landscape in
relation to global trends, sectoral growth opportunities and global benchmarks. It also examines the factors that
influence manufacturing competitiveness, including market potential, infrastructure readiness, policy support, raw
material availability, technology readiness, employment potential and India’s current position in the value chain.
The project has been approached with the objective of identifying sectors where India has strong growth potential
and where targeted interventions can help strengthen domestic capabilities, improve competitiveness, enhance
value addition and support export-led manufacturing growth. The study also draws on the experience of leading
manufacturing countries to identify relevant learnings and develop sector-specific recommendations for addressing
key challenges and promoting growth in the identified sectors.
27
Methodology
Crisil leveraged its ongoing coverage of over 75 traditional, sunrise, and PLI sectors to evaluate manufacturing
opportunities in India. The project was divided into four phases.
Phase 1: Shortlisting Sectors basis their relative attractiveness - Identifying sectors with high growth potential,
based on market size and growth rate in India and globally.
Phase 2: Conducting a comprehensive, three-pronged examination of the shortlisted sectors.
Phase 3: Analyzing best practices in champion countries to inform strategies for the shortlisted sectors.
Phase 4: Developing actionable recommendations and a clear path forward for each sector.
Figure 11:Methodology adopted for the study
Phase 1: Sector selection
In the first phase, the aim was for selection of 12 manufacturing sectors for which a relative attractiveness method
was used. To judge relative attractiveness of each sector, the growth potential across both global as well as domestic,
existing market size, coupled with the employment creating opportunity and strategic alignment with the priorities of
the Indian government were considered.
The list of 62 sectors was primarily sourced from the Ministry of Statistics and Programme Implementation (MOSPI)
database and supplemented by sunrise sectors and those included under the Production-Linked Incentive (PLI)
scheme.
28
Figure 12: List of manufacturing sectors considered for shortlisting
To determine the relative score for each sector, a 4-step methodology was employed, using the following parameters:
domestic market size, global market size, domestic growth rate projection (fiscal 2023 to fiscal 2030), and global
growth rate (fiscal 2023 to fiscal 2030). The calculation process involved:
1. Data Collection: Gathering current and projected market size and growth rate data for the 62 shortlisted sectors.
2. Median Calculation: Determining the median values for each parameter across all 62 sectors.
3. Median Multiplier Calculation: Computing median multipliers for each parameter, which normalized the sector-
specific values against the median values. For example, the Median Multiplier for Domestic Market Size was
calculated as the sector's current domestic market size divided by the median domestic market size of all 62
sectors.
4. Cumulative Score Calculation: Assigning a 25% weightage to each median multiplier and calculating a cumulative
score for each sector.
To provide a visual representation and facilitate a more nuanced understanding, the market size and growth rate
scores were plotted in a 4x4 matrix with quadrants classified as below:
• Q1: High Market Size – High Growth [Most Attractive Sectors]
• Q2: Low Market Size - High Growth [Sunrise Sectors]
• Q3: Low Market Size - Low Growth [Unattractive Sectors]
• Q4: High Market Size - Low Growth [Attractive Sectors]
29
Figure 13: Sector classification matrix based on market size and growth
Source: Crisil Intelligence
Following this analysis, 12 high-potential sectors from the Q1, Q2, and Q4 quadrants, which exhibited strong market
size and growth prospects were identified. The shortlisted sectors were:
1. Automobiles
2. Chemicals
3. Capital Goods
4. Electronics
5. Pharmaceuticals
6. Defense: Defense & Drones
7. Food Processing
8. Textiles
9. Steel
10. Leather and Footwear
11. Telecom Equipment
12. Solar PV Manufacturing
Phase 2: Sector assessment
In Phase 2 of the project, the sectors shortlisted based on market attractiveness underwent a deeper evaluation to
determine their true potential within the Indian context. To achieve this, each sector was evaluated using a 3-pronged
approach: strategic alignment, operational and financial viability, and value chain play. Each prong provided a distinct
perspective on a sector’s suitability.
30
Figure 14: Framework for detailed evaluation of shortlisted sectors
Source: Crisil Intelligence
1) Strategic alignment:
The first approach, strategic alignment, is essential to ensure that sector development is not only economically viable
but also consistent with India’s long-term national priorities. This approach assesses how well each sector aligns
with India’s critical priorities. A sector that is geopolitically advantageous, rich in local raw materials, raw material
dependence on friendly nations, linked to high-export potential, and supportive of productive employment generation
will offer stronger long-term strategic value. This means that sectors are chosen based not just on profitability but
because they serve India's broader strategic ambitions, including reducing import dependence, enhancing global
competitiveness, and driving inclusive economic growth
• Raw material availability: Identified the key global raw material suppliers for each sector and the suppliers that
India relies for import of the raw materials
• Geopolitical considerations: Evaluated India's geopolitical relationships with major supplier countries. These
relationships were classified into positive and neutral
• Global trade landscape: Analyzed the global trade patterns of each sector by identifying the major exporting
and importing countries and their share in total exports as well as imports
• Employment intensity: Examined the employment intensity of sectors, including employment rates,
productivity, and skill requirement levels.
• Technology readiness: Assessed the availability of local technology, foreign partnerships, and tech-know-how
in each sector.
31
2) Operational & financial viability analysis:
Even if a sector is strategically important, it must also be operationally and financially viable to scale in India and
attract private capital and investors. This approach assesses the profitability and sustainability of sectors, ensuring
that they do not rely on ongoing government support and can scale on their own. It evaluates whether India has, or
can develop the necessary cost structures, capital environment, and market access to make the sector viable for
long-term private and public investment that would aid in attracting private capital. Furthermore, it considers
scalability, efficiency, and the return on capital required to foster sustainable growth. This approach grounds the
analysis in financial realism, ensuring that shortlisted sectors are not only desirable but also capable of thriving
independently within India's current economic structure and business climate.
• Profitability: Evaluated the financial performance of each sector by examining the operating margins, Net margins
and Returns on capital (ROCE) for domestic as well as international players.
• Capex intensity: Assessed the capital expenditure requirements for each sector by using the capex-to–sales
metric for domestic and international companies.
• Market size and growth outlook: Evaluated the size and growth potential of each sector in both domestic and
global markets.
3) Value-chain play analysis:
This phase focuses on assessing India's position within the current manufacturing value chain, identifying specific
segments where the country has a competitive edge based on where the bulk of value addition occurs. Rather than
evaluating the sector as a whole, it examines the extent of current participation in the value chain and identifies
untapped opportunities for both forward and backward integration. By analyzing India's position within the value
chain, we can avoid becoming a low-margin, peripheral assembler in global value chains and instead chart a path
toward deeper integration and greater value addition.
• Current position in value chain: Mapped the current position of India in the global value chain of each sector,
including the nodes where India has a presence.
• Forward or backward integration opportunities: Identified opportunities for forward or backward integration in each
sector, including potential partnerships, joint ventures, or acquisitions.
• Profitability in each value chain stage: Analyzed the profitability of each stage in the value chain by using EBITDA
and ROE metrics.
Phase 3: Benchmarking with champion countries
To identify opportunities for India to become a global manufacturing hub, a benchmarking exercise with two leading
manufacturing countries for each of the 12 selected sectors was conducted. This dual-country approach is designed
to extract valuable insights into the factors that have enabled these countries to achieve global supremacy in their
respective sectors. By analyzing two countries per sector, the project aims to understand the effective policy
environment, company actions, and other critical aspects that have contributed to their success and to see which of
the identified best practices can be adapted to India’s context. For example, one country may exemplify a high-tech,
capital-intensive model, such as South Korea’s expertise in electronics, while another may represent a low-cost,
labor-driven model more akin to India’s strengths, such as Vietnam in apparel. This comparative assessment allows
us to contrast different development paths and identify strategies that could be realistically emulated or adapted in
India’s context.
The approach for Phase 3 involved the following steps:
a) Identification of leading manufacturing countries: Top two manufacturing countries based on criteria such
as manufacturing output and competitiveness.
32
b) Key success factors and best practices: Key success factors and best practices that have driven the
manufacturing growth of the selected countries. This included an analysis of their economic policies, trade
agreements, skilling initiatives, investment climate, and other factors in their success.
Phase 4: Recommendations and way forward
In Phase 4, a detailed round of stakeholder consultation meetings with industry leaders from the shortlisted sectors
was organised. The purpose of these meetings was twofold: to uncover insights from the industry leaders themselves
on the ground-level challenges they face and gather their recommendations for scaling up these sectors. These
meetings enabled incorporation of firsthand perspectives, enhancing the accuracy and relevance of the assessments
in previous phases. These on-ground challenges and recommendations from the stakeholders were combined with
challenges emerging from secondary research and recommendations emerging from the best practices from other
countries. The output from phase 4 is targeted recommendations for implementation across factors of production,
regulatory landscape, taxation, FTAs, Technical recommendations based on the gaps identified in Phase 2 and best
practices identified from Phase 3.
To ensure a structured and outcome-oriented approach, each sectoral recommendation follows a three-step
framework:
• Identifying key challenges: The major bottlenecks and constraints currently inhibiting sectoral growth were
identified.
• Recommendation to address the challenge: For each identified challenge, a specific, actionable recommendation
is proposed. These are designed to be transformative yet practical, targeting root causes of the challenge.
• Execution Strategy:
Clear steps to operationalize the recommendation, including necessary policy reforms, infrastructure
development, or investment incentives.
This structured approach ensures that each recommendation is evidence-backed and context-aware.
This edition of the report focuses on four high-potential manufacturing sectors: chemicals, textiles, telecom and
network equipment and solar photovoltaic manufacturing with the other 8 identified above to be released in
subsequent volumes.
Figure 15: Constituents of Volume I
Source: Crisil Intelligence
33
The selected sectors represent a combination of export-oriented, technology-intensive and employment-focused
manufacturing opportunities. Chemicals is deeply integrated into global value chains and offers significant scope for
strengthening India’s role in export-led manufacturing. Textiles remains one of India’s most employment-intensive
sectors, with strong linkages to micro, small and medium enterprises (MSMEs), rural and semi-urban economies
and global trade. Telecom and network equipment is critical for reducing import dependence, strengthening domestic
technology capabilities and building competitiveness in digital infrastructure. Solar PV manufacturing is strategically
important for India’s energy transition, domestic manufacturing scale-up and participation in the global clean energy
value chain.
Together, these sectors reflect the broader objective of identifying manufacturing opportunities that can support
India’s transition into a globally competitive manufacturing hub. The study evaluates each sector through a structured
framework covering market attractiveness, strategic alignment, raw material availability, global trade positioning,
technology readiness, financial viability, value-chain opportunities and policy support requirements. It also draws on
international benchmarking and stakeholder consultations to identify actionable recommendations for strengthening
domestic manufacturing capabilities, improving competitiveness and enabling scale.
34
Chemicals Textiles
Telecom and Network
Equipment
Solar PV
Chemicals Textiles
Telecom and Network
Equipment
Solar PV
Volume 1
Chemicals Textiles
Telecom and Network
Equipment
Solar PV
35
36
Table of contents
Executive summary ......................................................................................................................................................... 37
Introduction ..................................................................................................................................................................... 41
Petrochemicals and organic chemicals ........................................................................................................................ 41
Inorganic chemicals .................................................................................................................................................... 42
Specialty chemicals .................................................................................................................................................... 42
Overview of the global chemicals industry ....................................................................................................................... 43
Domestic chemicals industry: A detailed profile ................................................................................................................ 45
Strategic alignment ......................................................................................................................................................... 52
Financial viability ............................................................................................................................................................. 57
Value chain play .............................................................................................................................................................. 60
Case studies and global best practices ............................................................................................................................ 62
China .......................................................................................................................................................................... 63
ASEAN (South Korea, Indonesia, Malaysia, Vietnam, and Thailand) ........................................................................... 66
Recommendations: Policy initiatives and reforms ............................................................................................................ 70
Conclusion ...................................................................................................................................................................... 82
37
Executive summary
Sector overview
India’s chemicals industry is a strategically important part of the country’s manufacturing ecosystem, supplying critical inputs
to agriculture, pharmaceuticals, textiles, automotive, construction, electronics, consumer goods and several other
downstream sectors. The industry accounts for 3-3.5% of the global chemicals market, ranks sixth globally and fourth in
Asia by production, and was valued at $200-220 billion in fiscal 2025. It is expected to grow at a 6-8% CAGR over the next
five fiscals, supported by rising domestic consumption, favourable government policies, expanding manufacturing capacity,
higher disposable incomes, urbanisation and changing consumer preferences.
Globally, the chemicals industry remains large and diversified, with the market projected at $4,300-4,500 billion in 2025 and
expected to reach $5,000-5,500 billion by 2030, implying a 2-4% CAGR. Asia-Pacific is the largest and fastest-growing
region, led by China, while India’s current share remains relatively modest, indicating significant headroom for expansion.
By fiscal 2030, India’s domestic chemicals market consumption is expected to reach $290-310 billion, with the country
aiming to increase its share in global chemical consumption to 5-6%.
The sector’s long-term growth is expected to be driven by multiple structural factors. Low per capita consumption presents
a large opportunity for demand expansion across consumer goods, agriculture, construction, pharmaceuticals and personal
care. India’s large domestic market, improving engineering and research capabilities, supply-chain diversification away from
China, and rising purchasing power further strengthen the growth outlook. The report also highlights that India can transition
from being a large consumption-led market to a more globally relevant manufacturing and export hub if policy, infrastructure
and capability gaps are addressed in a coordinated manner.
38
Industry structure
The domestic chemicals industry is broadly led by three key consumption segments: petrochemicals and organic chemicals,
specialty chemicals, and inorganic chemicals. Petrochemicals and organic chemicals form the largest segment and include
polymers, synthetic fibres, performance plastics, building blocks, intermediates and end-products. These products support
industries such as packaging, textiles, pharmaceuticals, dyes, adhesives and plastics. In fiscal 2025, petrochemicals and
organic chemicals accounted for a sizeable share of the domestic chemicals market.
Specialty chemicals are high-value, low-volume products customised for specific applications. They include dyes and
pigments, paints and coatings, agrochemicals, surfactants, flavours and fragrances, construction chemicals, polymer
additives and textile chemicals. This segment is attractive because it offers higher value addition, stronger margins and
export potential. India is already a net exporter in agrochemicals and colourants, while global supply-chain diversification
creates further opportunities for Indian manufacturers. However, India remains import-dependent in certain specialty
segments such as polymer additives and surfactants.
Inorganic chemicals are essential industrial inputs used in construction, water treatment, food processing, electronics,
manufacturing and agriculture. This segment includes products such as soda ash, caustic soda, chlorine, hydrochloric acid,
carbon black and inorganic pigments. Demand is supported by the versatility of these chemicals and their relevance across
multiple end-use industries. However, the segment faces challenges related to raw material availability, limited domestic
capacity in some products and dependence on imports.
The report highlights that India’s industry structure is constrained by a persistent gap between domestic production and
consumption, particularly in petrochemicals and inorganic chemicals. Feedstock allocation in India is skewed towards bulk
commodities rather than higher-value downstream derivatives. For example, a large share of propylene is used to produce
polypropylene, while ethylene is largely used for polyethylene production. This limits the availability of building blocks for
more complex and value-added chemicals. Strengthening downstream integration and incentivising complex derivatives
are therefore critical to enhancing domestic value addition.
Global case studies
Global example What worked What India can adopt
China Large-scale integrated manufacturing, strong
supplier networks, low-cost production,
industrial zones and active policy support
Build scale, deepen domestic supply chains,
incentivise downstream derivatives and
strengthen cluster-based manufacturing
ASEAN economies Country-level chemical roadmaps, investment
incentives, petrochemical self-sufficiency and
sector-specific policies
Create long-term sectoral plans with clear
investment targets, feedstock security and
technology priorities
Jurong Island,
Singapore
Anchor investments, shared infrastructure,
strong logistics connectivity and proactive
governance
Develop plug-and-play chemical parks with
shared utilities, pipelines, effluent systems and
efficient approvals
Rotterdam and
Nanjing chemical
hubs
Integrated port, pipeline, storage and industrial
ecosystems with stable zoning and strong
cluster discipline
Front-load infrastructure, ensure land-use
stability and create empowered authorities for
chemical hubs
39
Challenges and recommendations
Key challenge Impact on industry Recommended action
Import dependency on
raw materials
Exposure to price volatility,
supply disruptions and
geopolitical risk
Identify critical chemicals for import substitution;
support domestic production through incentives and
viability gap funding
Infrastructure and
connectivity gaps
Higher logistics cost, slower
project execution and lower
competitiveness
Develop integrated PCPIRs, shared utilities, pipeline
grids, common effluent systems and port-linked
chemical hubs
Impact of free trade
agreements (FTAs) and
regulatory interventions
Domestic industry growth and
competitiveness
Negotiate balanced FTAs, create awareness and
ensure effective utilisation of FTAs, promote localised
production and sustainable shipping methods
Chemicals
41
Introduction
The Indian chemicals industry accounts for 3-3.5% of the global chemical industry and ranks sixth globally and fourth in
Asia by production. It was valued at $200-220 billion in fiscal 2025 and is expected to grow at a compound annual growth
rate (CAGR) of 6-8% over the next five fiscals.
On the production side, domestic output is estimated to be 16,000-17,000 kilotonnes (KT) in fiscal 2025, with a 4-6%
CAGR expected through fiscal 2030. Growth is underpinned by rising domestic consumption, favourable government
policies, expanding manufacturing capacity, higher disposable incomes, urbanisation and shifting consumer preferences.
Petrochemicals and organic, inorganic, and specialty chemicals are the key segments of India’s chemicals industry based
on market consumption.
Figure 16: Supply chain of the chemical industry
Note: PP – Polypropylene, PE – Polyethylene, PS – Polystyrene
Source: Crisil Intelligence
Petrochemicals and organic chemicals
Petrochemicals, also known as petroleum distillates, are derived from petroleum and natural gas through a refinement
process. This segment encompasses a wide range of products, including polymers, synthetic fibres and performance
plastics. The category can be broken down into three main sub-segments:
• Building blocks: These are the basic chemicals used to produce other petrochemicals, such as ethylene, propylene,
benzene, toluene and butadiene, which are used in the production of plastics, synthetic fibres, dyes,
pharmaceuticals and adhesives
• Intermediates: These are chemicals used to produce other petrochemicals, including terephthalic acid (PTA),
styrene, vinyl chloride monomer (VCM), phenol, methanol and formaldehyde, which are used in the production of
adhesives, resins and plastics
• End-products: These are the final petrochemical products, such as high-density polyethylene (HDPE), linear low-
density polyethylene (LLDPE), and polyvinyl chloride (PVC). Petrochemicals represent the largest segment of the
chemicals industry
Organic chemicals, on the other hand, are carbon-based compounds used in various applications, such as pharmaceuticals,
agrochemicals and dyes.
Examples of organic chemicals are fertilisers and pesticides, which are used in the agriculture sector.
Crude oil, Natural gas
Minerals, brine
Petrochemicals:
Ethylene, propylene
Polymers: PP, PE, PS
Commodity
chemicals: Phenol,
LAB
Agrochemicals
Colorants
Surfactants
Polymer additives
Textile chemicals
Construction
chemicals
Manufacturers
Distributions
Traders
Feedstock Basic chemicals Specialty chemicals Marketing/sales
42
In fiscal 2025, petrochemicals and organic chemicals accounted for approximately 24% of the domestic chemical industry,
with a market size of ~$50 billion.
Inorganic chemicals
Inorganic chemicals are a vital component of India's industrial foundation, providing crucial materials for various sectors,
such as construction, water treatment and electronics. This broad category of compounds, characterised by the absence of
carbon-hydrogen bonds, includes a wide range of substances, such as metals, salts and minerals.
The applications of inorganic chemicals are diverse and widespread, catering to numerous industries, including
• Agriculture (ammonia is used in fertilisers to promote crop growth)
• Manufacturing (hydrogen peroxide is used for surface treatment of metals)
• Food processing (sodium hydroxide is used in various food processing applications)
Other examples of inorganic chemicals are:
• Alkali chemicals (such as soda ash and caustic soda)
• Chlor-alkali products (such as chlorine and hydrochloric acid)
• Carbon black (used in the production of tyres and other rubber products)
• Inorganic pigments (such as titanium dioxide and iron oxide)
Demand for inorganic chemicals is driven by their versatility and the availability of raw materials, making them an essential
part of various industries. Overall, inorganic chemicals play a significant role in supporting the growth and development of
multiple sectors.
In fiscal 2025, inorganic chemicals accounted for approximately 9% of the domestic chemical industry, with a market size
of ~$17 billion.
Specialty chemicals
Specialty chemicals are high-value, low-volume chemicals used in specific applications. They are often customised based
on the needs of a particular industry or customer and are used to add value to a product or process. Specialty chemicals
can be either organic or inorganic.
Some examples of specialty chemicals are:
Dyes and pigments (used in textiles, paints and coatings)
Paints and coatings (used in construction, automotive and industrial applications)
Agrochemicals (used to control pests and diseases)
Surfactants (used to reduce surface tension and types are anionic, non-ionic, cationic and amphoteric)
Flavours and fragrances (used in food, beverages and personal care products)
In fiscal 2025, the specialty chemicals accounted for approximately 18% of the domestic chemical industry, with a market
size of ~$37 billion.
43
Overview of the global chemicals industry
The chemicals industry is a critical enabler of industrial and consumer value chains, supplying materials that underpin
sectors such as agriculture, pharmaceuticals, automotive, construction, electronics and consumer goods. The industry
encompasses commodity chemicals, specialty chemicals, agrochemicals, polymers and advanced materials.
The global chemicals market is projected to be valued at $4,300-4,500 billion in 2025, comprising a diverse range of
chemicals categorised by chemistry, source and end-users.
From a production and trade perspective, China continues to dominate with a share of approximately 39%, supported by
large-scale integrated complexes and favourable feedstock economics. The European Union (~15%) and the United States
(~13%) follow, with competitive advantages in innovation, regulatory compliance and high-value derivatives. India currently
accounts for 3-3.5% of global output, reflecting substantial scope for market share expansion in the coming decade.
Market growth and projections
The global chemicals market is projected to expand at a CAGR of 2-4% through 2030 to $5,000-5,500 billion. Growth will
be driven predominantly by Asia-Pacific economies, with sustained demand from end-use industries and incremental
contributions from sustainability-driven and technology-intensive segments.
The sector demonstrated resilience during the pandemic-related downturn and has since benefitted from supply-chain
restocking, structural demand in healthcare and food security, and accelerated adoption of specialty chemicals in electric
mobility, renewable energy and sustainable packaging. Long-term growth will be further supported by regulatory push
towards lower-carbon processes, circular-economy initiatives, and advances in bio-based and recyclable materials.
Regional market distribution (2024)
• Asia-Pacific (~55%) remains the largest and fastest-growing region, led by China and supported by expanding
capacities in India, South Korea, Japan and Southeast Asia
• Europe (including Russia, ~20%) is strong in high-value specialties, performance chemicals and sustainability-
focused solutions
• North America (~15%) benefits from cost-competitive shale-gas feedstocks and leadership in life sciences and
advanced materials segments
• Rest of the world (~10%): Africa continues to represent the smallest regional market due to limited industrial
infrastructure and investment
Key players
At a country level, China, Germany, Japan and the United States remain the pre-eminent forces in production, innovation
and international trade. Leading multinational corporations maintain diversified global footprints, while increasingly
evaluating additional manufacturing bases in cost-competitive and geopolitically stable jurisdictions such as India to
enhance supply-chain resilience.
44
Table 1: Key components of chemicals segments
Segments Sub-segments
Basic chemicals
Inorganic chemicals (caustic soda, soda ash, chlorine, titanium dioxide), bulk petrochemicals and
intermediates (ethylene, propylene, BTX, methanol), plastic resins (PE, PP, PVC, PET, PS), synthetic
rubber and fibres
Specialty chemicals
Agrochemicals (active ingredients and formulations), electronic chemicals, polymer additives and
masterbatches, construction chemicals, water treatment chemicals, adhesives and sealants, flavours
and fragrances, dyes and pigments, personal care actives, performance lubricants and fuel additives
Agricultural chemicals
Fertilisers (nitrogenous, phosphatic, potash, complexes), crop protection (insecticides, herbicides,
fungicides, biopesticides)
Consumer chemicals
Surfactants, oleochemicals, preservatives, emulsifiers, rheology modifiers used in soaps, detergents,
shampoos, cosmetics, oral care, household cleaners
Note: PP – Polypropylene; PE – Polyethylene; PS – Polystyrene; PVC – Polyvinyl Chloride; PET – Polyethylene Terephthalate;
BTX – Benzene, Toluene, Xylene
Source: Crisil Intelligence
Figure 17: Global chemicals industry and segment-wise share of the chemicals industry
Global chemicals industry
Segment-wise share of the chemicals industry
Note: Industry size excludes pharmaceuticals. P: Projected
Source: Crisil Intelligence
• The basic chemicals segment remains the domain of feedstock-advantaged nations and mega-scale integrated
players
• Specialty chemicals offer the highest profitability and resilience; leadership is concentrated in Germany,
Switzerland, the US, Japan, and increasingly China and India (for cost-competitive innovation)
• Agricultural chemicals are undergoing rapid transformation due to sustainability regulations, patent expiries and the
rise of biological alternatives
• Consumer chemicals are seeing a structural shift in the supply chain: While formulation and branding remain with
Western fast-moving consumer goods (FMCG) majors, a growing share of functional ingredients is now
manufactured in Asia, particularly India and Southeast Asia.
4,316
4,300-4,500
5,000-5,500
CY19 CY23 CY30P
$bnn
Basic
chemicals
57%
Specialty
chemicals
19%
Agricultural
chemicals
11%
Consumer
chemicals
13%
45
Domestic chemicals industry: A detailed profile
The Indian chemicals industry accounts for 3-3.5% of the global industry and ranks sixth globally and fourth in Asia by
production. It was valued at $200-220 billion in fiscal 2025 and is expected to grow 6-8% over the next five fiscals. Inorganic
chemicals, petrochemicals and specialty chemicals are the three key attractive segments for manufacturers. The domestic
industry produces more than 80,000 products.
1
Figure 18: India’s share in the global chemicals industry
Source: Crisil Intelligence
India’s chemicals industry is a cornerstone of the country’s manufacturing ecosystem, supplying essential raw materials to
critical industries such as agriculture, pharmaceuticals, textiles, automotive and construction.
Besides its hold on domestic production, India also captures the export market and ranks 11
th
in terms of exports by value
for chemicals. As of fiscal 2025, India is a net exporter in agrochemicals and colourants, which account for nearly 59% of
the specialty chemicals industry total market size domestically. For polymer additives and surfactants segments, which
comprise ~29% of the specialty chemicals market, India is a net importer, whereas the textile chemicals and construction
chemicals segments operate mostly via domestic production (forming ~12% of the specialty chemical market in India).
2
Owing to limited feedstock materials and minerals, both inorganic chemicals and petrochemicals will have a trade deficit.
India's high import requirements highlight a significant shortfall in domestic production, underscoring the need to enhance
domestic manufacturing capabilities. By addressing capacity gaps, India can transform its chemicals industry and emerge
as a key global player.
1
India Brand Equity Foundation
2
Crisil Intelligence
India: $200-220 billion
Global: $4,300-4,500 billion
FY25
India: $290-310 billion
Global: $5,000-5,500 billion
FY30P
46
Figure 19: India’s chemicals industry - Market size
Note: Others include pharma, API, biotech, etc.
Source: Crisil Intelligence
Besides robust domestic production, the industry has a strong export footprint, positioning India as the eleventh-largest
exporter of chemicals by value, even though the inorganic chemicals and petrochemicals segments will have a trade deficit
due to limited feedstock of materials and minerals.
India's chemicals industry is hindered by structural constraints that limit its growth and integration into global value chains,
necessitating government intervention to unlock its full potential. Key challenges include:
1. High reliance on imports: India heavily relies on imports, particularly for petrochemical intermediates and specialty
chemicals.
2. Trade deficit: This reliance on imports has resulted in a significant trade deficit, undermining the industry's
competitiveness and sustainability.
By providing targeted support and addressing these structural constraints, the government can help the Indian chemicals
industry to achieve its full potential, reduce its trade deficit, and become a more significant player in the global chemicals
market.
Infrastructure limitations, including insufficient feedstock availability, inadequate common user facilities, and logistical
constraints, further impact cost competitiveness. Additionally, complex regulatory frameworks, environmental compliance
hurdles and skill shortages present significant barriers to domestic production and investment.
The Indian petrochemical industry's feedstock allocation is skewed towards producing bulk commodities, rather than higher-
value chemicals. For instance:
1. Propylene: 95% is used to produce polypropylene (PP) in India, compared with 70% globally
3
3
Powering India’s participation in Global Value Chains, July 2025
Fiscal 2026 to 2030
~5%
~5%
~8%
~6%
~9%
CAGR (%)
47
2. Ethylene: 75% is used for polyethylene (PE) production in India, versus 63% globally
4
3. Benzene: 87% is allocated to alkylbenzene, chlorobenzene and cumene in India, whereas globally only 25% is used
for these chemicals, with a larger share going to more complex derivatives
5
4. Butadiene: About 84% is converted to polybutadiene rubber (PBR) and styrene-butadiene rubber (SBR) in India,
compared with a global average of 54%
6
To address this imbalance and make the Indian petrochemical sector more competitive globally, targeted government
support is necessary. This could include:
• Viability gap funding (VGF) to encourage investments in downstream, higher-value chemical manufacturing
• Incentives for producing complex derivatives, such as ethylbenzene, cumene, cyclohexane and nitrobenzene,
which have higher value-added potential
By providing targeted support, the government can catalyse investments in higher-value chemical production, helping the
Indian petrochemical industry become more competitive and diversified.
India’s share of imports has tripled over the past 20 years, clocking the highest growth rate of ~15%, followed by China and
Brazil.
Petrochemicals and organic chemicals, specialty chemicals, and inorganic chemicals are the three key segments
of India’s chemicals industry based on market consumption.
1. Petrochemicals and organic chemicals: Derived from petroleum and natural gas, this segment includes polymers,
synthetic fibres and performance plastics. It is divided into building blocks, intermediates and end-products, and is the
largest chemicals segment, with a persistent production-consumption gap
2. Specialty chemicals: High-value, low-volume chemicals that drive innovation and customisation in industries such as
pharmaceuticals, agriculture and personal care. Examples include paints, dyes, agrochemicals and surfactants. This
category is research-intensive and accounts for a significant portion of India's chemical exports
3. Inorganic chemicals: Essential materials for construction, water treatment, electronics and other sectors, these
chemicals are a broad category of compounds without carbon-hydrogen bonds. They include metals, salts and minerals,
and are used in various industries, such as agriculture, manufacturing and food processing, driven by diverse
applications and raw material availability.
4
Powering India’s participation in Global Value Chains, July 2025
5
Powering India’s participation in Global Value Chains, July 2025
6
Powering India’s participation in Global Value Chains, July 2025
48
Figure 20: India has strong export potential in dyes, pigments and agrochemicals
Source: DCPC, Crisil Intelligence
As the external environment remains challenging, the industry requires short-term support from both the industry and
policymakers to achieve the targets and vision set for the future.
Focused and timely interventions can help the industry meet evolving demand, while also ensuring environmental safety
and the well-being of workers.
To cater to the increasing demand for chemicals in India, it is essential to significantly boost domestic production capabilities.
This can help India achieve several goals, including:
1. Doubling its share in the global chemicals value chain (GVC)
7
: India aims to increase its participation in the global
chemicals market, targeting a 5-6% share by fiscal 2030
2. Becoming a net-zero importer: By ramping up domestic production, India can reduce its reliance on imports and
become self-sufficient in meeting its chemical needs
3. Creating new job opportunities: The industry is expected to generate 700,000-1 million
8
new jobs by the end of the
decade
To achieve these objectives, India needs to double its production of chemicals to $220-280 billion by fiscal 2030. As of fiscal
2023, the country produces chemicals worth around $110 billion.
9
By 2030, the domestic chemicals market consumption is
expected to reach $290-310 billion, accounting for 5-6% of global consumption.
This ambitious target requires significant investments, infrastructure development and policy support to drive growth in the
industry.
Becoming a net-zero importer
To become a net-zero importer by 2030, India’s chemicals industry can adopt a strategic approach that involves:
1. Boosting exports: Increasing exports of specialty chemicals to around $45 billion
10
, driven by segments such as:
• Dyes and pigments
• Paints and coatings
• Agrochemicals
7
Powering India’s participation in Global Value Chains, July 2025
8
Powering India’s participation in Global Value Chains, July 2025
9
Powering India’s participation in Global Value Chains, July 2025
10
Powering India’s participation in Global Value Chains, July 2025
000 MT
49
• Flavours and fragrances
2. Balancing imports with exports: Offsetting imports of petrochemicals and inorganics with increased exports
3. Enhancing domestic production capabilities: Implementing focused initiatives to improve production capabilities,
enabling India to increase its share of the global chemicals market and reduce reliance on imports
To achieve this aspiration, India’s chemicals industry needs to demonstrate:
• A 10-11%
11
increase in the consumption CAGR to drive demand and growth for the next five fiscals
• A 14%
12
increase in production CAGR to meet growing demand and expand exports
By 2030, the industry can aim to achieve the following export targets
13
to become a net-zero importer:
Table 2: Chemical sector exports target by 2030:
Chemical segment Export target by 2030
Specialty chemicals $45 billion
Inorganic Chemicals $5-10 billion
Petrochemicals $26 billion
The industry requires targeted investments and interventions to help India meet its 2030 targets.
The industry has several strengths, including:
• Growing domestic demand
• Supportive government policies
• Robust manufacturing capabilities
However, there are challenges that need to be addressed, such as:
• Infrastructure gaps
• Regulatory hurdles
• Need for technological advancements
To overcome these obstacles and capitalise on opportunities, the industry requires a comprehensive road map that includes:
• Targeted investments to drive growth and innovation
• Policy interventions to support the industry
• An innovation-driven ecosystem to position India as a leader in the global chemicals value chain
A structured and strategic approach can help India unlock its full potential and become a major player in the global chemicals
industry.
Growth opportunities and trends
The chemicals industry is poised for significant growth, driven by:
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Powering India’s participation in Global Value Chains, July 2025
12
Powering India’s participation in Global Value Chains, July 2025
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Powering India’s participation in Global Value Chains, July 2025
50
1. Low per capita consumption: India’s per capita chemical consumption is much lower than the global average and that
in developed economies such as the US or Germany. This gap reflects under-penetration in end-use sectors such as
consumer goods, agriculture and construction, and presents opportunities for new investments.
For instance, in personal care and pharmaceuticals, rising middle-class aspirations could double demand for specialty
chemicals such as surfactants and polymers in the next five fiscals. Investment opportunities are present in greenfield
projects for basic chemicals production, supported by the Production Linked Incentive (PLI) scheme. The low base
creates fertile ground for both domestic firms and multinational entrants to scale up operations, potentially adding value
through localised manufacturing.
2. Large domestic market: A vast population, strong agricultural sector, and growing export demand are expected to
drive industry growth. With a population exceeding 1.4 billion, India represents one of the world’s largest untapped
markets for chemicals, particularly in agrochemicals (accounting for 20% of global demand) and industrial inputs. The
agricultural sector, employing 40-50% of the workforce, relies heavily on fertilisers and pesticides, with demand
projected to grow at a good pace amid efforts to boost farm productivity.
Meanwhile, export demand is surging in textiles, automobiles and electronics, where chemicals like dyes, resins and
adhesives are essential.
3. Geopolitical shifts: The global supply chain’s shift away from China creates an opportunity for India to capitalise on
challenges and become a preferred trade partner. Ongoing trade uncertainties, coupled with post-pandemic supply
disruptions, have accelerated supply chain diversification strategies, positioning India as an attractive alternative for
chemical manufacturing. The Atmanirbhar Bharat initiative, alongside free trade agreements with the UAE and Australia,
enhances this pivot by streamlining logistics and reducing duties. Challenges like raw material shortages persist, but
they offer entry points for joint ventures.
4. Rising gross domestic product (GDP) and purchasing power: The domestic market holds growth potential as GDP
and purchasing power increase. India’s GDP is forecast to reach $5 trillion by 2027, which directly correlates with
heightened chemical demand across consumer durables, housing, and mobility. Purchasing power parity (PPP)
improvements, with household incomes expected to rise, will fuel consumption in high-value segments such as paints,
adhesives and water treatment chemicals.
Government measures such as goods and services tax rationalisation, easier credit access for small and medium-sized
enterprises (SMEs) will unlock growth potential, enabling a shift from low-margin commodities to premium products,
thereby enhancing profitability margins.
5. World-class engineering, research and development (R&D) capabilities: India’s strong engineering and research
capabilities support the industry’s growth. Indian chemical companies have developed cost-effective and efficient
production processes.
For example, the world’s largest single-site refinery-cum-petrochemical complex in Jamnagar, has world-scale crackers,
aromatics and downstream units that consistently achieve 98–99% capacity utilisation and top-quartile energy
efficiency. Similarly, companies have mastered highly complex, multi-step chemistries (e.g., fluorination, high-pressure
hydrogenation and continuous-flow reactions) that very few countries outside Germany, Japan and China can execute
reliably at commercial scale.
On the production side, Indian manufacturers excel in backward integration into critical intermediates and raw materials,
which will help reduce import dependency and improve margins. These operational and engineering strengths,
combined with in-house R&D teams that optimise yields and debottleneck plants, give Indian producers a decisive edge
in both commodity and specialty segments. This capability is a key reason global majors are increasingly outsourcing
complex molecules and partnering with Indian firms for co-development and toll manufacturing, driving higher value
addition and sustained double-digit growth for the sector.
51
Growth projections
India’s share in the global chemicals value chain is expected to reach $290–310 billion by fiscal 2030, clocking a healthy
CAGR of 6 - 8%. This reflects India’s steady shift from being a large importer to a global-scale producer and exporter. The
key macro factors driving this long-term growth are:
1. Rising disposable incomes: The expected increase in disposable incomes in India is expected to contribute to
household consumption growth by 2030. This will drive higher penetration of chemicals-intensive products in multiple
end-use segments, including packaged foods, personal care, household products, pharmaceuticals, coatings and
automotive care.
As households cross key income thresholds, consumption patterns will shift toward branded, performance-oriented and
value-added products, creating steady and broad-based demand for a wide range of basic and specialty chemicals.
2. Urbanisation: Growing urbanisation and evolving consumer preferences for sustainable and health-conscious options
will drive demand for specialty chemicals. India continues to experience rapid urban growth, accompanied by changing
lifestyle aspirations and increasing awareness of health, safety and sustainability. These trends are accelerating
demand for advanced and differentiated chemical products such as low-VOC (Volatile Organic Compounds) and water-
based coatings, eco-friendly surfactants, bio-based materials, performance polymers and functional additives.
The shift towards modern retail, organised housing, personal mobility and green products is structurally increasing the
share of specialty and functional chemicals in the overall consumption basket.
3. Supply chain diversification: Global companies seeking to diversify their supply chains present an opportunity for
India to become a preferred trade partner. Heightened focus by global corporations on risk mitigation and resilience has
accelerated efforts to reduce single-country concentration. India is emerging as a preferred alternative destination
because of its scale advantages, established manufacturing base in agrochemicals and pharmaceuticals, improving
regulatory alignment and competitive cost structure.
This global rebalancing is translating into inbound investments, long-term supply agreements, technology partnerships
and the qualification of Indian facilities as strategic second sources, thereby providing a durable platform for export-led
growth.
Emerging trends
1. Sustainable and health-conscious products: Growing demand for eco-friendly and healthy products will drive
innovation in the chemicals industry. Heightened environmental awareness and regulatory pressure, combined with
evolving consumer preferences, are driving strong demand for eco-friendly, low-toxicity and bio-based chemical
solutions. End-use industries such as personal care, home care, paints and coatings, textiles, and packaging are
increasingly specifying greener formulations - including biodegradable surfactants, plant-derived additives, water-based
resins, and low-VOC or zero-VOC products.
This shift is compelling manufacturers to invest in green chemistry, renewable feedstocks and circular-economy
processes. Companies that develop sustainable portfolios are gaining preferential access to premium domestic
segments and regulated export markets (particularly Europe and North America), while also benefiting from favourable
incentives under India’s evolving environmental framework.
2. Supply chain resilience: India can leverage its manufacturing base to boost export capabilities and become a reliable
trade partner. Global corporations are actively reconfiguring supply chains to reduce single-country risk and enhance
operational continuity. India’s established manufacturing depth in agrochemicals, pharmaceuticals, dyes, pigments, and
specialty intermediates, coupled with its improving infrastructure and policy stability, positions it as a credible
diversification destination.
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This trend is manifesting through long-term offtake agreements, vendor qualification programmes, joint-venture
investments and the establishment of India-based captive production units by multinational enterprises. The resulting
increase in export-oriented capacity and technology inflow is strengthening India’s reputation as a reliable, scale-
capable trade partner in the global chemicals ecosystem.
3. Global economic shifts: India is expected to become the world’s third-largest economy by 2030, with middle-income
households likely to surge to 181 million
14
in the period, driving demand for chemical products. The resultant surge in
consumption of automobiles, housing, consumer durables, packaged goods and healthcare products will directly
translate into structurally higher demand across the chemicals value chain - from basic building blocks to high-
performance specialties.
This domestic demand tailwind, combined with India’s growing integration into global value chains, is creating a virtuous
cycle of scale, investment and innovation that will underpin long-term industry expansion.
Strategic alignment
Raw material availability
Table 3: Key raw materials used in specialty chemicals manufacturing and leading producer countries
Source: Crisil Intelligence
Methanol, phenol, palm oil, acetic acid and formaldehyde are the key raw materials for the specialty chemicals industry.
The table above shows the top three source countries for each.
The Indian specialty chemicals industry remains heavily dependent on imported key starting materials and intermediates.
The five critical raw materials collectively form the backbone of several high-growth specialty chemical value chains (e.g.,
resins, agrochemicals, surfactants, pharmaceuticals and adhesives).
Strategic implications
• High-intensity materials (methanol, phenol, palm oil derivatives) are overwhelmingly sourced from a limited number
of countries. This concentration exposes Indian manufacturers to price volatility, supply disruptions and geopolitical
risks
• China’s dominance in methanol, phenol, acetic acid and formaldehyde creates a structural vulnerability, particularly
as global buyers pursue supply derisking strategies while Indian producers still rely on Chinese feedstocks for the
same molecules they aim to export
• Palm oil derivatives are tied to Southeast Asia. While geographically closer than methanol or phenol sources, they
remain subject to export restrictions (as seen in Indonesia’s 2022 ban) and sustainability-related trade barriers in
Europe and North America
14
Crisil Intelligence
Raw material Methanol Phenol Palm oil Acetic acid Formaldehyde
Raw material intensity High High High Medium Low
Producer 1 China China Indonesia China China
Producer 2 Saudi Arabia US Malaysia US US
Producer 3
Trinidad and
Tobago
South Korea Thailand Malaysia Germany
53
• Acetic acid and formaldehyde, though less import-intensive in volume terms, are still largely imported or produced
domestically using imported methanol, creating indirect dependency
Emerging opportunities and strategic responses
• Backward integration initiatives: Several large Indian players and consortiums are investing in methanol and phenol
projects (both coal/gas-based and green methanol routes) to reduce import dependence over the medium term.
• Alternative feedstock strategies: Companies are exploring bio-based routes (e.g., bio-methanol, fermentation-
derived acetic acid) and diversifying palm oil derivative sourcing through long-term contracts with Malaysia and new
plantations in northeast India and Andaman and Nicobar Islands.
• Policy support: The government is prioritising these molecules under the Petroleum, Chemicals and Petrochemicals
Investment Regions (PCPIRs) and the PLI scheme for key starting materials, offering viability gap funding and
capital subsidies for domestic mega-plants.
• Inventory and hedging mechanisms: Industry bodies are working with the government to create strategic raw
material buffers and coordinated procurement platforms to reduce price volatility.
Table 4: Geopolitical relation with major raw material supplier countries
Source: Crisil Intelligence
India imports these materials from multiple countries, often because of lower cost and unutilised capacity. For methanol,
major suppliers include Oman, Saudi Arabia and Iran, which together account for over 70% of the total imports. In Iran and
Saudi Arabia, methanol is produced from natural gas which is abundantly available there at much lower cost. Phenol is
imported from Thailand, Saudi Arabia and US since India’s production has not kept pace with the growing downstream
demand.
Palm oil is imported from Indonesia, Malaysia and Thailand owing to its low availability in India because of its unsuitable
climate. Acetic acid is primarily imported from China, Malaysia and Singapore because of its limited domestic installed
capacity. Imports account for less than 1% in formaldehyde supply because of overcapacity in India.
Raw material Methanol Phenol Palm oil Acetic acid Formaldehyde
Supplier country 1 Oman Thailand Indonesia China Spain
Supplier country 2 Saudi Arabia Saudi Arabia Malaysia Malaysia Germany
Supplier country 3 Iran US Thailand Singapore China
Domestic availability Yes Yes Yes Yes Yes
Import share 93-98% 35-40% 60-65% 85-90% ~1%
Geopolitical relationship Positive Neutral
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1. World trade
Figure 21: World trade
Note: Import and export data includes agrochemicals, dyes and pigments, and surfactants
Source: Trade Map, Crisil Intelligence
China, the US, Germany, India and France dominate the specialty chemical export market owing to abundant low-cost raw
materials, strong process engineering capabilities and low-cost manufacturing capabilities. China leads with a 16% share
(2024), driven by the country’s engineering expertise, technological advancement, high production capacity and abundance
of low-cost raw material. The US, with a 10% share, is home to some top specialty chemical players. It is the second largest
producer of specialty chemicals with abundant natural resources, a highly skilled workforce and global distribution networks.
Germany also holds a 10% share (2024), with companies benefiting from large production facilities, excellent research
landscape and world-class infrastructure. India’s share (8%) is because of its increased production capacity, technological
advancement and favourable government policies, whereas France (6%) is the leading partner in the European Union for
chemicals owing to its stable business climate that attracts global investors.
On the import side, Brazil leads with a share of 6%, driven by surging demand from key end-user industries such as personal
care and agriculture. Despite its economic strength, the country faces challenges owing to limited domestic investments in
R&D. Germany holds a 5% share, mostly importing dyes and pigments despite its strong presence in the specialty chemicals
industry. France (5%) depends heavily on imports for raw materials and intermediate products to support its industries and
maintain production levels. The US (5%) has substantial import demand, driven by essential inputs used for domestic
chemical production. Canada (5%) imports specialty chemicals because of its limited capacity.
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Figure 22: World trade
Note: Export data includes agrochemicals, dyes and pigments, and surfactants
Source: Directorate General of Foreign Trade (DGFT), Crisil Intelligence
Indian specialty chemicals exports to various destinations have increased owing to a combination of market demand, trade
agreements, competitive manufacturing costs and strategic positioning. In 2024, the US (17%) remained the largest
destination, benefitting from the increased technological prowess of Indian manufacturers and infrastructure development
in the US. Brazil (16%) is also an important export destination, given its increasing demand from end users such as personal
care and agriculture. Bangladesh (4%) has also become a key market, owing to increased demand for specialty chemicals
driven by rising requirement for high-performance chemicals and emphasis on value-added manufacturing sectors.
China (4%) mostly imports dyes and pigments from India because of its availability of resources and since they are cheaper.
Japan (4%) has also been an important market owing to its commercial relations with India, aided by partnerships such as
the Comprehensive Economic Partnership Agreement.
As of calendar year 2024, India's presence in major import markets was limited at ~8%, indicating a huge opportunity for
the growth in exports. This share is moderate mainly due to intense international competition and a strong focus on the
domestic market. As a net exporter of specialty chemicals, India is poised to see an increase in exports on account of its
cost competitiveness, rising international demand and technological advancement. The global shift away from China creates
new opportunities for Indian exporters.
To cater to the increasing demand for chemicals in India, it is essential to improve domestic production, which could boost
India's share in the global chemicals value chain and transform the country into a net zero importer.
By fiscal 2030, India's chemicals market consumption is projected to reach $290-310 billion, accounting for 5-6% of global
chemical consumption. To achieve this, the country’s consumption needs to log a CAGR of 10-11% and production needs
to log a 14% CAGR.
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This can be accomplished by boosting specialty chemical exports to $45 billion, driven by segments such as dyes and
pigments, paints and coatings, agrochemicals, and flavours and fragrances. Additionally, the inorganic chemicals segment
could contribute $5-10 billion in exports, while the petrochemicals segment could expand exports to $26 billion from $21
billion.
15
To become a net zero importer, India aims to balance imports of petrochemicals and inorganic chemicals with $20-25 billion
exports of specialty chemicals. Reaching these milestones requires a plan that prioritises investments and interventions.
India's chemicals industry has competitive advantages, including rising domestic consumption, supportive policies and
strong manufacturing capabilities. However, challenges such as infrastructure gaps, regulatory hurdles and the need for
technological advancements need to be addressed.
To overcome these challenges and capitalise on opportunities, a comprehensive roadmap is necessary. This includes
fostering targeted investments, enabling policy interventions and building an innovation-driven ecosystem to position India
as a leader in the global chemicals value chain.
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Powering India’s participation in Global Value Chains, July 2025
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2. Technological readiness
Source: Crisil Intelligence
Financial viability
Source: Crisil Intelligence, company reports.
Note: The capex number reflects capital expenditure data reported at the company level.
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Operating margins, net margins and return on capital employed (ROCE) are consistently higher for the international players
compared with domestic ones, indicating higher input costs and intense competition among domestic players. The industry
faces challenges and stiff competition due to China’s dominance, driven by its massive production capacity and lower costs.
Additionally, international companies benefit from cost efficiencies by leveraging economies of scale, accessing cost-
effective global supply chains and optimising production.
Sectoral outlook
The domestic market size as of fiscal 2024 (~Rs 3,064 billion) is estimated to log a CAGR of 6-8% between fiscals 2024
and 2030, driven by increasing demand in domestic and international markets, advancement in chemical technology and
shift towards higher value chemicals. In contrast, the international specialty chemical market (~Rs 52,277 billion) is expected
to log a moderate 4-6% CAGR due to increasing demand from end-user industries such as automotive, pharmaceuticals,
agrochemicals and construction.
Figure 23: Domestic and global growth outlook for specialty chemicals
Note: The number represents the market size
Source: Crisil Intelligence, company reports.
Employee productivity
The specialty chemical industry’s employee productivity is 1.82 times compared with the aggregate manufacturing sector in
value terms on account of its complex manufacturing processes coupled with automation and skilled employees.
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Figure 24: Employee productivity
Note: The numbers represent the ratio of gross value added per person engaged in the sector relative to that of the industry, RMG: Ready-made
garments
Source: Crisil Intelligence, Annual Survey of Industries 2022
Skill requirement
The chart below shows the skill level distribution in the workforce in the specialty chemical sector. Minimally skilled workers
handle tasks like material handling and distribution. Semi-skilled workers operate machinery, perform basic quality checks,
etc. Skilled workers are involved in advanced manufacturing, research and development, among others.
Figure 25: Skill requirement
Source: Crisil Intelligence, National Skill Development Corp
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Value chain play
The chemical industry is complex and multifaceted, relying on a range of raw materials, including organic and inorganic
inputs. The industry can be categorised into several stages, including feedstock, basic chemicals, specialty chemicals, along
with marketing and sales.
Feedstock
The chemical industry relies on a range of raw materials. For instance, organic raw materials include oil, gas, coal and bio-
based products. Petrochemicals come from oil and gas, while oleochemicals are derived from plants and animal materials,
primarily palm kernel oil and coconut oil. Inorganic inputs include minerals, salt and brine.
Basic chemicals
Basic chemicals are produced in large quantities and serve as the building blocks for a range of consumer and industrial
products. This includes petrochemicals such as ethylene, propylene and benzene, which are used in plastics and other
products. Inorganic chemicals are extracted from raw materials such as brine and minerals using processes such as chlor
alkali method. These chemicals are essential for manufacturing a range of products across various industries.
Specialty chemicals
This stage involves production of specialty chemicals such as paint, adhesive, inks, coatings and surfactants. These
products are specialised and diverse, designed to meet specific market or customer demands, primarily within other
industries. They are directly sold to end markets such as automotive, construction, pulp and paper, printing and textiles.
Marketing and sales
This stage of the value chain focuses on marketing and selling products. These chemical products cater to a diverse range
of industries including agriculture, automotive, construction, pharmaceuticals, surfactants and personal care.
Figure 26: Performance benchmarking of India's chemical value chain
Source: Crisil Intelligence, company reports
Profitability lies in specialty chemicals, which are high-margin products. However, in fiscal 2024, margins were affected due
to oversupply caused by inventory destocking, increased imports and declining discretionary spending, leading to reduced
revenue.
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Areas where the sector has government support
Significant market potential and a rapidly growing Indian economy have increased the demand for chemicals.
The following table illustrates support and guidance from the government for India to position its chemicals sector as a
global leader:
Table 5: Key government initiatives supporting the chemicals sector
Scheme Objective
Petroleum, Chemicals and
Petrochemicals Investment
Regions (PCPIRs)
Under the new PCPIR Policy 2020-2035, the government aims to make a combined investment
of $142 billion by 2025, $213 billion by 2030 and $284 billion by 2035 in all PCPIRs across the
country. The four PCPIRs — Andhra Pradesh (Visakhapatnam), Gujarat (Dahej), Odisha
(Paradeep) and Tamil Nadu (Cuddalore and Nagapattinam) — are expected to generate
employment for ~34 lakh people
Supply chain derisking by global
multinationals
The rerouting of manufacturing to India has benefited some Indian specialty chemicals players
Anti-dumping duty (ADD)
With the over-supply of chemical commodities, particularly from countries such as China,
Taiwan and South Korea, the government of India has implemented proactive anti-dumping
measures to safeguard local producers and reduce cheap imports. The ADD is applicable on
imports of sodium nitrite, toluene diisocyanate (TDI), purified terephthalic acid (PTA), phthalic
anhydride, phenol, aniline, chlorinated polyvinyl chloride (CPVC), isopropyl alcohol and soda
ash, among others.
Chemical Promotion Development
Scheme (CPDS)
The primary objective of this scheme is to facilitate growth in the chemicals and petrochemicals
industry with knowledge dissemination through studies, surveys, data banks and promotional
materials. The three main components of the scheme are knowledge-product creation,
knowledge dissemination and excellence awards for research and innovation
Centres of excellence (CoEs)
The scheme aims to modernise manufacturing, improve product quality and drive technological
advancement by incentivising educational and research institutions. 18 CoEs were approved as
of December 2024
Quality control orders (QCOs)
The scheme aims to make adherence to specific product standards mandatory, so domestic
manufacturers and overseas suppliers meet the quality and safety parameters set by the Bureau
of Indian Standards (BIS)
Source: Crisil Intelligence
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Case studies and global best practices
Evaluating countries that lead the chemical manufacturing sector globally and assessing government
policies/initiatives/frameworks/incentives which have contributed to the sector’s growth, with a focus on nations with high
production volumes and those with economic conditions like India. This approach can help in identifying key strategies
which India could adopt to boost its own chemical manufacturing sector.
Table 6: Selection of top chemical manufacturing countries
Country Production ($ billion, CY24) CAGR (CY24-CY30)
China 2,269 2-3%
India 192 7-9%
South Korea 166 1-2%
Malaysia 47 6%
Indonesia 36 5%
Thailand 26 3%
Vietnam 4 9%
Source: Crisil Intelligence
China, India and ASEAN countries such as South Korea, Indonesia, Malaysia, Vietnam and Thailand are top chemical
manufacturing countries, driven by high demand from downstream industries. Among these, China leads through rapid
investment and intense competition and fragmentation across large numbers of segments.
India is rapidly growing on account of a favourable regulatory environment, labour utilities and capital cost, while ASEAN
countries benefit from government policies, geographical locations and labour cost.
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China
Investments in the new chemical segments
In 2023, China accounted for nearly 45%
16
of the total global chemical production and 46%
17
of capital investment. Initially
focussed only on basic chemicals to meet the domestic demands with minimal technology requirement, the country now
dominates the global market for many commodity and fine chemicals. China holds 55%
18
of the global acetic acid capacity,
50%
19
of the global carbon black capacity and 45%
20
of the global titanium dioxide capacity.
China's petrochemicals and plastics production have logged remarkable growth, driven by strategic investments in
infrastructure, research and development (R&D) and by leveraging the country’s unique competitive advantages. China’s
chemical industry accounts for ~23% of global exports and 12% of global imports, while meeting 75-80% of the domestic
demand. Over the last two decades, the country has transformed from being a net importer in 2010 to a net exporter across
multiple product categories, establishing itself as a dominant player in the global chemical market.
The industry's growth trajectory can be divided into three distinct phases. In the initial phase, state-owned enterprises drove
expansion through significant investments and the establishment of small-to-medium-scale production facilities, relying
heavily on imported technologies to build critical capabilities, such as, ethylene production. As the industry matured,
multinational corporations entered the market, and joint ventures emerged, combining local resources with foreign expertise.
In recent years, government policy reforms have enabled private enterprises to consolidate and develop domestic
technologies. This has accelerated the sector’s modernisation and large-scale expansion, with privately owned companies
now playing a major role in advancing China’s petrochemicals and plastics industry.
All such chemicals require relatively low levels of technology and innovation, allowing them to be produced in large volumes,
enabling Chinese producers to benefit from strong economies of scale. However, companies focussed on these basic
products increasingly face economic pressure owing to intense competition, overcapacity and slowing demand growth.
As a result, the industry is shifting toward new-age chemicals, specialty chemicals and energy transition related products.
Several state-owned enterprises have expanded into these emerging areas and are making rapid progress as innovators.
Supply chain competitiveness
The Chinese supply chain has become highly competitive, largely due to its favourable capital expenditure (capex) structure,
which is ~70%
21
of that in Western countries. This cost advantage has made China an attractive location for multinational
corporations (MNCs) seeking cost-efficient manufacturing locations. Factors contributing to China's competitive advantage
include:
1. Labour costs In China, labor cost comprises 44
22
percent of overall cost which accounts to 20 to 40
23
percent of the
cost of labor in the US. This significant gap allows Chinese firms to maintain a much lower overall cost structure.
2. Labour productivity: China has 2-3
24
times higher labour productivity compared with many other regions, resulting in
a more efficient supply chain with a greater output in lesser time. This higher productivity enables Chinese firms to
produce more goods at a lower cost.
16
China Britan Business Focus
17
China Britan Business Focus
18
Information Technology and Innovation Foundation
19
Information Technology and Innovation Foundation
20
Information Technology and Innovation Foundation
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Powering India’s participation in Global Value Chains, July 2025
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Powering India’s participation in Global Value Chains, July 2025
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3. Competitive supplier network: China's supplier network is also among the most competitive globally, with continuous
price competition driving down material costs. This allows firms operating in China to access key components and
materials at significantly lower prices.
4. End-to-end domestic supply chain: China offers a distinct advantage through its end-to-end supply chain, enabling
companies to source most required materials and services locally. This reduces import costs, minimises supply chain
bottlenecks, and enhances overall operational efficiency.
While China’s chemical industry has grown rapidly, the country has also faced an economic slowdown and rising geopolitical
uncertainties in recent years. Several nations have imposed trade restrictions—such as the US import tariffs, Germany's
de-risking efforts, and the European Union's (EU) Green Deal Industrial Plan, which includes tariffs on titanium dioxide
imports—creating challenges for Chinese chemical companies.
Despite these pressures, China's competitive supply chain remains its major strength, helping the country to maintain its
position as an attractive investment destination. The government continues to support the sector through infrastructure
development and initiatives that promote innovation. As the global landscape evolves, China's favourable capex structure,
low labour costs, high labour productivity, competitive supplier network and integrated domestic supply chain are likely to
sustain its competitiveness and continued growth in the chemical industry.
Regulatory environment and government policies -
Import tariffs and anti-dumping duties
China imposed tariffs on paraxylene, propylene and Ortho xylene exported from Taiwan in 2024, raising the import duty on
paraxylene from 0%
25
to 2%
26
that year.
PP copolymer grade tariffs to move up to 6.5%
27
from its duty-free status.
Country to retain the anti-dumping duties on imports of o-chloro-p-nitroaniline from India
Easing trade restrictions
• China's proactive approach to industrial development has been a major driver of its competitiveness. The creation of
specialised industrial zones and clusters has significantly reduced production and logistics costs for domestic
companies. These zones feature modern infrastructure, including advanced wastewater treatment facilities, energy-
efficient systems and compliance with stringent regulatory standards.
• Clustering of companies within the same sector also lowers transportation costs and boosts overall productivity. The
government has strengthened competitiveness further by liberalising trade and improving market access for foreign
investors. Trade restrictions have fallen sharply—from nearly 200 in 2013 to just a few dozen in 2021. The expansion
of free trade zones, growing from 1 in 2013 to over 20 in 2022, has also enhanced China's position as a global
manufacturing hub. These zones offer attractive incentives such as reduced barriers and improved market access to
international markets, encouraging foreign direct investment and supporting continued economic growth.
Work plan for the petrochemical and chemical industry
China's 14
th
Five-Year Plan
28
, introduced in 2020 during the Covid-19 pandemic, prioritises self-reliance and sets ambitious
targets for the chemicals and petroleum sectors, including the development of innovative materials. The plan seeks to
achieve high levels of self-sufficiency in various areas, such as:
25
S&P Global
26
S&P Global
27
S&P Global
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Powering India’s participation in Global Value Chains, July 2025
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• 70% in engineering plastics
• 90% in specialty rubbers and elastomers
• 85% in high-performance fibres, and
• 75% in new chemical materials
To support these goals, the government is promoting the development of advanced technologies, such as next-generation
catalysts, efficient purification processes, and carbon capture and utilisation solutions. China has also outlined strong
environmental goals for 2025 under the Industrial Green Development Plan, which include increasing the share of renewable
energy to 33%, reducing carbon emissions by 2.6 giga tonnes and limiting crude oil processing.
The government has committed to achieving peak carbon emissions by 2030 and net-zero emissions by 2060, with a focus
on carbon-neutral production, carbon capture technologies, and the use of renewable energy and green feedstocks. To
support these goals, it has introduced supportive policies and eased trade restrictions, attracting increased foreign
investment into the industry.
Additionally, a two-year work plan (2023-2024) was launched to boost the development of the petrochemical and chemical
sectors, emphasising energy conservation, carbon reduction, and pollution control. The plan included the following
measures:
• Promoting energy efficiency and pollutant emission limits in the refining, ethylene and other sectors
• Encouraging the adoption of intelligent manufacturing technologies
• Improving management of chemical parks and refining fiscal policies
• Securing stable supplies of production factors at reasonable prices through medium-to-long-term contracts
Overall, China's strategic plans and policies aim to drive growth in the petroleum and chemical sectors while minimising the
environmental impact and achieving self-sufficiency in key areas.
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ASEAN (South Korea, Indonesia, Malaysia, Vietnam, and Thailand)
A coordinated approach among South Korea, Indonesia, Malaysia, Vietnam and Thailand leverages each country’s
strengths to build a self-sustaining regional chemical ecosystem. Governments in these countries are prioritising the sector
through significant investments and strategic policies.
Regulatory environment and policies in ASEAN
South Korea
In South Korea, the Ministry of Environment of Korea (MoE) established the Act on Registration and Evaluation of Chemical
Substances (K-REACH) in January 2015.
Source: Crisil Intelligence
In 2024, the country revised its requirements for new chemical substances registration under K-REACH. These revisions
not only revised the regulatory framework, introducing new requirements for registration, evaluation and risk management
of chemical substances, but also aligned South Korea’s chemical regulations with international standards, facilitating global
trade.
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Import tariffs
• South Korea applies a flat 10%29 value added tax (VAT) on all imports and domestically manufactured goods.
• Tariffs and taxes must be paid in Korean won within 15 days after goods clear customs.
Indonesia
Investment goals
• Indonesia aims to become ASEAN’s largest petrochemical producer with $31 billion30 in planned investments by 2030,
focusing on self-sufficiency through the North Kalimantan superhub.
• The country imported $22.2 billion31 and exported $11.2 billion32 in chemicals.
Recent developments
• Lotte Chemical Titan is investing $433 billion in a new ethylene project. Indonesia’s refining capacity stands at 1.1
million34 barrels per day (b/d), the third largest in the region.
Government actions
• The ‘Making Indonesia 4.0’ roadmap emphasises reducing imports, expanding domestic petrochemical capacity and
developing biofuels and bioplastics.
Malaysia
Investment goals
• Malaysia’s chemical industry roadmap 2030 (CIR2030) targets increasing the sector’s contribution to over 4.5%35 of
GDP by 2030, with $8.8 billion36 in added-value contributions.
Recent developments
• CIR2030 identifies base chemicals and specialty chemicals as priority segments, aligning with the New Industrial Master
Plan 2030 (NIMP 2030).
Government actions
• The roadmap supports targeted investments and industrial development to advance Malaysia’s petrochemical sector
into more complex specialties and strengthen downstream capabilities.
Vietnam
Investment goals
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Southeast Asia Chemicals
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Southeast Asia Chemicals
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Southeast Asia Chemicals
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Southeast Asia Chemicals
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Southeast Asia Chemicals
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Southeast Asia Chemicals
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Southeast Asia Chemicals
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Southeast Asia Chemicals
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• Vietnam’s chemical industry, valued at $4 billion37 by 2024, is growing at CAGR of 8.73%38. Key segments include
fertilizers, pharmaceuticals and petrochemicals.
Government actions
• The 2022 strategy targets 10-11%39 annual growth by 2030, focussing on sustainable development and technological
advancement. It also emphasises cross-ministerial collaboration in policy, investment, technology and workforce
development.
Thailand
Investment goals
• The petrochemical industry currently contributes ~5%
40
to GDP, driven by strong domestic demand. The Map Ta Phut
complex is a key asset.
Recent developments
• The RAPID project, part of Petronas’s $27 billion
41
Pengerang Integrated Complex, includes a petrochemical refinery
and related units, although its inauguration has been delayed.
Government actions
• Thailand’s ‘Bangkok Goals on Bio-Circular-Green (BCG) economy’ focusses on climate mitigation, sustainability, trade
and effective waste management.
How Asian policies supercharged the chemical industry over the last decade
China
• Reform and open-door policy (1978): This attracted foreign investment to special economic zones, fuelling growth
• Government support: Low-cost capital, subsidies and relaxed environmental regulations reduced operating costs
• R&D investment: Between 2007 and 2017, heavy investments in research and development (R&D) strengthened
China’s global competitiveness compared with the EU, while Japan saw a modest 1-2% increase in capex and R&D
spends.
• Special economic zones: These zones offered tax breaks and infrastructure support and attracted significant
investment from Hong Kong and Taiwan.
• Market growth: China’s share of global chemical sales jumped to 42% in 2023 from 24% in 2010, accounting for nearly
half of the global supply.
Malaysia
The decline of Malaysia’s tin ore and natural rubber industries was driven by government actions after independence in
1957.The government introduced industrial strategies and policies to boost the petrochemicals value chain and attract
foreign investment, leading to rapid economic growth in the early 1990s and accelerating the development of the chemical
industry. Key government measures that helped the Malaysian chemical industry include:
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Southeast Asia Chemicals
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Southeast Asia Chemicals
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Southeast Asia Chemicals
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Southeast Asia Chemicals
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Southeast Asia Chemicals
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• Diversification policies: post-1957, the government focussed on shifting from the traditional (tin and rubber) industries
toward manufacturing and chemicals.
• Attracting foreign investment: Industrial strategies and policies helped drive economic growth effectively and
establish major chemical plants.
• Establishment of PETRONAS (1974): Under the Petroleum Development Act, PETRONAS was granted full ownership
and rights to explore and exploit Malaysia’s oil and gas resources. The company operates through production-sharing
contracts, enabling effective resource management and driving industry growth.
• Infrastructure development: The Peninsular Gas Utilisation project initiated by PETRONAS in 1984 and completed
in 1993, created the country’s longest gas pipeline, enabling efficient natural gas transmission.
• Creation of industrial hubs: The development of petrochemical hubs in Kerteh, Gebeng and the Pasir
Gudang/Tanjung Langsat area provided essential infrastructure and services, attracting major companies.
Indonesia
Since the 1997 economic crisis, Indonesia has prioritised foreign direct investment (FDI) to support job creation, economic
growth and poverty reduction. The chemical sector has been a major focus, benefitting from these targeted investment
incentives.
• Investment incentives: Indonesia has strengthened its efforts to attract FDI through measures such as reduced import
duties and easy financing.
• Infrastructure and jobs: In the Banten province, investment in the chemical industry has enhanced infrastructure
development and generated significant indirect jobs.
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Recommendations: Policy initiatives and reforms
Recommendation IA: Strengthen domestic feedstock production
To achieve an ambitious target of achieving a 5-6% share in the global chemical value chain by 2030, with a net zero trade
balance, it is essential to identify the chemicals that need to be prioritized for government interventions.
Reducing import dependency
The chemicals industry requires a significant production boost to facilitate import substitution and reduce single-source
dependency. The bulk of the domestic demand for essential chemicals is met through imports, which stand at $75 billion.
Also, many of these imports come from just a few supplier countries. By increasing production capacity and enhancing
product quality, India can become a competitive player in the international market, particularly in segments like specialty
chemicals, where it currently has a minimal presence.
The chemicals industry accounts for 30-40% of the total raw material imports within different segments:
• Deficit in C1, C2, C3 and C7: India imports 70-80% of high-value raw materials, especially active pharmaceutical
ingredients, ethylene and propylene, for the merchant market and methanol and toluene for domestic consumption.
Figure 27: Production capacity versus demand in India and the Middle East (million metric tonne or MMT)
Note: Positive values represent excess production capacities over existing demand, whereas negative values represent a supply deficit
C1, C2, and C3 petrochemicals are derived from hydrocarbons with 1, 2, and 3 carbon atoms, respectively
Source: DCPC, Crisil Intelligence
C1, -2.5
C2, 1
C3, -0.5
C7, -0.4
C1, 7.5
C2, 7
C3, 3
C7, 2.2
-4 -2 0 2 4 6 8
C1
C2
C3
C7
Middle EastIndia
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To reduce import dependency, the government may implement the following strategies:
1. Identify chemicals for import substitution: This process involves analysing import data, growth rates and market
shares of chemicals. This will help identify chemicals that can be produced domestically.
2. Provide incentives to encourage domestic production: The government can provide incentives, like Production
Linked Incentives (opex subsidies), to encourage domestic production of the identified chemicals. This can help reduce
import dependency and increase domestic production capacity.
3. Improve infrastructure and logistics: This can help reduce transportation costs and increase the competitiveness of
domestic producers. It includes investing in ports, roads and warehouses, as well as streamlining customs procedures.
Imports are expected to increase in the medium term because of non-availability of raw material. Also, there is a wide gap
between gas and methanol prices. Hence, purchasing methanol from the spot market is more cost-effective than producing
it in-house. Similarly, there is an increase in the import of toluene because of its use as a precursor in the production of
benzene, xylene and TDI.
Forward integration of oil and gas refineries into downstream petrochemical manufacturing, i.e., crude oil to chemicals
is accelerating. This may limit feedstock availability in the merchant market. Thus, long-term supply agreements or captive
production would be critical.
In 2020, the Indian government launched the coal gasification scheme to gasify 100 MMT of coal by 2030, thereby
reducing reliance on imports, especially of the oil, gas, fertiliser and petrochemical sectors, and conserving foreign
exchange.
The government has also approved a Rs 8,500 crore incentive scheme for coal gasification projects, encouraging both
private companies and public sector undertakings to participate.
The government is also encouraging public and private players to set up bamboo-to-methanol plants to produce green
methanol. Cachar Paper Mill in Panchgram (Assam) has already commissioned this project, valued at Rs 2,000 crore. It is
expected to generate 18,900 jobs.
Recommendation IB: Promote backward integration
From Petrochemicals side of thing, as much as 50-60% of the feedstock (such as naphtha and natural gas) required for
plastics and synthetic fibres is imported in India.
Under the coal gasification projects, India aims to gasify 100 MMT of coal by 2030, this creates a diversified feedstock
system that is more resilient to global supply disruptions. The Ministry of Coal is offering a 50% rebate in revenue share
to promote coal gasification. It is also offering long-term coal allotments to gasification plants.
Mega coal to chemicals complexes is catalysing new downstream clusters in methanol-to-olefins, ammonia derivates and
synthetic fuels. Co-location of downstream consumers lowers logistics costs, ensures steady feedstock supply and supports
globally competitive manufacturing ecosystems.
Integrated chlor-alkali complexes linking chlorine production with downstream PVC, CPVC, chloromethanes, solvents and
specialty chemicals-reduce reliance on imports and stabilise chlorine economics. This model ensures consistent feedstock
availability for domestic manufacturers and supports industrial competitiveness. Growing requirements of PVC,
pharmaceuticals (active intermediates) and water-treatment chemicals justify capacity expansion. This strengthens India’s
role as a reliable hub for global supply chains and improves availability of high-value feedstocks in export-oriented industries.
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Together, coal gasification and chlorine downstream development broaden India’s feedstock base across carbon-hydrogen
and halogen value chains. They reinforce global supply chain stability, support regional industrial clusters, reduce import
dependence, and strengthen India’s role as reliable partner for critical chemicals manufacturing.
Figure 28: Domestic demand for methanol is met largely through imports, driven by rising consumption of formaldehyde, acetic
acid, pharmaceuticals and chloromethane
Source: Crisil Intelligence
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Recommendation IIA: Ensure integrated infrastructure, faster approvals for
PCPIR success
The government has been devising measures to increase the share of the domestic chemical industry in the global market.
The challenges that the industry faces and require urgent attention include inadequate infrastructure, regulatory bottlenecks,
and shortage of skilled talent. According to a report published by the Department of Chemicals and Petrochemicals (DCPC),
the chemical sector should be encouraged to invest in refineries to address the surging fuel demand, increase the
processing capacity of crude oil and produce feedstock for downstream industries.
PCPIRs: An overview and current standings
Petroleum, chemicals and petrochemicals investment regions (PCPIRs), introduced by the Government of India under the
PCPIR policy, are large, specifically delineated industrial regions planned to promote investment in petroleum, chemicals
and petrochemicals in an integrated and infrastructure-led manner.
Each PCPIR was envisaged as a mega industrial region of around 250 square kilometres (sq.km.) or more, with at least
40% of the area earmarked as a processing zone for manufacturing units and the remaining area (non-processing) allocated
for residential, commercial, social and institutional infrastructure.
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The idea was to move away from fragmented industrial development and create globally competitive clusters with shared
utilities, logistics, ports and social infrastructure, reducing costs, improving efficiency and attracting large domestic and
foreign investments.
The policy was brought in at a time when India’s chemical and petrochemical demand was rising steadily, but investments
were constrained by inadequate infrastructure, regulatory delays and lack of integrated planning. Through PCPIRs, the
government aimed to attract large anchor investments, such as refineries and crackers, enable downstream and ancillary
industries, boost exports, generate employment and ensure environmentally planned industrial growth.
Four PCPIRs were approved across India—the Dahej PCPIR in Gujarat, the Visakhapatnam–Kakinada PCPIR in Andhra
Pradesh, the Paradeep PCPIR in Odisha and the Cuddalore–Nagapattinam PCPIR in Tamil Nadu. Each of these regions
was expected to develop around a large anchor petrochemical or refinery complex that would drive downstream investments
over time
.43
Regional overview
The performance of PCPIRs has been uneven, with each chemical hub having its unique strengths and challenges:
Gujarat (Dahej): The Dahej PCPIR in Gujarat is widely regarded as the most successful implementation of the policy. The
presence of ONGC Petro Additions Ltd (OPaL), whose petrochemical complex was commissioned in March 2017, provided
the region with a strong anchor. Supported by robust port connectivity, early infrastructure development and proactive state
government involvement, the Dahej PCPIR has attracted cumulative investments of more than Rs 1.2 lakh crore, as per
official ministry data. Employment generation in the region is estimated at ~2.38 lakh jobs, including direct and indirect
employment.44 The availability of feedstock, reliable utilities and proximity to export markets have encouraged growth of
several downstream chemical and polymer units, making Dahej a functioning industrial ecosystem rather than just a notified
zone.
42
Policy Resolution for Promotion of Petroleum, Chemicals and Petrochemical Investment Regions (PCPIRs)
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PCPIR - Department of Chemicals and Petrochemicals
44
PCPIR - Department of Chemicals and Petrochemicals
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Another major factor was Gujarat’s early and sustained infrastructure readiness. Port connectivity at Dahej was already
operational and continuously expanded, road and rail connectivity were strengthened early, and utilities such as water,
power and gas pipelines were developed ahead of demand. Gujarat already had a mature petrochemical ecosystem.
Existing refineries, chemical manufacturers, skilled manpower, ancillary industries and service providers reduced execution
risk.
Odisha (Paradip): The Paradip PCPIR in Odisha has also made tangible progress, though at a slower pace compared with
Gujarat. The commissioning of Indian Oil Corporation’s Paradip refinery in February 2016 acted as the anchor project for
the region. According to official data, investments of around Rs 47,000 crore have been realised in the PCPIR so far, with
employment generation of ~40,000 jobs.45 While the core refinery is operational, downstream petrochemical development
has taken time due to infrastructure gaps and phased investment decisions. Nevertheless, the region is considered
operational, with continued efforts by the state government to attract petrochemical and chemical manufacturing units
around the refinery complex.
Andhra Pradesh (Visakhapatnam to Kakinada): The Visakhapatnam-Kakinada PCPIR in Andhra Pradesh, which has a
large, notified area of 640 sq.km. and a strategic coastal location, has not been able to secure a strong anchor petrochemical
complex under the PCPIR framework. Official figures indicate investments of ~Rs 18,000 crore and employment generation
of ~1.41 lakh jobs, but much of this activity is not directly linked to an integrated PCPIR-led petrochemical value chain.46
Delays in infrastructure development, land acquisition challenges, regulatory coordination issues and the absence of a
committed anchor project have limited investor confidence. Reports by government bodies have highlighted execution gaps
and lack of momentum as key reasons for the slow progress of this PCPIR.
47
Land acquisition and environmental clearances faced delays due to local resistance, coastal regulation constraints and
administrative coordination issues. Policy continuity at the state level was another challenge. Changes in priorities and focus
across administrations reduced momentum and delayed decision-making on large capital-intensive projects.
Tamil Nadu (Cuddalore and Nagapattinam): The Tamil Nadu PCPIR covering the Cuddalore and Nagapattinam region
has seen the least progress and is effectively stalled. Although it was initially notified under the PCPIR policy, the state
government cancelled the local planning area notification in 2020, which significantly weakened the institutional framework
required for its development. As per parliamentary responses, investments in the region remained limited at ~Rs 8,000
crore, with employment below 14,000 jobs and no major anchor petrochemical project realised. Policy uncertainty, local
opposition, environmental concerns and shifting state priorities contributed to the lack of progress, resulting in the PCPIR
not evolving as originally envisaged.
The region faced strong environmental and social opposition, particularly due to its coastal ecology and existing livelihood
concerns. This made land acquisition and project approvals politically and administratively difficult.
More than a decade after the policy was introduced, only two PCPIRs can be considered operational—one is partially
realised, and one has effectively stalled.
The experience with PCPIRs shows that policy notification alone is not sufficient to create large industrial ecosystems.
Successful PCPIRs have been those with strong anchor projects, early infrastructure development, consistent state support
and proximity to ports and markets. Lagging PCPIRs have faced challenges, such as delays in land acquisition,
environmental clearances, weak coordination between central and state authorities, lack of anchor investments and policy
reversals. As of the latest official position, Dahej and Paradeep PCPIRs are operational, with significant investments and
employment, the Andhra Pradesh PCPIR remains underdeveloped relative to its original plan, and the Tamil Nadu PCPIR
is not progressing under the original policy framework.
45
PCPIR - Department of Chemicals and Petrochemicals
46
PCPIR - Department of Chemicals and Petrochemicals
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Recommendations and way forward for PCPIRs and Indian chemical hubs
1. Approach to planning and implementation
a. Formulate an overarching master plan that draws upon the most successful global models and practices in
the field
b. Design and implement a realistic and workable public-private partnership framework capable of mobilising
the required financial resources for timely project delivery
c. Develop a comprehensive feedstock security plan that covers the entire value chain, ensuring consistent
and adequate raw material availability specifically for downstream manufacturing units
d. Create a strong backbone of logistics facilities, general infrastructure, and an interconnected pipeline grid
2. Measures from government
a. Establish a unified single-window mechanism that enables rapid and expedited approvals
b. Offer attractive concessions to investing companies, including rebates on GST and income tax, plus
exemption from customs duty on imported raw materials/feedstocks
c. Install dedicated full-time committees and leadership for each PCPIR, along with specialised managerial
and technical support teams
3. Launch focused programmes for building skilled manpower
The current institutional framework for domestic chemical hubs faces challenges in implementation, with only Gujarat having
a dedicated management board. A central empowered committee and administrative body may be set up at the chemical
hub level. The empowered committee will oversee strategic direction, policymaking and investment screening for chemical
hubs, while the administrative body will handle day-to-day operations, investment screening, land management and
coordination with service providers at the chemical hub level.
Case study on Jurong Chemical Park: A successful model
Jurong Island in Singapore is a global leader in the chemical industry. It ranks among the top 10 hubs worldwide in terms
of chemical exports. With an impressive $40 billion investment to enhance its production capacity, Jurong Island has
attracted more than 100 chemical companies. The success of the park can be attributed to its high production capacity,
well-developed shared infrastructure and excellent strategic connectivity. "Jurong Island boasts a substantial cracker
capacity of 4 MMTPA for ethylene and 2.5 MMTPA for propylene, ensuring efficient petrochemical production and a steady
supply of raw materials for downstream industries.
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Key factors contributing to Jurong's success
1. High production capacity: Jurong Island has a substantial cracker capacity, ensuring efficient petrochemical
production and a steady supply of raw materials for downstream industries.
2. Well-developed shared infrastructure: The island features well-developed shared infrastructure, including utilities
and logistics, which lowers operational costs and enhances overall efficiency.
3. Excellent strategic connectivity: Jurong Island's strategic location and connectivity through comprehensive transport
networks ensure the seamless transportation of raw materials and finished products.
4. Effective governance and proactive role of the government: Providing a conducive business environment and
streamlining regulatory processes, the Singapore government has played a crucial role in the development of the park.
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Replicating the Jurong model in India
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India can learn from the success of Jurong Island and replicate its principles to the domestic chemical industry. By investing
in refineries and petrochemical complexes, building a collaborative ecosystem and developing well-planned infrastructure,
the country can create a world-class chemical industry. The government can play a proactive role in providing a conducive
business environment, streamlining regulatory processes and attracting investments.
Takeaways from other leading global hubs - Port of Rotterdam, Nanjing Chemical Industrial Park
The Port of Rotterdam is the largest port and one of the biggest petrochemical hubs in Europe. It hosts multiple large
refineries and integrated petrochemical complexes operated by various multinational chemical and petrochemical
companies.
The Nanjing Chemical Industrial Park is one of China’s major state-backed chemical clusters, anchored by large state-
owned enterprises and multinational companies.
Some key takeaways from the set-up and success of these industrial hubs:
• Secure and operationalise anchor refinery or cracker projects before notifying large investment regions
• Plan ports, pipelines, storage, utilities and industrial plots as one integrated system
• Front-load core infrastructure instead of waiting for demand to emerge
• Create a single empowered authority with decision-making power
• Ensure long-term land use, zoning and regulatory stability to reduce investor risk
• Build shared pipelines, utilities and effluent systems to lower entry barriers for downstream units
• Enforce cluster discipline by allowing only relevant chemical and petrochemical industries
• Focus on fewer, deeper, execution-ready clusters rather than multiple underdeveloped regions
Proposed governance structure for Indian chemical hubs
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The proposed governance structure for Indian chemical hubs includes a central empowered committee and administrative
body. The empowered committee will oversee strategic direction, policymaking and investment screening for the hubs, while
the administrative body will handle day-to-day operations, investment screening, land management and coordination with
service providers at the chemical hub.
Key entities and their roles
1. Empowered committee: Oversees strategic direction, policymaking and investment screening for all chemical hubs.
2. Administrative body: Handles day-to-day operations, investment screening, land management and coordination with
service providers at the chemical hub level.
3. Anchor tenants: Provide essential feedstock for downstream industries and work closely with chemical companies.
4. Infrastructure and services: Develop shared infrastructure, including utilities and logistics, to lower operational costs
and enhance overall efficiency.
Recommendations
1. Invest in refineries and petrochemical complexes: Encourage investment in refineries to address the surging fuel
demand and increase capacity to process crude oil and produce feedstock for downstream industries.
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2. Build a collaborative ecosystem: Foster partnerships with technology providers and international suppliers of crude
oil to strengthen crude oil supply and enhance bilateral energy cooperation.
3. Develop well-planned infrastructure: Invest in shared infrastructure, including utilities and logistics, to lower
operational costs and enhance overall efficiency.
4. Streamline regulatory processes: Provide a conducive business environment and streamline regulatory processes to
attract investments and facilitate the growth of the industry.
5. Attract investments: Attract investments from domestic and international players to enhance the production capacity
and competitiveness of the industry.
By implementing these recommendations, India can make the chemical industry more competitive, sustainable and
innovative and ultimately increase its share in the global market.
Recommendation IIB: Upgrade port infrastructure
India has 12 major ports and 205 notified minor ports. Most were developed several years ago and require significant
upgrades. The design of existing ports is inadequate to meet the current requirements for faster turnaround and higher
cargo volumes, resulting in delays in cargo movement
Key issues/pain-points
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I. Insufficient handling capacity
• Indian ports lack dedicated berths and specialised handling capacity for chemicals
• Compared with benchmarks, the gap is large
i. Antwerp (Belgium): 286 MMT
ii. Kandla: 138 MMT, Paradip: 135 MMT
With chemical volumes rising, current infrastructure cannot keep pace
II. Limited storage capacity
• Specialised tankage for hazardous and bulk chemicals is inadequate
• Antwerp offers 9.6 MMT + 6.15 million sq. m covered storage, while Indian ports often have 3-5 MMT storage
capacity
• Storage shortage leads to delays, longer turnaround time and safety risks
III. Low mechanisation
• Heavy dependence on manual handling due to budget constraints
• Lack of advanced cranes, compressors and vacuum systems slows operations
• Manual processes also heighten safety risks for hazardous materials
IV. Poor last-mile connectivity
• Weak road, rail and pipeline connectivity between ports and chemical clusters
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• In contrast, Antwerp is within 500 km of 60% of Europe’s consumer market and has seamless multimodal
connectivity
• Port infrastructure needs a revamp to boost chemical exports: The industry is seeking world-class port infrastructure
for better logistics performance, higher maritime trade, economic growth and higher yield to be able to create a
global impact. Indian ports have a far lower handling capacity compared with global standards. This needs
immediate attention in terms of expansion.
• India has 12 major ports and 205 notified minor ports. Most were set up several years ago and need to be upgraded
at a considerable cost. However, the design of existing ports is inadequate to meet the current requirement for a
quick turnaround and handling of increased volumes, which is causing delays in cargo movement. The turnaround
time in India, therefore, remains vastly inferior. The government and the port authorities must take appropriate action
to bridge such gaps.
• However, Union Budget 2025-26 marks a significant push toward modernising India's ocean freight logistics sector.
Strategic initiatives such as the maritime development fund, shipbuilding clusters and tax incentives, port
connectivity enhancements under the PM Gati Shakti programme were launched to boost shipbuilding, improve
port connectivity and encourage green shipping practices, ultimately driving economic growth and strengthening
India's position in international trade.
Recommendations
The type and extent of port infrastructure required for different chemicals varies depending on the chemical's properties,
handling requirements and transportation modes.
Liquid chemicals
• Tanker berths: Dedicated tanker berths with suitable draft and mooring facilities to accommodate large tankers.
• Storage tanks: Adequate storage tank capacity to store liquid chemicals, with features such as heating, cooling and
nitrogen blanketing.
• Pumping systems: High-capacity pumping systems to transfer liquids between ships, tanks and pipelines.
• Pipeline infrastructure: Extensive pipeline networks to transport liquids to and from storage tanks, processing facilities,
and other ports
Dry bulk chemicals
• Dry bulk terminals: Specialised dry bulk terminals with features such as conveyor belts, silos and warehouses to handle
dry bulk chemicals.
• Unloading facilities: Grab cranes, bucket elevators or pneumatic conveyors to handle dry bulk chemicals.
• Storage facilities: Adequate storage facilities such as silos, warehouses or open storage areas to store dry bulk
chemicals.
• Loading facilities: Loading facilities such as conveyor belts, bucket elevators or pneumatic conveyors to load dry bulk
chemicals onto ships or trucks.
Gas chemicals
• Gas terminals: Specialised gas terminals with features such as liquefied natural gas and liquefied gas chemicals.
• LNG terminals: Specialised terminals with features such as regasification facilities, storage tanks and pipelines.
• Petrochemical terminals: Specialised terminals with features such as ethylene crackers, propylene and other
petrochemical facilities.
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Focus on chemicals to make India a global manufacturing hub for chemical sector:
To enhance the competitiveness of India's chemical industry, the government has proposed a revised governance and
operational framework for chemical parks. This framework emphasises centralised coordination, state-level autonomy and
seamless integration of stakeholders, with clearly defined accountability and responsibilities.
Global best practices
India can draw inspiration from successful global chemical parks, such as:
1. Jurong Island in Singapore: Contributes to ~3% of Singapore's GDP and employs thousands of people.
2. Ludwigshafen Chemical Park in Germany: Generates ~€20 billion in annual revenue and is one of the largest
chemical parks in the world.
3. Jubail Industrial City in Saudi Arabia: Houses over 100 companies and produces ~7% of the world's petrochemicals,
generating thousands of jobs.
Institutional framework
The institutional framework for India's PCPIRs could include the following:
1. High-powered committee: With representatives from the Union Ministry of Ports, Shipping and Waterways, the
Department of Chemicals and Petrochemicals, and senior officials from other central ministries and departments may
be constituted. The committee would also seek advice from public and private terminal operators, industry members,
and safety and compliance experts.
2. Management Boards: Special purpose vehicles (SPVs) that handle master planning, infrastructure development and
investment facilitation.
Challenges and opportunities
Despite progress, India's chemical hubs face challenges, such as:
1. Operating difficulties
2. Contractual issues
3. Reluctance from international companies to enter ventures without majority shareholding
To address these challenges, it is essential to:
• Enhance coordination and optimise infrastructure development
• Streamline regulatory processes
• Prioritise sectoral growth
• Address environmental and community issues
By implementing these recommendations, India can overcome its port infrastructure challenges and emerge as a global
leader in the chemical sector, driving economic growth and sustainable development. With a world-class port infrastructure,
India can enhance its competitiveness, increase exports, and improve safety standards, ultimately achieving its goal of
becoming a global manufacturing hub for the chemical sector.
Recommendation III: Leverage FTAs; safeguard domestic growth
The domestic chemicals industry generates more than two million jobs and plays a crucial role in the nation's economic
output. However, the industry faces significant challenges, including a widening gap between imports and domestic
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production, which is forecasted to expand substantially. The free trade agreements (FTAs) that are already signed and that
are under negotiations, particularly with the Middle Eastern countries, have brought both opportunities and challenges for
the industry. This section examines the impact of the FTAs on the industry, highlighting the gaps and challenges that need
to be addressed to make it competitive and self-reliant.
Gaps and challenges
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FTAs have a mixed impact on the chemicals industry, with several roadblocks that complicate growth and competitiveness.
The key challenges faced by the industry include:
1. Cost competitiveness and import surge: India's chemical imports reached nearly $75 billion in fiscal 2023, with China,
Saudi Arabia and the United States being major suppliers. The influx of low-cost chemical imports, particularly from the
Asia-Pacific FTA partners, has put pressure on domestic players, making it difficult for them to compete with cheaper
imports.
2. Limited protection for sensitive sectors: FTAs often include sensitive product lists, which allow some sectors
protection through tariffs. However, India's sensitive lists do not adequately shield critical segments within the chemicals
industry, such as petrochemical intermediates and specialty chemicals, from zero-duty imports.
3. Impact on value-added manufacturing: FTAs inadvertently promote raw material imports over local value-added
manufacturing expansion, which curtails job creation and economic development. Although India exported around $44
billion worth of chemicals in fiscal 2024, much of this was in lower-value segments, limiting opportunities for more
advanced and specialised manufacturing.
4. Inadequate feedstock and infrastructure support: FTAs have increased India's dependence on imported feedstock,
as most domestic producers lack access to competitively priced raw materials. The lack of basic feedstock infrastructure
means that the industry remains exposed to global supply chain risks, further constraining growth.
5. Overlooked industry-specific needs in FTA negotiations: FTAs typically focus on broader economic interests
without adequately addressing the specific needs of the chemicals sector, which demands a nuanced approach.
Fostering balanced growth from future FTAs
To build a more resilient and competitive chemicals industry, India needs to negotiate FTAs that incorporate specific
provisions for the sector. The following initiatives could help:
1. Targeted FTA negotiations: India could negotiate FTAs that incorporate industry-focused protections, such as tariff
quotas or selective duty exemptions on critical raw materials and petrochemical feedstock, while retaining tariffs on
imported finished products to protect domestic manufacturers.
2. Awareness and effective utilisation of FTAs: Improving awareness and accessibility of FTA provisions could
enhance their utility and ensure that exporters are able to take full advantage of tariff reductions. Simplifying
administrative processes, especially around proving the origin of exports, could lower costs and improve compliance.
3. Promoting localised production and sustainable shipping methods: The government may promote investments in
localised production, sustainable shipping methods and robust trade infrastructure to ensure stability in the future.
Case study: The Indo-Japanese free trade agreement
The CEPA between Japan and India, signed in FY11, has played a significant role in shaping trade relations, particularly
affecting India's trade balance in the chemicals sector. Since the agreement, Japan's exports to India have nearly doubled,
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Powering India’s participation in Global Value Chains, July 2025
81
while India's exports to Japan have seen limited growth, leading to a more pronounced trade imbalance. This imbalance is
notably reflected in the chemicals sector, where India's import-to-export ratio with Japan has worsened. The FTA's rules of
origin and product-specific norms have created barriers for Indian chemical exports, highlighting the need for a review of
the CEPA's terms to ensure that the chemicals industry can better capitalise on export opportunities to Japan.
Going forward, India must prioritize FTAs that avoid such restrictive norms and ensure more balanced, mutually beneficial
market access for its chemical industry.
The government may explore to subsidise the outward freight or manage the ocean freight rate and provide freight support
packages to help the industry deal with increasing freight rates. It may also introduce competitive financing or tax structures
for micro, small and medium enterprises to help them maintain or grow their position in the chemical industry.
FTAs have created a mixed landscape for the Indian chemicals industry, with several challenges that need to be addressed
to foster a competitive and self-reliant industry. The government needs to negotiate FTAs that incorporate specific provisions
for the sector, promote localised production and sustainable shipping methods, and impose ADD on key chemicals to protect
the domestic industry. By doing so, India can build a more resilient and competitive chemicals industry capable of
capitalising on global supply-chain opportunities and contributing to the country's economic growth.
Recommendations
1. Revise customs duty: Revise customs duty on several products, including laboratory chemicals, phosphoric acid, and
boric acid to support domestic manufacturing and curb competition.
2. Subsidise freight: Subsidise outward freight or manage ocean freight rates and provide freight support packages to
help the industry deal with increasing freight rates.
3. Competitive finance: Make available competitive finance or tax structures for micro, small and medium enterprises to
help them maintain or grow their position in the chemical industry.
4. Promote localised production: Promote investments in localised production, sustainable shipping methods and robust
trade infrastructure to ensure future stability.
5. Imposing ADD: Impose ADD on several key chemicals to protect the domestic industry from cheaper imports and
provide a level-playing field for domestic manufacturers.
By implementing these recommendations, India can foster a competitive and self-reliant chemicals industry capable of
contributing to the country's economic growth and development.
Regulatory Framework for Dual-Use Chemicals
• The current framework is approval-centric, resulting in multiple clearances, repetitive documentation and lengthy
approval timelines.
• Excessive compliance requirements, overlapping regulatory oversight and procedural delays increase operational
and legal risks for legitimate users.
• Regulatory scrutiny focuses more on permissions than on actual industrial end-use, with limited incentives for
voluntary compliance and self-disclosure.
• A more facilitative framework is proposed through voluntary disclosure windows, safe-harbour protection, digital
reporting systems, risk-based monitoring, standardised end-user declarations and corrective-action mechanisms
before penalties.
These measures would improve transparency, reduce compliance burdens and strengthen regulatory oversight.
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Conclusion
The Indian chemical industry is a vital component of the country's economy, contributing significantly to its growth and
development. The industry has the potential to become a global manufacturing hub, driven by increasing demand from end-
user industries, government support and a favourable regulatory environment. However, the industry faces several
challenges, including inadequate infrastructure and significant environmental and safety issues.
The government and industry stakeholders must work together to address these challenges, implementing a comprehensive
strategy that promotes domestic production, enhances competitiveness and fosters innovation, which can be achieved by
investing in research and development, developing infrastructure and providing incentives to support the growth of the
industry. The industry must also adopt sustainable practices, reduce its environmental impact and ensure the safety of its
workers and the communities.
The Indian chemical industry has a diverse range of products, including petrochemicals, specialty chemicals and inorganic
chemicals. The industry is expected to log a CAGR of 6-8% between fiscals 2024 and 2032, driven by the growth of the
automotive, construction and pharmaceutical sectors. The industry is also expected to benefit from the government's
initiatives to promote domestic production, enhance competitiveness and foster innovation.
To achieve the goal of making India a global manufacturing hub for the chemical sector, the government and industry
stakeholders must work together to implement a comprehensive strategy that addresses the existing challenges. The
recommendations outlined are poised to significantly help India to achieve economic growth, create job opportunities and
increase its global competitiveness.
Key recommendations
1. Promote domestic production and reduce import dependency
The government and industry stakeholders must work together to reduce dependence on imports and enhance
competitiveness. By reducing its reliance on imports, India can conserve foreign exchange, mitigate the impact of global
price volatility and ensure a stable supply of essential chemicals. This can be achieved through the promotion of domestic
production, encouraging investments in the chemical sector and implementing policies that support the growth of the
industry.
2. Investing to improve competitiveness
I. Develop infrastructure: The government must invest in infrastructure development, including the construction of new
ports, roads and railways, and upgrade the existing infrastructure to promote growth. Apart from these, focus on
establishing integrated facilities must be on our list to increase our global competitiveness with little reliance on imports
II. Provide incentives: The government must provide incentives, such as production-linked incentive schemes, to support
growth and encourage investment.
III. Adopt sustainable practices: The industry must adopt sustainable practices, such as the use of renewable energy,
waste reduction and recycling, to reduce its environmental impact.
By developing a competitive chemical industry, India can enhance its global reputation, attract foreign investments, and
become a preferred destination for chemical manufacturing and sourcing. This can lead to increased market share and
improved efficiency and productivity.
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3. Leverage FTAs while safeguarding domestic industry growth
The Indian chemicals industry faces challenges from increasing imports and evolving trade dynamics. A balanced approach
that safeguards domestic industry while promoting global competitiveness will be critical to positioning India as a resilient
and globally integrated chemicals manufacturing hub.
To make India a global manufacturing hub for the chemical sector, it is essential to promote and incentivise the production
of certain chemicals which have high demand, growth potential and strategic importance.
Table 7: Priority chemicals for enhancing domestic manufacturing capabilities
Chemicals
Domestic
capacity (FY25)
(KTPA)
Utilisation
levels (FY25)
Import value
(FY25) ($
million)
Import
dependency
(FY25)
Import
dependency
(FY30)
Share (%) of countries in
India’s import basket
(FY25)
Phenol 280 131% 263.48 41% 31%
Thailand – 47%
Singapore – 14%
Korea – 12%
South Africa – 8%
US – 7%
Methanol 746.64 15-20% 917.67 85-90% 85-90%
Oman – 50%
Saudi Arabia – 22%
Qatar – 13%
Iran – 5%
Bahrain – 4%
Acetic acid 196 80-85% 477.43
85-90%
85-90%
China – 51%
Malaysia – 23%
Singapore – 14%
Taiwan – 7%
Oman – 2%
Source: Crisil Intelligence
Phenol’s demand is driven by end-user industry growth along with capacity additions of its downstream products such as
polycarbonates and BPA. Domestic consumption was at 596 KTPA as of fiscal 2025. Import dependency was reduced to
40% as of fiscal 2025 and is expected to decline to 30% by fiscal 2030 owing to capacity additions by existing as well as
new players.
Methanol is one of the largest consumed organic chemicals in India. Domestic consumption stood at 3,309 KTPA for fiscal
2025 and import dependency was at 85-90% as of fiscal 2025; the latter is expected to remain the same till fiscal 2030.
Manufacturers opt for imports owing to unfavourable cost economics. No significant methanol capacity additions are
expected in the next five years. But, by leveraging coal gasification, India can reduce methanol imports and enhance
domestic production. Moreover, India is also aiming for 100 million tonne (MT) coal gasification by 2030 with investments
worth over Rs 4 lakh crore, which would help in reducing import dependency.
Acetic acid is one of the major organic chemicals imported in India. Demand for acetic acid stood at ~1,380 KTPA as of
fiscal 2025. Import dependency was 85-90% for the fiscal and is expected to remain the same till fiscal 2030 as no capacity
addition is planned. There is less incentive for the manufacturer to produce acetic acid because of the high production cost
due to dependency on methanol (the primary raw material), for which India is again dependent on imports.
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85
Table of contents
Executive Summary ............................................................................................................................... 87
Introduction ........................................................................................................................................... 90
Overview of Indian textile industry .......................................................................................................... 91
Global textile industry overview .............................................................................................................. 94
Textiles value chain ............................................................................................................................... 97
Cotton ................................................................................................................................................ 97
MMF (polyester) ................................................................................................................................... 98
Strategic alignment – RMG and MMF .................................................................................................. 100
Raw material availability – RMG ...................................................................................................... 100
Raw material availability – MMF ...................................................................................................... 102
Global trade – RMG ........................................................................................................................ 103
Global trade – MMF ......................................................................................................................... 105
Technology readiness - RMG ........................................................................................................... 107
Technology Readiness - MMF ......................................................................................................... 108
Financial viability - RMG .................................................................................................................. 108
Financial viability - MMF .................................................................................................................. 109
Employee productivity ..................................................................................................................... 110
Skill requirement ............................................................................................................................. 111
Growth drivers ..................................................................................................................................... 112
Benchmarking against competing countries ......................................................................................... 116
Bangladesh ..................................................................................................................................... 117
Vietnam ........................................................................................................................................... 119
China .............................................................................................................................................. 121
Policy framework and industry support mechanism .............................................................................. 123
Recommendations: Policy initiatives and reforms ................................................................................. 124
Recommendations for Enhancing Raw Material Cost Competitiveness ............................................ 124
Recommendations to improve the scale of operations ..................................................................... 129
Recommendations to expand market outreach in the downstream sector ........................................ 132
Improving efficiency of labour in the textile sector ............................................................................ 135
Recommendation on policy support for branding of Indian textiles ................................................... 137
Strengthening specific segments of the textile industry .................................................................... 138
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Textiles
87
Executive Summary
Sector overview
India’s textile and apparel industry (T&A) is one of the country’s most important manufacturing sectors,
contributing approximately 2% to national GDP, 11% to manufacturing GVA, and 9% of merchandise exports.
The sector is also the second-largest employer after agriculture, providing livelihoods to more than 45 million
people and supporting widespread MSME-led industrial development. In fiscal 2025, India exported textile
products worth USD 37.7 billion and accounted for 4.1% of global textile and apparel exports, making it the
sixth-largest textile exporter globally. The sector therefore plays a critical role in advancing India’s
manufacturing, export, employment, and inclusive growth objectives.
Global opportunity
The global textile industry is expected to reach approximately USD 1.8 trillion by 2027, supported by rising
disposable incomes, urbanisation, growth in e-commerce, and increasing demand for apparel, home textiles,
and technical textiles. While natural fibres continue to occupy a significant share of global consumption, demand
is increasingly shifting towards man-made fibres (MMF), particularly polyester, owing to their durability,
versatility, and suitability for performance apparel and technical applications. As global consumption patterns
evolve, countries with strong capabilities across both cotton and MMF value chains are expected to be best
positioned to capture future growth opportunities.
India’s competitive position
India possesses several natural and structural advantages, including a strong raw material base, manufacturing
capabilities for complete value chain, and a sizeable domestic market. The country is among the world’s largest
FY30 target
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cotton producers and remains the largest exporter of cotton yarn. However, achieving the government’s target
of USD 100 billion in textile exports by fiscal 2030 will require India to expand beyond its traditional strength in
cotton textiles and develop greater competitiveness in MMF-based segments that are witnessing faster global
growth.
Several structural factors are expected to support the growth of India’s textile industry over the coming years.
Rising incomes, expanding urbanisation, increasing adoption of e-commerce platforms, and growing demand
for value-added apparel are expected to drive domestic consumption. At the same time, increasing global
demand for technical textiles, sustainable products and MMF-based garments presents significant export
opportunities. Government initiatives such as the Production Linked Incentive (PLI) Scheme for Textiles, PM
MITRA Parks, the Samarth skilling programme, the National Technical Textiles Mission and the recently
announced Mission for Cotton Productivity are expected to further strengthen manufacturing capabilities and
improve sector competitiveness.
Lessons from Global Leaders
The experiences of leading textile-exporting countries provide valuable lessons for India.
Bangladesh has emerged as one of the world’s leading garment exporters through competitive labour costs,
dedicated export-oriented industrial zones, strong infrastructure support, and preferential market access
arrangements that have enabled rapid export growth.
Vietnam has strengthened its position through extensive trade integration, strong foreign direct investment
inflows, specialized industrial parks, and close integration with global supply chains. The country has
successfully leveraged trade agreements and a favorable investment environment to become a major global
textile manufacturing hub.
China continues to dominate the global MMF ecosystem through long-term industrial planning, strong policy
support, large-scale manufacturing capacities, extensive R&D investments, and integrated supply chains
spanning raw materials to finished textile products.
The experiences of these countries underscore the importance of scale, trade competitiveness, integrated
manufacturing ecosystems, technology investments, and policy support in building globally competitive textile
industries.
Key Challenges Hindering Competitiveness
Despite its strong foundations, India faces several structural challenges that constrain its global
competitiveness.
First, the domestic textile industry remains heavily reliant on cotton, even as global demand increasingly shifts
towards MMF-based products. Limited availability and higher costs of key MMF feedstocks such as PTA and
MEG affect the competitiveness of downstream manufacturers.
Second, manufacturing capacities in critical segments such as weaving and processing remain fragmented,
with a large proportion of production concentrated among MSMEs that often face constraints relating to
technology adoption, scale, and productivity.
Third, Indian exporters continue to face market access disadvantages relative to competing countries such as
Bangladesh and Vietnam, which benefit from wider preferential trade arrangements in major export markets.
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Fourth, labour productivity in the textile sector remains significantly below the overall manufacturing average,
while gaps in skilling, technology adoption, and innovation continue to affect competitiveness. Private sector
investment in research and development also remains limited relative to leading global peers.
Strategic Priorities for Accelerating Growth
To strengthen India’s global position and accelerate export growth, the report identifies the following priorities:
• Improve raw material competitiveness by addressing MMF feedstock constraints, improving cotton productivity
and quality, and rationalising duties.
• Promote scale through infrastructure support for MSMEs, technology upgradation, larger weaving and
processing capacities, and greater foreign investment.
• Expand market access through deeper trade integration and targeted FTAs.
• Enhance productivity through workforce skilling, labour welfare measures, and technology adoption.
• Strengthen emerging segments such as technical textiles, MMF-based products, sustainable textiles, and
premium Indian weaves.
Way Forward
India possesses raw material base, a complete value chain, entrepreneurial ecosystem and policy support
necessary to emerge as a leading global textile manufacturing destination. However, achieving the target of
USD 100 billion in textile exports by fiscal 2030 will require a strategic shift towards MMF-led growth, stronger
integration with global value chains, enhanced productivity, improved market access, and sustained investment
in innovation and technology. A coordinated policy approach focused on competitiveness, scale, and value
addition can transform the sector into a major engine of exports, employment generation, and industrial growth
over the coming decade.
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Introduction
Textile is one of the oldest industries and encompasses all segments—from cultivation and production of raw
fibres such as natural cotton and silk or synthetic fibres such as polyester—as well as the designing,
manufacturing and distribution of final products such as yarn, fabric and garments. It is one of the most
significant global sectors, covering both small-scale and large-scale enterprises involved in processing and
manufacturing of various textile products. These enterprises contribute notably to industrial output, exports and
employment.
Against this backdrop, this report aims to evaluate the government policies, initiatives, frameworks, and
incentives that have facilitated the growth of the global textile manufacturing sector, with a particular focus on
identifying countries that have emerged as leaders in this space. By examining the strategies and best practices
of nations with high production volumes, significant export market share, and extensive global coverage, this
report seeks to inform the development of targeted interventions that can help India's textile manufacturing
sector become globally competitive. Specifically, the report will assess the key strategic priorities that India
needs to address in order to drive growth, enhance productivity, and increase its market share in the global
textile industry. By doing so, the report aims to provide a roadmap for India's transformation into a global
manufacturing hub for textiles.
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Overview of Indian textile industry
The textile and apparel industry accounts for 2% of India's gross domestic product (GDP)
53
and 11% of
manufacturing GVA
54
. It is also a major export contributor, representing 9% of total merchandise exports
55
.
In fiscal 2025, India exported textile items
56
worth $37.7 billion.
As the second-largest employment generator after agriculture, the textile industry provides jobs to over 45
million people
57
, including a significant number of women and rural population. Furthermore, nearly 80% of
the industry's capacity is spread across micro, small, and medium enterprise (MSME) clusters
58
throughout
the country, promoting inclusive growth.
The industry is, therefore, well-aligned with the government's key objectives, including Make in India, Skill
India, women's empowerment, rural youth employment and inclusive growth.
On the global stage, India is the sixth-largest exporter of textiles and apparel
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, with a 4.1% share of the
global market in calendar year 2024. This significant presence in the global export market underscores the
importance of the textile industry to India's economy and highlights its potential for continued growth and
development.
The Indian textile and apparel industry is vibrant and diverse, with a value chain spanning the entire
production process—from fibre to finished apparel. The value chain includes an upstream segment,
comprising cotton fibre, man-made fibre (MMF), cotton yarn, and man-made yarn and filament; a mid-
stream segment, that includes cotton, synthetic, and blended fabric; and a downstream segment,
comprising readymade garments (RMG), home textiles and technical textiles. The industry's product
portfolio is remarkably diverse, ranging from handmade craftsmanship to contemporary and modern
fashion, offering a broad range of products.
India is a major cotton producer, accounting for approximately 22% of global output in the 2023/24
marketing year, which runs from August 1st to July 31st
60
. However, the global textile market is shifting
towards man-made fibers (MMF).
Over the past three years, India has experienced a decline in cotton production, whereas the production of
MMF has shown an upward trend.
Cotton’s virtues such as softness, breathability and versatility make it a preferred choice for apparel and
home textiles. However, changing fashion trends and growing demand for durable, wrinkle-resistant and
quick-drying fabrics is driving the rise of MMF such as polyester.
Recognising this shift, the Indian government has introduced several schemes to promote domestic MMF
manufacturing, thereby strengthening the country's competitiveness.
53
Ministry of Statistics and Programme Implementation (MOSPI)
54
Ministry of Statistics and Programme Implementation (MOSPI)
55
Directorate General of Foreign Trade (DGFT)
56
Directorate General of Foreign Trade (DGFT)
57
Press Information Bureau
58
Economic Survey 2024
59
Trade statistics for international business development
60
U.S. Department of Agriculture
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Figure 29: Production of man-made fibre in million kgs
Source: Ministry of Textile, Office of the Textile Commissioner, Crisil Intelligence
Cotton yarn production in India declined 5% annually from 3,962 million kgs in fiscal 2020 to 3,438 million
kgs in fiscal 2023. In contrast, production of manmade filament yarn and blended/non-cotton yarn grew 2%
annually, reaching 3,650 million kgs. Despite this decline, India remains the largest exporter of cotton yarn,
accounting for 29% of global exports in CY 2023. Meanwhile, demand for polyester yarn is rising owing to
its versatility and use in technical textiles, performance wear and sportswear.
Figure 30: Production of filament yarn and spun yarn in million kgs
Source: Ministry of Textile, Office of the Textile Commissioner, Crisil Intelligence
1,688
1,326
2,016 1,904
3,962
3,625
4,075
3,438
1,702
1,521
1,758
1,746
2019-20 2020-21 2021-22 2022-23
Manmade filament yarn Cotton yarn Blended & 100% Noncotton yarn
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Although woven fabric production has increased, India continues to rely on imports owing to quality and
cost concerns. In contrast, the knitting fabric segment is more self-sufficient, with local production meeting
a significant portion of domestic demand.
The Indian textile and apparel industry comprises both, domestic and export segments. Historically, the
domestic segment has grown faster than exports, which have been impacted by the global slowdown,
Covid-19 pandemic and high export tariffs levied by the European Union (EU), compared with the zero-
import duty for other exporting countries, such as Bangladesh. The domestic industry is divided into ready-
made garments (RMG), technical textile and home textiles, with RMG as the largest segment, followed by
technical textile. For exports, the industry is RMG-dominated, followed by home textiles.
Figure 31: Indian textile and apparel market – overall market in $ billion
Source: DGCIS, Crisil Intelligence
P*- Target set by Government of India
India's textile industry is well positioned globally, particularly in cotton production. However, it faces several
challenges that must be addressed to achieve the export target of $100 billion by fiscal 2030 (up from $37.7
billion in fiscal 2024). These challenges include issues related to global demand dynamics, supply chain
disruptions, production limitations, competitive disadvantages, and structural inefficiencies. To meet this
target, India needs a strategic, multi-layered approach that addresses both industry-specific and broader
trade-related challenges.
Exports Domestic
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Global textile industry overview
The global textile industry encompasses a range of products, including upstream segments such as fibres,
yarns, and fabrics, as well as downstream segments comprising garments, home textiles and technical
textiles. The industry experienced consistent growth from 2018 to 2023, except for Covid-19-linked decline
in 2020. The market recovered with 3.8% year-over-year growth in 2021, a 3.9% increase in 2022 and a
0.3% increase in 2023.
The global textile industry is expected to grow at a CAGR of 2.5-3.5% from 2023 to 2027, reaching $1,780-
$1,830 billion in revenue terms by 2027. This growth will be driven by fast fashion, the expansion of e-
commerce platforms, urbanisation and growing disposable incomes, that are transforming the market and
driving demand.
Figure 32: Global textile market
Source: Crisil intelligence and Grandview Research
Between 2018 and 2023, natural fibres accounted for ~44% of the textile market in value terms, driven by
their versatility, sustainability and environmental appeal. Natural fibres are likely to maintain their leading
position going forward.
With a market share of 29%, polyester ranked second in value terms between 2018 and 2023. Its durability,
resistance to wrinkles and fast-drying properties made it an ideal material for a wide range of applications
in apparel, home textile and technical textile.
At 20%, nylon held the third-largest market share, owing to its durability, elasticity and moisture-wicking
properties. Its applications range from women's stockings and parachutes to industrial uses, where its
superior strength and stretchability, compared with polyester, makes it a preferred choice, supporting
expectations of higher future growth.
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In addition to these leading fibres, other segments, such as polyethylene (PE), polypropylene (PP), aramid
and polyamide, also hold a significant market presence. Polyethylene's unique properties, including its high
resistance to acids and alkalis at elevated temperatures and low moisture absorption, have driven its rising
demand. The market share of different fibres is expected to remain largely unchanged by 2027.
Figure 33: Fibre-wise segmentation of global textiles by value (%)
Source: Crisil intelligence and Grandview Research
The global textile trade logged a CAGR of 1% from 2018 to 2023, reaching $901 billion. Although the Covid-
19 pandemic caused a dip in 2020, the trade rebounded in 2021 with a 16% year-on-year increase.
However, growth slowed in 2022 and 2023 owing to inflation and weak consumer sentiment, resulting in an
8% decline in 2023. Additionally, within the textiles sector, apparel dominated the global textile trade,
followed by fabrics and home textiles.
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Figure 34: Global textile trade (CY2018-2024)
Note: Trade numbers have been calculated based on global export data; Harmonized System (HS) codes used for analysis include:
50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 65, 4203, 4303, 4304
Source: ITC Trade, Crisil Intelligence
Figure 35: Breakup of global textile trade (CY2023)
Source: ITC Trade, Crisil Intelligence
The Asia Pacific region—led by China, India, Bangladesh and Vietnam— remains the largest supplier of
downstream textile products, driven by well-established manufacturing capabilities, large labour pools and
raw material availability. The US and the EU, on the other hand, serve primarily as major consumption
markets.
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Textiles value chain
Cotton
Ginning
The textile value chain begins with the planting of cotton in March, April and May, followed by harvesting in
September and October. The freshly harvested cotton is then sent to ginning units, where it is processed.
Ginning of cotton involves separating raw cotton from seeds to produce lint, the fibre used in spinning. This
process is crucial, as it prepares the cotton for the subsequent stages, ensuring that the quality of the fibre
is preserved. Ginning plays a vital role in determining the final quality of the yarn, as it removes impurities
and short fibres, thereby creating a cleaner and more uniform product that is essential for efficient spinning.
Spinning (cotton)
Following ginning, the cotton lint is spun into yarn, the fundamental building block of textiles. In this stage,
cotton fibres are twisted together to create yarns of varying thicknesses and strengths, depending on the
intended use.
Weaving and knitting
The yarn is then woven or knitted into fabric, which forms the intermediate stage of the textile value chain.
This fabric can vary widely in terms of texture, weight and appearance, depending on the weave or knit
pattern used. The fabric is then dyed, printed or finished according to the requirements of the final product,
with additional processes such as bleaching or mercerising enhancing its characteristics. This stage is
critical as it determines the aesthetic and functional qualities of the final garment.
Garmenting
Finally, the fabric is transformed into RMGs, the end products that reach consumers. In this stage, the fabric
is cut, stitched and assembled into various clothing items, ranging from basic apparel to intricate fashion
garments. The RMG segment is where the creative and technical aspects of fashion design come together,
producing finished products that meet market demands in terms of style, comfort and durability. This final
stage is the most labour-intensive and involves various skill levels, from basic sewing to advanced tailoring
and quality control, ensuring that the garments meet industry standards and consumer expectations.
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MMF (polyester)
Raw material
Polyester is produced through the continuous polymerisation of purified terephthalic acid (PTA) and mono
ethylene glycol (MEG). PTA is obtained from paraxylene, which is derived from naphtha, a hydrocarbon
produced through crude oil distillation. MEG is produced from ethylene. Ethylene is produced via steam
cracking of hydrocarbons (like naphtha or ethane).
Fibre and yarn
PTA and MEG are combined to produce polyester staple fibre and polyester filament yarn. Polyester staple
fibre is further converted into 100% polyester spun yarn or combined with materials such as cotton, viscose,
wool and other materials to produce blended yarn. On the other hand, polyester filament yarn is made from
long, continuous strands of polyester.
Weaving and knitting
Polyester yarns are then knitted or woven to create blended fabrics, which can be a mix of polyester and
other materials, or 100% polyester fabrics. The fabric is then treated with dye, print or finish to meet the
final product's requirements.
Garment/ made-ups
Fabric thus generated through weaving and knitting is used to make a wide range of products, including
garments like sportswear, activewear and dresses, as well as home textiles like bedspreads, curtains,
carpets and tablecloths.
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Figure 36: Domestic presence and profitability across textile value chain
Note: Positioning of red arrow indicates the presence in the domestic market
Note: The list of companies is representative, not exhaustive.
Note: EBITDA and RoE are average for FY21, FY22, FY23
Source: Crisil Intelligence, Company Reports
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Strategic alignment – RMG and MMF
The RMG segment is a key pillar of the domestic textile industry, accounting for 50-60% of the domestic
market and 42% of the country's total textile exports, which amounted to $37.7 billion in the fiscal year
2024, according to Crisil Intelligence.
In the upstream segment, the domestic textile industry is currently dominated by cotton. However, the global
shift towards MMF-based textiles has highlighted the need for India to enhance its MMF production capacity.
To achieve the government’s vision of $100 billion textile exports by fiscal 2030, it is essential to scale up
MMF production capacity over the next five years.
Raw material availability – RMG
RMG companies produce apparel, such as shirts and t-shirts, in standard sizes, which are then sold to
retailers. In India, the majority of apparel is typically made from cotton, polyester or a blend of both. Natural
fibres constitute approximately 65% of the total fibre production in India, with cotton being the predominant
fibre, accounting for more than 75% of the natural fibre. Meanwhile, polyester dominates the MMF and
filament segment, making up over 80% of the total MMF production (refer to Annexure V).
Table 8: Key RMG raw materials and major producing countries
Note: Raw material intensity refers to the proportion of raw material costs to the total cost of the final product
Source: Crisil Intelligence
The table highlights the availability and intensity of raw materials for the textile industry, focusing on two
key fibres: cotton and polyester. Cotton has high raw material intensity, indicating its significant availability
and utilisation in the global textile industry. China, India and Brazil are the leading producers of cotton, with
these countries having vast agricultural areas dedicated to cotton cultivation. These nations not only supply
cotton to their domestic industries but also play a critical role in the global cotton trade, making them critical
players in the global textile value chain.
The table also indicates that polyester, much like cotton, has a high raw material intensity. This reflects the
significant global demand for synthetic textiles, which are predominantly made from polyester fibres. The
high intensity of polyester production is driven by its widespread use in various applications, from everyday
apparel to industrial fabrics, due to its durability, versatility and cost-effectiveness. Leading producers such
as China, India and Indonesia have capitalised on this demand by establishing robust polyester
manufacturing industries, supported by readily available petrochemical resources.
India’s prominent role in both cotton and polyester production positions it as a versatile player in the
global textile industry, capable of catering to diverse market needs. However, domestically, cotton-based
textiles have maintained their dominance.
Raw materials Cotton Polyester
Raw material intensity High High
Producer 1 China China
Producer 2 India India
Producer 3 Brazil Indonesia
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Table 9: Countries from where India procures raw materials
Source: Crisil Intelligence
*Based on quantity imported in fiscal 2025
India is one of the largest producers of cotton globally, with a significant portion of its textile industry being
self-sufficient in cotton procurement. Extensive cotton cultivation across states such as Gujarat,
Maharashtra and Telangana ensures that more than 90% of the cotton used in the domestic textile industry
is sourced domestically.
In terms of polyester production also, the country is largely self-sufficient, with major players such as
Reliance Industries Ltd, Indo Rama Synthetics (India) Ltd, Filatex India Ltd, Sanathan Textiles Ltd and
Bombay Dyeing Manufacturing Company Ltd leading the charge. The country produces a wide range of
polyester fibres, which are crucial for both the domestic textile industry and export markets.
According to the Asia petrochemical industry conference (APIC) Country Paper 2025, India's polyester
production capacity, which includes polyester staple fibre and partially oriented yarn, stood at ~6.2 million
tonne in fiscal 2024. However, the actual production was ~4.8 million tonne, resulting in a capacity utilisation
rate of ~ 77%, down from 80% in fiscal 2023. The primary reason for the decrease in utilisation was a slump
in demand from the downstream garment and home textile segments.
The availability of raw materials such as cotton and polyester is crucial for India’s RMG sector. Having a
stable and indigenous supply of these inputs ensure that the domestic RMG industry can operate efficiently
and without disruptions that could arise from heavy reliance on imports.
This strong raw material base not only supports domestic manufacturing but also enhances India’s
competitiveness in the global market. To be sure, India’s position as a leading producer and exporter of
cotton, particularly cotton yarn, solidifies its importance in the global textile supply chain.
Also, the ability to supply high-quality downstream textiles at competitive prices makes the country a
preferred partner for many global brands.
As a result, the RMG sector in India continues to thrive, contributing significantly to the economy via exports
and providing largescale employment.
Raw Materials Cotton Polyester
Supplier country 1 India India
Supplier country 2 Australia* China
Supplier country 3 Brazil* Indonesia
Domestic availability Yes Yes
Import share 5-10% 5-12%
Geopolitical relationship Positive Neutral
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Raw material availability – MMF
India's MMF industry is driven by polyester and viscose, which together account for ~97% of total fibre
consumption.
The major raw materials to make polyester are paraxylene, PTA and MEG, with the Indian MMF sector
relying majorly on imports of PTA and MEG.
The top three source countries for each of the raw materials for the global textile industry are:
Table 10: Top raw material sources for global textile industry
Source: Crisil Intelligence
India’s limited PTA and MEG capacities can be attributed to high barriers to entry due to the capital-intensive
nature of setting up manufacturing facilities. As a result, the market is dominated by a few large players,
including Reliance Industries Ltd, MCPI Pvt Ltd and Indian Oil Corporation Ltd in PTA production, and
Reliance Industries Ltd, India Glycols Ltd and Indian Oil Corporation Ltd in MEG production.
Second, India's dependence on crude oil imports, a key feedstock for PTA and MEG production, exposes
the industry to significant risks, including price volatility and exchange rate fluctuation. The uncertainty and
volatility of crude oil prices, combined with the depreciation of the rupee, can increase the cost of feedstock
procurement, affecting the competitiveness of domestic production.
India imports PTA and MEG from multiple countries, primarily due to cost and logistical considerations.
Table 11: Countries from where India procures raw materials
Source: Crisil Intelligence
Domestic production meets about 75% of India’s PTA demand and ~65% of its MEG demand, with the
remainder met through imports
The presence of a large-scale petrochemical industry in China and Taiwan, mainly in the aromatics value
chain, has resulted in the countries becoming major exporters. Furthermore, availability of cost-effective
Raw materials Paraxylene PTA MEG
Raw material intensity High High Medium
Producer 1 South Korea China Saudi Arabia
Producer 2 Japan South Korea USA
Producer 3 China Thailand Canada
Raw materials PTA MEG
Supplier country 1 China Kuwait
Supplier country 2 Taiwan Saudi Arabia
Supplier country 3 Thailand Singapore
Domestic availability Yes Yes
Import share ~25% ~35%
Geopolitical relationship Positive Neutral
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raw materials (crude oil and natural gas) has resulted in Kuwait and Saudi Arabia becoming India’s major
trade partners.
Global trade – RMG
China is the world's largest exporter of RMG, accounting for ~29% share, owing to its robust domestic
manufacturing capabilities. However, its share in the global RMG export market has declined due to ongoing
supply chain derisking by manufacturers and a ban on Xinjiang cotton.
Asian countries, particularly Bangladesh and Vietnam, play an important role in the global RMG industry.
These countries are leveraging their large labour base, cost-effective production capabilities and growing
industrial capacities to become dominant exporters in the RMG market. Over recent years, their influence
has only grown, reflecting a broader trend, where Asian economies are increasingly becoming the world’s
manufacturing hubs, supplying garments to developed markets.
On the other hand, developed countries such as the US, Germany and other European nations continue to
be the largest consumers of these garments. These countries import vast quantities of RMGs, driven by
strong consumer demand and reliance on global supply chains that source affordable and diverse fashion
products from Asian manufacturers. These dynamics underscore a global trade pattern, where production
is concentrated in developing economies and consumption is predominantly in wealthier, developed
markets.
Figure 37: World Trade
Note: HS codes 61 and 62 considered
Source: Trade Map, Crisil Intelligence
Major RMG exporting countries Major RMG importing countries
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The market share trends illustrated in the charts suggest that Asian manufacturers, particularly those in
Bangladesh and Vietnam, are increasingly capturing a larger slice of the global market. This shift reflects
their growing competitiveness and rising demand for their products in global markets. Concurrently, the
stable yet slightly diversifying import patterns of developed countries indicate that while these continue to
rely heavily on imports from a few key Asian suppliers, there is also a gradual exploration of new sourcing
options to meet their domestic demand.
In terms of global demand, the steady increase in export as well as import of RMGs points to a robust and
expanding market. The growing middle class in developing countries, along with a sustained appetite for
fast fashion in developed economies, continues to drive this demand.
As Asian countries strengthen their position as the world’s garment manufacturers, these are likely to
continue benefiting from these global consumption trends, strengthening their roles in the international trade
landscape.
As illustrated in the below chart, the major export destinations for the Indian RMG industry shifted somewhat
between 2018 and 2024. Still, the US remains the largest market, increasing its share from 26% in 2018 to
33% in 2024, underscoring the continued strong demand for Indian garments in the US market. The UAE
also remains a significant market, although its share decreased slightly to 8% from 12%. This shift might
reflect changes in trade policies, consumer demand, or increased competition from other RMG exporting
countries.
The data also shows a moderate increase in the share of exports to Australia and the Netherlands,
indicating that India's RMG industry is successfully penetrating new markets or expanding its presence in
existing ones. The stability or slight increase in exports to these markets reflects a strategic broadening of
the country’s export base, which could help mitigate risks associated with overreliance on a few key
markets.
Figure 38: Major export destinations for Indian RMG industry
Note: HS codes 61 and 62 considered
Source: Trade Map, Crisil Intelligence
This diversification is crucial for sustaining growth and resilience in the face of global economic
uncertainties and shifting trade dynamics.
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As India continues to navigate the complexities of global trade, maintaining and expanding its foothold in
diverse markets will be key to ensuring the long-term vitality of its RMG sector.
Global trade – MMF
China is the largest exporter of MMF, accounting for ~48% of global exports, supported by strong domestic
manufacturing capabilities. Favourable government policies resulted in faster capacity additions, boosting
overall production capacities. Presence of all major global RMG players outsourcing and manufacturing in
China has further bolstered production volume. The US is the second-largest exporter of synthetic fibres,
with higher focus towards polyester and nylon. Robust raw material support, owing to the availability of
crude oil and petrochemical products, along with lower power costs, creating a favourable production
environment for the US.
Presence of major exporters, including India and Indonesia, facilitates easier and cost-effective availability
of input material.
On the import front, major outsourcing destinations such as Vietnam (8%) and Bangladesh (5%) are among
the largest importers of synthetic fibres. The expansive garment manufacturing industry in these countries
results in sustained requirement for synthetic fibres. The absence of manufacturing and technological know-
how and extremely competitive markets further restrict the growth of domestic manufacturing.
Italy (3%) maintains steady import levels to meet domestic demand for luxury. Also, despite domestic
production, the US (4%) and China (4%) continue to import, depending on availability of cost-effective
products globally.
Figure 39: Global trade dynamics pertaining to the MMF industry
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Note: HS codes 54 and 55 considered
Source: Trade Map, Crisil Intelligence
Indian MMF exports have remained steady due to favourable global demand-supply dynamics. Presence
of domestic textile and intermediaries’ industry, along with competitive manufacturing cost, makes the
country a strong competitor for global exports. In 2024, overall exports declined, owing to lower global
demand resulting from growing recessionary pressures. Increasing dumping from China further resulted in
lower competitiveness of domestic products and reduction in overall capacity utilisation.
India-UAE free trade agreement (FTA) and the government’s PLI scheme are expected to boost cost-
effective production of synthetic fibres in India. Indian manufacturers can leverage competitive production
costs, efficient supply chains and the ability to produce grades that meet diverse market requirements to
meet the growing international demand.
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Figure 40: Major export destinations for Indian MMF industry
Note: HS codes 54 and 55 considered
Source: Trade Map and Crisil Intelligence
Technology readiness - RMG
Note: The green logo denotes that the parameter is available in India, while the red logo denotes that it is not
Source: Crisil Intelligence
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Technology Readiness - MMF
Note: The green logo denotes that the parameter is available in India, while the red logo denotes that it is not
Source: Crisil Intelligence
Financial viability - RMG
Figure 41: Profitability Benchmarking of India’s RMG Sector Against Key Global Peers
Source: Crisil Intelligence, company reports
Note:The financial year for India is April-March, while for Bangladesh, it is July-June.
The list of companies used for this analysis is available in Annexure 1
The margins of domestic RMG companies are at par with those of international players. However, the
margins of Vietnamese RMG companies are lower owing to their concentration on low-margin export
markets and lack of high-premium products, which limits their ability to command higher prices.
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Financial viability - MMF
Figure 42: Profitability Benchmarking of India’s MMF Sector Against Key Global Peers
Source: Crisil Intelligence, company reports
Please note that international players considered are Xinfengmin, Hengyi and Tongkun and domestic players considered are
Century Enka, Indo Rama and Filatex India.
In the MMF segment, the overall financial profile of the international players is significantly better than that
of the domestic players. Indian players incur higher costs, primarily due to two reasons – import
dependence on raw materials and low-capacity utilisation of domestic players. Despite having a robust fibre
and yarn industry, India lacks raw material capacities for some key raw materials such as PTA-MEG. Global
oversupply of raw materials at competitive prices is the key reason for lack of domestic capacities for
feedstock, resulting in import reliance, inflating costs for downstream players. Despite being a net-exporter
of fibres, India faces consistent pressure from international players (mainly China), resulting in lower
capacity utilisation impacting returns. Higher economies of scale and backward integration have enabled
global players to have a favourable and competitive cost structure vis-à-vis Indian players. Furthermore,
the presence of SMEs and lower focus towards technology/machinery upgradation have resulted in higher
wastage and lower efficiency for Indian manufacturers, thereby increasing costs.
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Employee productivity
Figure 43: Gross value added per person engaged across sectors
Note: The numbers represent the ratio of gross value added per person engaged in the textiles sector relative to that of other
sectors
Source: Crisil Intelligence, Annual Survey of Industries 2022
The chart presents a comparison of employee productivity across different sectors by examining the ratio
of gross value added (GVA) per person engaged. In this comparison, the textile sector's employee
productivity is notably lower than the overall industry average. The ratio for textiles stands at 0.50, which is
half of the overall industry benchmark of 1.00. This indicates that, on average, each worker in the textiles
sector contributes significantly less to the GVA compared with their counterparts in other industries. The
high-value sector, represented by a ratio of 2.26, shows more than double the productivity of the average
industry worker, further highlighting the productivity gap between textiles and more capital-intensive or
technology-driven industr ies.
Several factors contribute to the relatively low employee productivity in the textile industry. One primary
reason is the labour-intensive nature of textile production, particularly in segments like garment
manufacturing, where a large portion of the work is manual. Unlike high-value sectors that often rely on
advanced machinery, automation and high levels of capital investment, the textile industry, especially in
developing countries, tends to depend heavily on low-cost labour. This reliance on manual processes can
limit the efficiency and speed of production, leading to lower productivity per worker.
Additionally, the textile industry often faces challenges such as fluctuating raw material costs, outdated
technology and stiff competition in global markets, which can further suppress productivity. Investments in
modernising equipment and training workers are often limited, especially in smaller firms, resulting in
inefficiencies. The sector's dependence on seasonal demand and the variability in orders also contribute to
inconsistencies in production levels, making it difficult to maintain a high and steady productivity rate. This
combination of factors explains why the employee productivity in textiles remains below the overall industry
average.
2.26
1.00
0.50
0.31
High Overall Industry Textiles Low
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Skill requirement
The readymade garments industry relies heavily on a workforce distributed across three skill levels as can
be seen from the chart below: minimally skilled, semi-skilled and skilled workers. The majority, comprising
54% of the workforce, falls into the minimally skilled category. These workers typically handle basic,
repetitive tasks such as cutting fabric, performing simple sewing operations, operating basic machinery and
packing garments.
Semi-skilled workers, who make up 31% of the workforce, perform more complex tasks that require a
degree of technical expertise. Their responsibilities might include operating advanced sewing machines,
assembling garment components, conducting quality control, and assisting with machinery setup. The
smallest segment, skilled workers, represents 15% of the industry’s workforce. These individuals take on
the most complex and critical roles, such as pattern making, advanced tailoring, supervising production
lines and ensuring quality standards. They often lead specialised processes and provide training to less
skilled workers, reflecting their significant experience and expertise.
Figure 44: Skill-level distribution: Indian textile sector
Source: Crisil intelligence and National Skill Development Corporation
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Growth drivers
Key growth drivers for the Indian textile sector are:
• Favourable demography
India's middle and high-income classes are expected to clock significant growth over the next decade.
By fiscal 2031, the share of middle- and high-income groups is expected to reach ~95% from 86%,
supported by growth in per capita income. This growth will lead to increased domestic consumption of
textiles and apparel, as rising disposable incomes fuel demand for high-quality clothing and textiles.
Figure 45: Income-based split of the population
P: Projected
Note: The low-income group comprises those earning less than Rs 125,000 per annum; middle-income group comprises those earning
between Rs 125,000 and Rs 30 lakh per annum; and high-income group comprises those earning more than Rs 30 lakh per annum
Source: People Research on India’s Consumer Economy (ICE) 360° survey, Crisil intelligence
• Urbanisation
As per the World Bank, India's urban population has grown substantially, from 32.8% of the total
population in 2018 to 36.9% in 2024. Despite this growth, the country still lags other major economies
in terms of urbanisation, presenting a significant opportunity for further development. As urbanisation
accelerates, Indian fashion is poised to undergo a transformation, with western casual wear becoming
increasingly popular. Urban areas can expect a surge in demand for fashionable clothing, while
traditional and ethnic wear will continue to be preferred for special occasions, resulting in a growth in
overall apparel demand.
15% 14%
5% 2%
82%
82%
84%
72%
3% 4%
11%
26%
FY16 FY21 FY31P FY47P
Low Income Middle incomeHigh Income
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Figure 46: Urban population as a percentage of total population of key economies (CY 2024)
Source: World Bank and Crisil Intelligence
• Government and policy support
The Indian government has implemented several initiatives to support the textile sector, including the
Production-Linked Incentive (PLI) scheme and the PM MITRA Parks Scheme. These schemes aim to
increase manufacturing, attract investments and create large-scale infrastructure, making Indian textiles
more competitive globally. The government has also launched the Samarth scheme, a skill development
programme, to ensure a steady supply of skilled labour for the manufacturing sector and sustainable
growth.
• Rise of e-commerce
According to a report by ANAROCK and ET Retail, the Indian e-commerce market is expected to witness
substantial growth, rising from $125 billion in 2024 to $345 billion in 2030, and eventually reaching $550
billion by 2035. As the market expands, companies will be able to reach a wider audience, offering a
variety of products at competitive prices, leading to an increase in demand for apparel in Tier 2 and Tier
3 cities, as well as in Tier 1 and metro cities, providing a significant boost to the entire apparel sector.
• Diversification of product portfolio
The Indian textile industry is undergoing a significant transformation, driven by a strategic focus on
diversification and expansion of its product offerings. Manufacturers are broadening their product ranges
to include technical textiles, functional textiles, and value-added products, in addition to traditional
segments such as apparel and home textiles. The government's initiatives, including the National
Technical Textiles Mission, are also facilitating this diversification by providing support for research,
development and promotion of technical textiles, thereby enabling the industry to explore new
opportunities.
• Focus on sustainable manufacturing practices
The global market is witnessing a significant shift towards sustainable products, with a growing demand
for eco-friendly processes and the use of recycled materials. In line with this trend, the Indian
government is also promoting sustainable practices to enhance competitiveness. As a result, the textile
57.7%
36.9%
65.5%
83.5%
84.9%
88.0%
40.2%
World India China USA UK BrazilVietnam
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industry is placing increasing emphasis on sustainability and environmentally friendly practices, which
can provide Indian textile players with a competitive advantage in the global market.
• Strong raw material base and integrated value chain
The Indian textile industry benefits from a rich raw material base and a fully integrated value chain. The
country ranks as the second-largest producer of cotton and silk, the largest producer of jute, and a
leading producer of polyester and viscose. This strong raw material availability ensures a steady supply
and cost competitiveness. In addition, India’s end-to-end integration, from raw materials to finished
goods, reduces import dependency and enhances production efficiency. These strengths enable the
industry to respond swiftly to global demand shifts, driving sustained growth, expansion, and
competitiveness in international markets.
RMG outlook
We expect the domestic RMG sector to log a CAGR of approximately 5% (see the graphic below) between
fiscals 2023 and 2030. Exports are projected to see a slightly higher growth rate of around 6%. This growth
in the export market is expected to be supported by improved market access, including the India-UK CETA
and the India-EU FTA, which is expected to provide additional market access once implemented.
Figure 47: RMG sector CAGR between FY23 and FY30
Source: Crisil Intelligence and company reports
Moreover, India’s emphasis on cotton textiles contrasts with the global shift towards synthetic materials
such as polyester. This mismatch in production focus has led to slower growth in the exports, with the
country not being able to meet the rising demand for synthetic textiles while remaining a dominant player
in cotton textiles. However, the global market’s preference for synthetic fibres, driven by their versatility and
lower costs, poses a challenge for India’s RMG sector to capture a larger share of international trade. To
enhance growth, the country may need to diversify its textile offerings and adapt to global market trends,
ensuring its RMG industry remains competitive both domestically and internationally.
Several demand drivers are poised to boost the growth of the domestic RMG industry in the future. Rising
disposable incomes and urbanisation are creating a more fashion-conscious consumer base, leading to an
increase in demand for diverse and high-quality garments. Additionally, the growth of e-commerce platforms
has made it easier for consumers to access a wide range of apparel, driving up demand further.
Domestic International
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
RMG market growth outlook: domestic vs international
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On the global front, the shift towards sustainability is expected to benefit India's RMG sector, as international
buyers are increasingly seeking suppliers who can offer eco-friendly materials and adopt ethical
manufacturing practices, areas in which India is already making significant strides. Moreover, the country’s
young population and growing middle class, coupled with the government's Make in India initiatives, are
likely to spur domestic production and consumption, supporting the long-term growth of the RMG industry
both domestically and internationally.
MMF outlook
According to our estimates, the domestic MMF market size at $ 6.8 billion is expected to clock a CAGR of
6-7% between fiscals 2023 and 2030, driven by growth in domestic consumption and increasing MMF
penetration. The domestic market is poised to outdo export growth due to several factors. For one, there is
a growing shift in consumer preference towards MMF over natural fibres such as cotton, driven by the rising
cost of natural fibres and increasing demand for more durable, versatile and affordable textiles. Additionally,
the country’s large and rapidly expanding middle class is fuelling demand for a wide range of clothing and
home textiles, which heavily utilise MMF. Moreover, government initiatives, such as the Production Linked
Incentive (PLI) scheme, are encouraging domestic manufacturing and innovation in the textile sector, further
boosting the MMF market. With its strong position in global textile exports and robust domestic
consumption, the domestic MMF sector is poised to grow faster than the global average.
Figure 48: MMF Industry CAGR between FY23 and FY30
Source: Crisil Intelligence, Company Reports
Domestic International
4.4%
4.6%
4.8%
5.0%
5.2%
5.4%
5.6%
5.8%
6.0%
6.2%
MMF market growth outlook: domestic vs international
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Benchmarking against competing countries
China, India, Bangladesh and Southeast Asian countries, such as Vietnam, Indonesia, Cambodia and Sri
Lanka, are leading readymade garments manufacturing countries, driven by availability of labour and
demand from the US and the UK. China leads by rapid investments and intense competition and
fragmentation across large numbers of segments in natural fibre as well as synthetic textiles. Indian textiles
rely on self-sufficiency in cotton, while other countries leverage availability of low-cost manpower to be cost
competitive in the international markets.
India is growing rapidly, supported by a favourable regulatory environment, thrust on synthetic textiles
production and entry into value addition, while competitors benefit from government policies, trade pacts,
geographical advantages and labour cost.
Table 12: Share of key exporting countries in the global RMG trade
Exporters 2004 2010 2015 2019 2023 2024
China 22% 35% 37% 29% 30% 29%
Bangladesh 3% 4% 6% 9% 9% 10%
Vietnam 2% 3% 5% 6% 6% 7%
India 3% 3% 4% 3% 3% 3%
Indonesia 2% 2% 2% 2% 2% 2%
Source: ITC Trade Map, Crisil Intelligence
Note: Figures correspond to calendar years
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Bangladesh
Textiles production is pivotal to Bangladesh’s economy, making the country one of the largest textile and
garment exporters in the world. The industry accounts for more than 85% of Bangladesh’s total exports,
driven by its large-scale production of RMG. Bangladesh has leveraged its competitive advantage of low
labour costs and a large workforce to attract international brands and retailers. The sector has also
benefited from favourable trade agreements, such as the Generalised System of Preferences (GSP) in the
European Union, which allows for duty-free access to key markets.
Fiscal incentives
The government offers cash incentives on 43 export product categories, ranging from 0.5% to 15% of export
value; readymade garments (RMG) receive a base incentive of 4%. Specific incentives include:
• A 1% cash incentive to all RMG exporters based on free-on-board (FOB) value
• An additional 4% incentive for exports to new markets beyond the EU, US, and Canada
• An additional 4% incentive for SME exporters with export volumes below $5 million
• An additional 2% incentive for exports to the EU
• Extra incentives for products manufactured using local fibres
These incentives are being gradually phased out as Bangladesh transitions out of Least Developed Country
(LDC) status by 2026. To offset this, the government is offering electricity tariff waivers of up to 10%, duty
exemptions on capital machinery imports, and low-interest loans for green energy initiatives.
The Duty Drawback Scheme refunds duties paid on imported raw materials, helping exporters lower their
production costs.
Tax benefits
• Corporate tax rate: Revised in 2022 to 15% for listed textile companies, versus 27.5% for non-listed
and 20% for listed companies (general)
• VAT exemptions: In place since 2016 on select textile products and raw materials; a VAT exemption on
domestically produced recycled fibre was under consideration as of April 2024 (traders currently pay
7.5% on purchase and 15% at point of sale)
• Port services exemption: 100% VAT exemption on port services for fully export-oriented industries and
EPZs, covering both imported and locally manufactured goods (granted by the National Board of
Revenue)
Infrastructure development
• Special economic zones (SEZs): Managed by BEPZA to attract foreign investment, offering a 5–7
year tax holiday, duty-free import/export, double taxation relief, 100% foreign ownership, no investment
ceiling, and full profit repatriation
• Garment Palli: A BGMEA-developed integrated garment park covering the entire value chain—from
sourcing to shipment—improving productivity and reducing costs
• Ports and Logistics: Modernisation of Chittagong (handles 90%+ of trade) and Mongla ports, backed
by $650 million in World Bank funding (June 2024) for the Bay Terminal deep seaport
• Compliance and Sustainability: Effluent treatment plants mandatory in large units; Bangladesh has
90 green-certified garment factories, the highest globally (USGBC)
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Trade agreements and market access
Bangladesh enjoys duty-free, quota-free access to the EU under the GSP and Everything But Arms (EBA)
schemes, with readymade garments accounting for nearly 90% of the EU's imports from Bangladesh. As a
member of SAARC and BIMSTEC, the country also benefits from reduced regional trade barriers. In
addition, Bangladesh has negotiated bilateral trade agreements with major economies such as China and
India, securing preferential access and reduced tariffs for its textile exports.
Financial Assistance and Subsidies
• Export development fund: Managed by the Bangladesh Bank, this fund offers low-interest loans to
exporters for financing raw materials and equipment
• Subsidies for raw material: The government provides subsidies for importing essential raw material,
such as cotton and dyes, to lower production costs and enhance competitiveness
Capacity Building and Skill Development
• Training programmes: In collaboration with the International Labour Organisation (ILO) and BGMEA,
the government runs training programmes that enhance technical skills, improve management
practices, and raise awareness of occupational safety and quality control.
• Textile institutes: Specialised institutions, such as the Bangladesh University of Textiles and the
National Institute of Textile Engineering and Research, play a key role in building a skilled workforce.
• Sustainable production practices: The Better Work Bangladesh programme further supports this effort
by improving labour standards and overall business competitiveness.
Environmental and Compliance Support
• ETPs: The government provides financial support for setting up ETPs, which are mandatory for large
textile units.
• Sustainable production practices: Initiatives such as the Green Textile Initiative offer incentives for
adopting eco-friendly production methods.
• Partnership for Cleaner Textiles (PACT): An IFC-led programme supporting factories across the value
chain in adopting cleaner practices, with BGMEA as the implementing partner and global brands such
as Levi's, Puma, and Tesco as partners
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Vietnam
Vietnam’s textile industry, comprising over 6,000 textile and garment manufacturing companies as of June
2022, is one of the country’s leading export industries, employing more than 2.5 million workers. In 2020,
Vietnam surpassed Bangladesh to become the second-largest exporter of readymade garments globally. A
combination of labour availability, low labour costs, and free trade agreements (FTAs) with key trading
partners drives the growth of the Vietnamese textile industry.
Export incentives
• Cash incentives: Provided to export-oriented enterprises, particularly in the textile and garment sectors,
to reduce costs and enhance global competitiveness
• Duty Drawback Scheme: Refunds duties paid on imported raw materials, lowering production costs
and improving the competitiveness of Vietnamese textiles
Tax benefits
Corporate tax rate: Vietnam offers a corporate tax rate of 20%. Companies that make new investments in
key sectors such as technology, garments, footwear and automobiles, or produce goods that are not
currently manufactured in Vietnam or meet EU quality standards, are eligible for substantial tax incentives
Infrastructure development
• Special Economic Zones (SEZs): Offer preferential tax rates and exemptions, import duty exemptions,
reduced land lease rates, and support services; Vietnam has four key economic regions (north, south,
central, and Mekong Delta), with the south hosting multinationals such as Nike and Adidas
• Industrial parks: Provide dedicated facilities for textile units, enhancing operational efficiency and
supporting growth
Trade agreements and market access
• Preferential trade agreements: Vietnam benefits from various FTAs, including the Comprehensive and
Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade
Agreement (EVFTA), which eliminate tariffs on garments and textiles, enhancing market access
• Regional trade agreements: As a member of ASEAN and the Regional Comprehensive Economic
Partnership (RCEP), Vietnam enjoys reduced trade barriers and regional cooperation
• Bilateral trade agreements: Significant bilateral trade agreements with the EU, Japan and South Korea
provide preferential access and reduced tariffs for Vietnamese textiles
Financial assistance and subsidies
• Export Development Fund: The Vietnam Development Bank offers export financing and credit facilities
to support textile and garment businesses
• Support for SMEs: The Small and Medium Enterprises Development Fund (SMEDF) provides financial
support, training, and market access programmes to boost the productivity and competitiveness of
small and medium enterprises (SMEs)
Skill development
• Training programmes: Industry–global brand collaborations focus on advanced manufacturing and
management skills
• Textile institutes: Technical universities and vocational colleges offer specialised training in textile and
garment technology
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Policy frameworks and Initiatives
Vietnam's textile industry has attracted significant FDI, with foreign-backed companies accounting for ~60%
of fabric and garment exports and ~70% of yarn exports. Investments originate from China, Singapore,
Japan, South Korea, and Taiwan—with Chinese companies being the largest contributors (over half of
textile FDI and roughly one-third of spinning capacity).
Vietnam's appeal stems from its proximity to key transport corridors, extensive shoreline, economic and
political stability, and business-friendly incentives such as tax cuts and streamlined procedures. It has
invested heavily in infrastructure (ports, railways, roads, SEZs, industrial parks) and signed 18 FTAs,
including the CPTPP, EVFTA, and RCEP, offering investors preferential market access.
Legal reforms under the Law on Investment 2020 and Law on Enterprises 2020 have made investing safer
and easier, with key provisions:
• Asset protection: Lawful assets cannot be nationalised or confiscated through administrative measures
• Choice of incentives: Existing incentives are retained if new laws are less favourable
• Efficient registration: Investment certificates issued within 5 working days of approval
• Growth support: Incentives apply to both new and expansion projects
• Project flexibility: Investors may adjust, transfer, merge, or divide projects
• Long-term stability: Project durations of up to 70 years (within economic zones) and 50 years (outside)
• Vietnam has also signed over 80 double taxation avoidance agreements (DTAAs) as of 2024, easing
the tax burden on foreign investors. Reflecting this, the Asia Manufacturing Index ranks Vietnam
second, ahead of India, as a preferred manufacturing destination in Asia.
Vietnam has also signed over 80 double taxation avoidance agreements (DTAAs) as of 2024, easing the
tax burden on foreign investors. Reflecting this, the Asia Manufacturing Index ranks Vietnam second, ahead
of India, as a preferred manufacturing destination in Asia.
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China
According to the International Cotton Advisory Committee (ICAC), China has emerged as the dominant
driver of synthetic and cellulosic fibre production, accounting for approximately 70% of the world's total
man-made fibres (MMF) in 2023. China's MMF exports, spanning fibres, yarn, fabric, and finished products,
have grown significantly, recording a 6% compound annual growth rate (CAGR) between 2017 and 2023.
Figure 49: Total Chinese MMF exports in million tonne
Source: Trade Data Monitor and Crisil Intelligence
Note: 12-month totals ending in September of each year. For example, Oct-17 represents exports from October 2017 to September
2018
The significant growth in China's MMF production can be attributed to a range of supportive policies,
including:
China’s five-year plan
China's five-year plan serves as a roadmap for national development, providing strategic direction for key
industries, including textiles. The 12th Five-Year Plan, for instance, aimed to drive innovation in the textile
industry by achieving breakthroughs across 50 technologies, spanning spinning, weaving, printing, dyeing,
textile processing, and environmentally friendly methods.
During the 14th Five-Year Plan period, the Ministry of Industry and Information Technology (MIIT) and the
National Development and Reform Commission (NDRC) issued the "Guiding Opinions on the High-quality
Development of China's Chemical Fiber Industry," setting ambitious goals for the chemical fibre (MMF)
industry by 2025:
• Increasing industrial added value by 5% annually while maintaining a stable global market share
• Boosting R&D investment to 2% of total expenditure and enhancing the development of high-
performance fibres
• Improving the green manufacturing system, with output of bio-based and degradable fibre materials
growing by over 20% annually
1.6 1.6 1.3 1.5 1.6 1.7 1.9
3.6 3.9 3.9
4.7 5
5.7 5.5
6.5
6.8
6.2
7.9
8.8
9
9.9
6.7
6.7
5.8
6.9
7.7
7.6
8.4
18.3
19.1
17.2
21.1
23.1
24
25.7
Oct-17 Oct-18 Oct-19 Oct-20 Oct-21 Oct-22 Oct-23
Synthetic and cellulosic fibresMMF yarn MMF fabric MMF products
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Collectively, the five-year plan provides a comprehensive blueprint that helps the sector prioritise efforts,
allocate resources, and make informed decisions about future growth.
Pre-tax super deduction of R&D expenses
Under China's pre-tax super deduction policy, eligible companies can deduct 200% of their research and
development (R&D) expenses from their income, effectively reducing their tax liability. The policy applies
broadly across most industries, with limited exceptions on a negative list. This enables the MMF segment
to invest in cutting-edge research, enhancing competitiveness and driving technological advancement.
Reduced corporate income tax
As part of China's Western Development Policy, domestic companies investing in chemical fibre
manufacturing in selected western regions, including Xinjiang, are eligible for a reduced corporate income
tax rate of 15%, compared to the standard rate of 25%. This preferential rate applies to investments made
between January 1, 2021, and December 31, 2030.
Export tax rebate
China's export tax rebate policy refunds the value-added tax (VAT) and consumption tax (CT) paid during
production and distribution, making Chinese goods more competitive internationally by eliminating double
taxation on exports. Current rebate rates on textile products range between 13% and 16%, offering
significant support to textile exports.
Tax incentives to encourage equipment upgrades
In 2015, the government introduced the "Circular on Further Improving the Enterprise Income Tax Policies
relating to the Accelerated Depreciation of Fixed Assets," allowing textile companies to apply accelerated
depreciation on purchased fixed assets from January 1, 2015. Companies could choose between two
options:
• Shortened depreciation period: Depreciate newly purchased assets over a shorter timeframe, subject
to a minimum of 60% of the standard period
• Accelerated depreciation method: Apply either the double declining balance method or the sum-of-the-
years'-digits method to depreciate assets faster
This policy encouraged companies to upgrade equipment and remain competitive, ultimately benefiting the
wider industry.
123
Policy framework and industry support mechanism
The following initiatives are aimed at supporting the Indian textile industry:
1. PLI scheme for textiles
• The PLI scheme for textiles aims to boost the production of MMF apparel, fabrics and technical
textiles in India
• The scheme has approved 96 applications, with a proposed investment of Rs 32,085 crore and a
projected turnover of Rs 2,32,158 crore. As of July 2025, the scheme generated investments of
Rs 7,343 crore, with a turnover of Rs 4,648 crore and exports of Rs 538 crore in the textile sector
2. Pradhan Mantri Mega Integrated Textile Region and Apparel park (PM MITRA parks)
PM MITRA parks will help India's textile industry scale up and create a modern, integrated value chain
Update on PM Mitra parks:
• Madhya Pradesh: As of September 2025, 1,294 acres of land has been allocated to 91 companies,
with expected investments exceeding Rs 20,000 crore and creation of over 72,000 jobs
• The PM Mitra Park in Telangana, developed at a cost of ₹1,695 crore, was inaugurated as the
country's first functional PM MITRA Park in May 2026.
3. Samarth scheme
• The scheme aims to provide demand-driven, placement-oriented skilling programmes, creating
jobs in the organised textile and related sectors
• As of August 2025, according to the Ministry of Textiles, the scheme had trained 4.57 lakh
beneficiaries, with 3.55 lakh (78%) of them having secured placements.
4. Rebate of State and Central Taxes and Levies (RoSCTL) on exports of apparel, garments and made-
ups, effective until September 30th, 2026
The RoSCTL scheme enables Indian exporters to remain competitive in the global market by
reimbursing state and central taxes/levies embedded in the exports of made-up articles and garments,
ensuring a level playing field
Other subsegment-specific schemes include:
• Mission for Cotton Productivity
It empowers farmers with advanced scientific and technological tools to enhance cotton yields, fibre
quality and resilience to climate and pest-related stresses, ultimately boosting their overall
productivity
• National Technical Textiles Mission (NTTM)
NTTM was launched in 2020 with a financial outlay of Rs 1,480 crore, focusing on research,
innovation and development to boost the technical textiles sector
As of March 2025, NTTM had received a total allocation of Rs 517 crore since its inception.
Furthermore, 168 research projects with a combined value of approximately Rs 509 crore have
been approved under NTTM
• National Handloom Development Programme (NHDP)
NHDP is a comprehensive initiative that aims to promote the integrated development of the
handloom sector in India, including financial assistance for loom upgradation, marketing support,
and access to domestic and export markets
• National Handicrafts Development Programme
It is a supportive initiative that provides a range of benefits to handicraft clusters and artisans,
including basic inputs, infrastructure support and capacity enhancement, to help them access and
serve target markets.
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Recommendations: Policy initiatives and reforms
Recommendations for Enhancing Raw Material Cost Competitiveness
Adequate availability of quality raw materials, such as natural fibres and man-made fibres, at internationally
competitive prices is a prerequisite for achieving the target of increasing the textile business size to $350
billion by 2030, from the current level of $179 billion.
In the case of cotton, the Minimum Support Price (MSP) often leads to domestic cotton prices being higher
than international cotton prices, particularly when there is increased production of cotton in the global
market. Furthermore, Indian cotton faces additional challenges, including having one of the lowest cotton
yields and a lack of quality cotton.
On the other hand, the production of man-made fibres (MMF) is also hindered by significant challenges.
India has domestic production capacity for PTA and MEG; however, supply-demand imbalances and import
dependence affect the cost competitiveness of polyester production. Additionally, the inverted duty
structure in MMF negatively impacts MMF yarn and fibre producers.
Given these challenges, it is essential to address these issues to create a level playing field with other
competing countries, such as China, Bangladesh and Vietnam, in terms of availability and pricing. Without
this, the Indian industry will struggle to compete globally.
Recommendation – I: Addressing the inverted duty structure between feedstock
and downstream industry in the polyester-based MMF industry
The introduction of the revised GST rates in September 2025 aimed to rectify the inverted duty structure in
the MMF sector. Previously, the GST was 18% on polyester fibre, 12% on polyester yarn, and 5% for
subsequent stages, resulting in significant input tax credit accumulation for yarn and fabric manufacturers.
The revised GST rates for all stages are 5%, including fibre, yarn and fabric, easing working capital pressure
on manufacturers. However, the revision did not completely address the inverted duty structure as the main
raw materials, PTA and MEG are still taxed at 18%, while downstream products are taxed at 5%, leading
to a higher inversion of duty, resulting in a significant accumulation of funds at the hands of yarn and filament
manufacturers. This will cause higher blockage of working capital for MMF yarn players and hinder the
industry's ability to expand.
Suggestions to implement recommendations:
Addressing the inverted duty structure: A revision of the duty structure to lower GST on essential raw
materials like PTA and MEG can significantly ease cash flow constraints for industry players. This move is
expected to provide crucial support to the sector and encourage the production of polyester fibre.
Recommendation – II: Enhanced Accessibility to MEG
The manufacturing of polyester requires PTA and MEG. Specifically, approximately 0.86 kg of PTA and 0.34
kg of MEG are required to produce 1 kg of polyester. India have a significant PTA production capacity of
approximately 6.5 MMTA, with Reliance Industries, Indian Oil Corporation Limited (IOCL), and MCPI as
major producers. In view of the planned substantial expansion, with 5.5 MMTA of new capacity expected to
be added in the next 2-3 years, India may achieve self-sufficiency in PTA production, nearly doubling its
current capacity. As a result, no adjustment to the import duty on PTA is required.
125
Details on upcoming project:
Source: Company reports, Crisil Intelligence
The global MEG market's oversupply situation has resulted in Indian producers exercising caution, with no
imminent plans for substantial capacity expansion. Therefore, to foster growth in the polyester industry,
governments may implement policies that improve access to MEG for Indian polyester producers, thereby
supporting the sector's expansion.
Suggestions to implement recommendations:
Removal or reduction of customs duty on MEG:
With approximately 35% of the country's MEG requirements being met through imports due to insufficient
domestic capacity, and no new substantial capacities on the horizon, the government may consider
eliminating or reducing the 5% customs duty on MEG imports. This move would help reduce the
manufacturing costs of polyester and enable domestic polyester manufacturers to produce yarn at
competitive rates, thereby boosting the industry's global competitiveness.
Recommendation – III: Accelerate adoption of recycled content in MMF
garmenting
Indian polyester manufacturers must prioritise scaling up recycled inputs like recycled polyethylene
terephthalate (rPET) and chemically or mechanically recycled chips. This strategic move will not only shield
them from raw-material volatility but also ensure they meet the EU's rapidly rising sustainability standards.
The Ecodesign for Sustainable Products Regulation (ESPR), which took effect on July 18, 2024, sets
requirements for products sold in the EU to contain more recycled content, use fewer hazardous
substances, and have a lower carbon footprint. The ESPR provides a framework for product-specific
ecodesign requirements, which may include recycled-content requirements for textiles and apparel. Hence,
it is important to provide policy support to accelerate the adoption of recycled materials in MMF garments.
Suggestions to implement recommendations:
• Improving waste collection: India's recycling ecosystem can be strengthened by introducing a digital
marketplace that connects informal waste aggregators with formal recycling units. This can be
complemented by establishing centralised sorting hubs, which can help ensure a stable and traceable
feedstock supply, ultimately enhancing the overall efficiency of the recycling process
Promoter Project details
Capacity
addition
Current status
GAIL Ltd
GAIL acquired the purified terephthalic acid (PTA)
manufacturing facility of JBF Industries Limited
through a resolution plan sanctioned by the
National Company Law Tribunal (NCLT).
Following the acquisition, the entity was renamed
as GAIL Mangalore Petrochemicals Limited
1.2 million
metric
tonnes
Project expected to
be completed in
2026
Indian Oil Corporation
Limited
The project involves setting up a Paraxylene and
Purified Terephthalic Acid (PX-PTA) facility at
Paradip, in the Jagatsingpur district of Odisha
1.2 million
metric
tonnes
Project expected to
be completed by
December 2026
Reliance ltd
A single-train Purified Terephthalic Acid (PTA)
plant project at Dahej is under implementation by
Reliance Industries
3.2 million
metric
tonnes
Project expected to
be completed by
June 2027
126
• Introducing minimum amount of recycled materials in MMF garments: In the long run, the
government may introduce regulations requiring MMF garment manufacturers to incorporate a
minimum amount of recycled materials into their products. Certifications like the Global Recycled
Standard (GRS) and Recycled Claim Standard (RCS) may be used to validate recycled content claims,
ensuring transparency and accountability
Recommendation – IV: Improving cotton productivity
India's cotton yield is significantly below that of several major cotton-producing countries and the global
average due to the use of outdated cotton seeds that are ineffective against the pink bollworm
(Pectinophora gossypiella), erratic weather, increasing seed costs and a lack of awareness among small-
scale farmers. Additionally, the country's small landholdings make it difficult to utilise various farm
equipment, further exacerbating the issue.
Figure 50 Global peer benchmarking of cotton productivity
Note: The data is based on the cotton marketing season, which commences in August and ends in July.
Source: Crisil Intelligence, USDA
Current initiative
The Union Budget for fiscal 2026 introduced a five-year Cotton Mission to tackle the issue of stagnant
cotton productivity, with a focus on extra-long staple varieties. The mission will provide technical support to
farmers, with a total outlay of Rs 2,500 crore over five years. The mission's three key objectives are:
• Improving cotton yield and productivity through strategic interventions such as research and human
resource development
• Modernising ginning and pressing units
• Promoting sustainable natural fibres such as banana, milkweed and bamboo, to diversify the country's
fibre base
Suggestions to implement recommendations:
• Providing new cotton seed technology: In 2002, India introduced Bt cotton, a genetically modified
(GM) crop developed by Monsanto in collaboration with Maharashtra Hybrid Seeds Company.
Marketed under the brand name Bollgard, this crop was specifically designed to combat American
bollworm (Helicoverpa armigera), a pest that had been causing significant damage to cotton crops. In
458
1,570
1,345
859
1,989
1,559
683
436
2,089
1,911
1,008
2,156
1,580
789
0
500
1000
1500
2000
2500
India China Brazil USA AustraliaTurkey World
average
Cotton yield (kg per hectare)
2015/162021/222022/232023/24
127
2006, India approved the use of Bollgard II, which has two genes for protection. This superior
technology further enhances the crop’s ability to control bollworm, tobacco budworm and other cotton
pests, making it the dominant cotton variety grown in the country. Despite its initial success, Bt cotton
is now facing significant challenges. The effectiveness of Bollgard II cotton seeds against bollworms
has decreased, resulting in decreased yields. Additionally, the emergence of secondary pests, such as
aphids and whiteflies, has become a significant problem. The increased cost of Bt cotton seeds is also
a major concern for small-scale farmers, who are struggling to maintain profitability amid declining
yields and increasing pest pressure.
• The Indian cotton industry is at a critical juncture, and it is essential to address these challenges to
ensure the long-term sustainability of cotton production. The country may accelerate the development,
evaluation and adoption of next-generation cotton seed technologies, including indigenous insect-
resistant, disease-tolerant and climate-resilient varieties, subject to applicable regulatory approvals.
This is necessary to improve crop yields, reduce losses and enhance the competitiveness of India’s
cotton industry.
• Training farmers: Despite training efforts, farmers remain skeptical about adopting new practices. To
overcome this, alternative approaches can be explored, such as partnering with local leaders, engaging
progressive farmers as mentors, and demonstrating the benefits of new techniques. Additionally,
mobile-based tools can be utilised to educate farmers on best practices such as soil testing and
herbicide use as well as innovative methods such as plastic film mulching, furrow irrigation, seedling
transplanting and precision seeding. Special emphasis should be placed on crop protection from
insects and effective agricultural management practices during the training. A nationwide initiative can
be implemented, comprising campaigns and training programmes for farmers on regenerative
practices.
• Increasing use of artificial intelligence in cotton farming for weather prediction and pest monitoring:
Erratic climate change poses a significant threat to cotton production as rising temperatures, droughts
and unpredictable weather patterns can lead to reduced yields and lower crop quality. However,
advances in machine learning can help mitigate these impacts by providing accurate weather
predictions. By leveraging historical data, satellite imagery and sensor data, machine learning models
can help farmers make informed decisions about planting, harvesting and irrigation, ultimately
contributing to more sustainable and resilient cotton production. Artificial intelligence (AI) can also be
used for real-time monitoring of pests, enabling farmers to make informed decisions about pest
management
Recommendation–V: Removal of import duty on cotton
In February 2021, the Government of India had announced an 11% duty on imported cotton. As of now, the
Government temporarily exempted custom duties on imports of raw cotton from 1 June 2026 to 31 October
2026. The measure aims to augment the availability of cotton for the domestic textile industry, reduce input
costs, improve the competitiveness of the textile and apparel sector.
Due to the minimum support price (MSP), domestic cotton prices do not move in tandem with international
cotton prices. When domestic cotton prices are lower than international cotton prices, the import duty has
a minimal impact on the textile industry. However, when domestic cotton prices are higher than international
cotton prices, the domestic value chain gets impacted, including the profitability of spinners and the
competitiveness of the textile sector. When domestic cotton prices exceed international prices, the imports
surge and exports decline. This makes cotton more expensive for Indian textile manufacturers as they must
choose between high-priced domestic cotton and imported cotton with an 11% duty. In contrast, countries
128
such as Bangladesh and Vietnam, which rely on imported cotton, do not have import duty on cotton, giving
them a competitive edge.
Figure 51: Cotton price comparison: domestic vs international
Source: Industry, Ministry of Commerce and Industry, Crisil Intelligence
Suggestions to implement recommendations:
To address this issue, the government may consider removing the import duty on cotton, thereby bringing
domestic players on a par with international players, or allow a certain quantity of cotton to be imported
duty-free, which could help fulfil the demand that is not being met by domestic producers and ensure a
stable supply of raw materials.
Recommendation–VI: Improving quality of cotton
India's cotton ginning segment has undergone significant modernisation, driven by various state and central
government subsidies. Although a substantial number of Indian ginning factories have upgraded their
facilities, many still face challenges in maintaining optimal production practices. Specifically, due to cost
constraints, a large number of ginning factories fail to clean the kapas (raw cotton) before ginning. According
to a research paper titled "Technological Evolution and Current Practices in the Indian Ginning Industry,"
published in 2024, a staggering 64% of factories do not clean the kapas at all before ginning, while 23%
rely on manual cleaning methods. Ginners also tend to avoid using lint cleaners, which can improve the
grade and appearance of cotton lint by removing small impurities and short fibers after ginning. The quality
issues arising during ginning are permanent and cannot be corrected in the later stages of cotton textile
value chain.
129
Suggestions to implement recommendations:
• Monitoring and Compliance for Modernised Ginning Units: Ginners who have benefited from subsidies
for modernisation should be obligated to employ kapas cleaners and lint cleaners. Compliance can be
ensured by requiring ginners to submit regular digital reports detailing kapas cleaner and lint cleaner
usage statistics, and quality reports.
• Standardised testing framework: Presently, India lacks a standardised testing framework for ginned
cotton. Implementing a standardised database with uniform testing parameters, methods, and a
centralised data upload system will ensure consistency and accountability among ginners. This will
motivate ginners to enhance their cleaning and handling practices. Additionally, it will facilitate a shift
towards quality-based cotton procurement, moving away from traditional bulk pricing methods
This measure is expected to yield cleaner lint, thereby strengthening the competitive position of Indian
cotton textiles in the global market.
Recommendations to improve the scale of operations
Recommendation I: Infrastructure and policy support for textile firms
According to Economic Survey 2024, approximately 80% of textile and apparel producers are micro, small
and medium enterprises (MSMEs), which typically operate on a relatively small scale. These MSMEs often
lack access to advanced machinery and technology, certification centres and digital infrastructure, hindering
their ability to participate in e-commerce and access global markets. Hence, it is essential to address this
issue.
Current initiatives
The government has launched the PM MITRA parks scheme, which aims to increase infrastructure support
for MSMEs. Each of the seven PM MITRA parks will span a minimum of 1,000 acres and provide plug-and-
play infrastructure, a vital component for MSMEs. This infrastructure will include dedicated facilities,
transport networks and e-commerce support, enabling MSMEs to operate efficiently. By bridging the gap
between small-scale manufacturers and large, export-oriented competitors, the PM MITRA scheme is
expected to enhance the competitiveness of MSMEs and facilitate their growth. Upon completion, each
park is envisaged to generate 100,000 direct jobs and 200,000 indirect jobs, thereby making a significant
contribution to employment creation. Furthermore, it is estimated that each PM MITRA park will attract
investments of approximately Rs 10,000 crore, providing a substantial boost to the industry.
Suggestions to implement recommendations
Promoting modernisation and innovation: To enhance productivity, competitiveness and product quality,
it is important to address technological gaps among textile firms. Government support may be provided to
facilitate the replacement of outdated machinery, adoption of automation and advanced production
technologies, and integration of resource-efficient and environmentally sustainable practices.
Facilitating access to information and certifications: Cluster-level certification centres may be
established as a one-stop support mechanism for MSMEs to meet domestic and international market
requirements. These centres could provide guidance and assistance in obtaining the certifications, testing
and compliance-related documentation required for textile exports, thereby reducing procedural difficulties
and facilitating smoother access to global markets.
130
Recommendation II: Attracting foreign direct investments
The textile sector accounts for only ~0.67% (average of past 12 years) of India's total FDI inflows. Despite
a 7% CAGR in overall FDI inflows over fiscals 2014-2025, the textile sector's FDI growth was limited to 2%
during the period. Key challenges facing the sector include lack of trade agreements, underdeveloped
infrastructure and regulatory hurdles.
Figure 52: FDI inflow trends pertaining to the Indian textile sector
Source: Department for Promotion of Industry and Internal Trade, Crisil Intelligence
Current initiatives
India allows 100% FDI in the textile sector under the automatic route. Single-brand retail also permits 100%
FDI, subject to certain conditions. In contrast, multi-brand retail has a 51% FDI limit, with specific
requirements.
Suggestions to implement recommendations:
• Reduction of stamp duty and registration fees
Stamp duty and registration charges vary significantly across Indian States and can add materially to
project establishment costs. This disparity makes property purchases in India relatively expensive
compared with countries such as Mexico, which has abolished traditional stamp duties in favor of
localized acquisition taxes. To attract foreign investors and remain competitive, it is crucial for India to
revisit its stamp duty structure and consider reducing these charges for investors.
• Streamlining approvals
To promote foreign investment in India, it is crucial to simplify the process of setting up a factory.
Currently, companies must navigate a complex web of approvals from various departments, including
the municipal corporation, state pollution control board, and others. This process is not only time-
consuming but also costly. A potential solution is to create a centralised online platform that offers a
one-stop solution for all approvals where land registration is electronically linked to all relevant state
departments. This would enable companies to obtain all necessary approvals through a single online
application, reducing the complexity, time and cost associated with setting up a factory in India.
199197
230
619
454
166
356
299
247
169
310
255
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
0
100
200
300
400
500
600
700
FY14FY15FY16FY17FY18FY19FY20FY21FY22FY23FY24FY25
FDI inflow: Textile
Textile FDI inflow in India (US$Mn)Total FDI inflow in India (US$Mn)
131
• Removal of exit barriers
According to a study by the Quality Council of India, which was conducted for the Economic Survey,
the time taken to close a company in India is excessively long, requiring approximately 1,570 days (4.3
years) to complete, even in the absence of any complications. Much of this time, nearly three years, is
spent navigating clearances and refunds from government agencies, such as the income tax
department, GST administration, and provident fund authority. This emphasises the need for reform
and simplification of exit procedures to facilitate easier business closure and promote a more business-
friendly environment.
Several measures can be taken to address the exit barriers, such as introducing a single-window
clearance for winding up companies with no liabilities and streamlining the process of repatriating
foreign funds when a company ceases operations.
• Support for foreign companies investing in PM MITRA parks
To promote technology transfer and reduce dependence on imports, the government may support
foreign firms that establish joint ventures with Indian companies in PM MITRA Park. This will encourage
foreign companies to share advanced technology and set up production units in the park, specifically
in segments where India currently relies heavily on imports.
By implementing these measures, India can fortify its presence in the textile industry, elevate its global
standing and attract substantial foreign investment, thereby achieving sustained growth and ultimately
transforming the sector to make it more competitive globally.
Recommendation – III: Creating large-scale capacities in the weaving and
processing sub-sectors
India’s textile sector uses outdated weaving and processing technologies, particularly the unorganised
power loom segment. This practice hinders its fabric quality and productivity. To bridge the gap with
competing countries such as China, it is essential to shift from obsolete shuttle looms to advanced shuttle-
less looms. Shuttle-less looms, such as rapier and air-jet looms, are faster and more efficient, thereby
increasing production and improving fabric consistency.
Suggestions to implement recommendations:
• Promoting adoption of shuttle-less looms:
The Ministry of Textiles may undertake a market research study to identify potential buyers with consistent
demand for high-quality fabrics. The findings of the study could be leveraged to identify existing textile
clusters with the potential to cater to such demand and facilitate their technological upgradation through
appropriate support. This would enable the clusters to enhance their product quality, productivity and
competitiveness in line with market requirements.
The Ministry may also play a facilitative role in establishing linkages between identified buyers and textile
clusters, including facilitating discussions on bulk procurement commitments that provide greater market
certainty to clusters while offering reliable sourcing opportunities to buyers. Such an approach could help
foster sustainable, long-term partnerships between buyers and clusters.
At the cluster level, the respective associations may be encouraged to aggregate and manage bulk fabric
orders, thereby streamlining the sales process, improving bargaining power, and ensuring that weavers
receive a fair price for their products.
132
Recommendation – IV: Promoting research and development (R&D) in the private
sector
The Indian textile sector lags in technology due to inadequate investment in R&D by the private sector.
Compared with Chinese peers, India's private sector lags in R&D investments, with top textile companies
allocating a mere 0.21% of sales towards R&D, significantly lower than the 2.25% spent by top Chinese
textile companies (as per Annexure IV). To drive innovation and competitiveness, it is essential to incentivise
and encourage private sector investment in R&D. Their participation in R&D is crucial for the sector to
progress, address environmental concerns and capitalise on emerging opportunities and challenges.
Suggestions to implement recommendations:
To encourage design innovation, some support may be provided to companies purely on outcome basis
that invest in design development and achieve commercial success with these designs.
This approach will lead to a reduction in the share of low-value-added products in India's export basket,
thereby increasing the dependence of international retailers on Indian suppliers and making it more difficult
for them to diversify to alternative suppliers.
Recommendation – V: Improving cost competitiveness
The textile industry in India is characterised by high logistics costs, exacerbated by the geographical
dispersion of the sector. For example, cotton produced in Gujarat, Andhra Pradesh and Maharashtra is
often transported to Rajkot and Coimbatore for spinning. The yarn is then sent to Pali, Erode or Bhiwandi
in Maharashtra for weaving, knitting and processing. The finished fabric is transported to major consumption
hubs such as Mumbai, Delhi, Bengaluru and others, where it is converted into ready-made garments. This
complex supply chain highlights the interconnectedness of the sector and the dependencies that exist
across the entire value chain.
Suggestions to implement recommendation:
• Lower charges for textiles cluster using dedicated freight corridor (DFC)
The DFC offers a significant opportunity for textile clusters to reduce logistics costs, as rail transport is
cheaper and more environment-friendly than road transport. To promote the use of DFC, the
government may offer lower charges for specific textile clusters transporting goods using this corridor.
Recommendations to expand market outreach in the downstream sector
Recommendation – I: Enhancing market access through trade agreements
To expand India's export reach, FTAs play a critical role in reducing trade barriers. Recent agreements,
such as the FTA with Australia, have demonstrated early success in boosting exports. Similar agreements
with other key markets, can help Indian exporters gain duty-free or preferential access, thereby making
Indian textiles more competitive globally.
133
Table 13: India’s key FTAs and country-wise RMG export growth rate
Countries
FY22
(YoY
RMG
growth in
quantity)
FY23
(YoY
RMG
growth
in
quantity)
FY24
(YoY
RMG
growth
in
quantity)
FY25
(YoY
RMG
growth
in
quantity)
Trade agreements
Japan 1% 12% -1% 14%
In 2011, India and Japan signed a Comprehensive Economic
Partnership Agreement (CEPA), allowing for duty-free import of
Indian garments to Japan. Despite this, textile and apparel trade
growth between the two countries has been modest. However,
on January 27, 2021, the textiles committee, Ministry of Textiles,
government and Japan's Nissenken Quality Evaluation Center
signed a memorandum of understanding (MoU) to enhance the
quality of Indian textiles and meet the requirements of Japanese
buyers through various initiatives, including testing, inspection
and conformity assessment, as well as training, capacity
building, R&D and consultancy services
Australia 25% 2% 24% 36%
The India-Australia Economic Cooperation and Trade
Agreement came into effect on December 29, 2022, providing
immediate duty-free access to 96.4% of India's exports to
Australia in value terms, including textiles and apparel, which
were previously subject to a 5% import duty
Mauritius -17% 38% 1% 7%
The Comprehensive Economic Cooperation and Partnership
Agreement entered into force on April 1, 2021. Under this
agreement, over 300 domestic goods from various sectors,
including agriculture, textiles (comprising 27 product lines),
electronics and others, will gain market access in the African
nation at concessional customs duty rates
UAE 13% 4% -8% 6%
The India-UAE CEPA, signed on February 18, 2022 and
effective from May 1, 2022, has India securing immediate duty
elimination on over 80% of its tariff lines, accounting for 90% of
the country's exports in value terms, with most of these lines
pertaining to labour-intensive sectors, such as textiles, which
previously attracted tariffs ranging from 5% to 10%
UK 14% -7% -5% 13%
On May 6, 2025, the government officially announced the
successful completion of the India-UK FTA. This agreement
provides extensive market access for goods across sectors,
encompassing India's export interests. With the elimination of
tariffs on ~99% of tariff lines, covering ~100% of trade value, the
India-UK FTA is expected to significantly enhance the
competitiveness of Indian textile goods in the UK market relative
to those of other countries.
Source: Directorate General of Commercial Intelligence and Statistics (DGCI&S), Crisil Intelligence
Table 14: Share of key FTA countries in India’s RMG export basket (volume-wise)
Countries FY21 FY22 FY23 FY24 FY25
Japan 1.16% 0.95% 1.15% 1.18% 1.18%
Australia 1.48% 1.50% 1.64% 2.10% 2.50%
Mauritius 0.23% 0.15% 0.23% 0.24% 0.22%
UAE 10.58% 9.92% 10.03% 9.83% 8.96%
UK 7.6% 7.03% 7.03% 6.93% 6.86%
Source: DGCI&S, Crisil Intelligence
134
Table 15: Duty-free access for RMG
Exporting countries
Importing
countries
India China Vietnam Bangladesh
US No No No No
EU-27 No
@
No No* Yes
UK Yes No No* Yes
Canada No No Yes Yes
South Korea Yes No* Yes No*
Australia Yes Yes Yes Yes
UAE Yes No No No
Russia No No No* No
Mexico No No No* No
Malaysia No* Yes Yes No*
Panama No No No No
Brazil No No No No
Kuwait No No No No
Switzerland Yes Yes Yes Yes
Israel Yes Yes Yes Yes
Saudi Arabia No No No No
Note: Bangladesh is enjoying duty-free access in UK, EU, Japan, Canada, Korea and Australia owing to its LDC status
* Exporting countries are subject to lower tariffs on RMG exports than other countries due to preferential treatment from importing
countries
“Yes” indicates availability of duty-free/preferential tariff access for RMG products under applicable FTAs, GSP/LDC schemes or
other preferential arrangements, subject to product-specific tariff lines and rules of origin.
@
FTA has been completely negotiated but yet to be ratified
Source: ITC Trade Map
India has an advantage over China, Bangladesh and Vietnam
No advantage to any of the four exporting countries
India has a disadvantage over China, Vietnam or Bangladesh
India and Bangladesh have an advantage over China and Vietnam
India and Vietnam have an advantage over China and Bangladesh
Suggestions to implement recommendations:
• Leveraging India’s strengths in cotton: FTAs should also focus on promoting India’s core strengths,
such as cotton textiles, to maximise export opportunities. Collaborative initiatives within FTAs to
promote Indian cotton as a high-quality, sustainable option could create additional demand in
international markets
• FTAs with high-potential markets: While traditional markets such as the EU and the US remain
crucial, India may strive to sign FTAs with these countries and simultaneously explore new trade
opportunities with high-growth markets such as Mexico, Canada, Malaysia, Brazil, Panama, Russia,
Kuwait and Saudi Arabia (Annexure II)
• Market development: Expanding into new markets can be achieved through:
o Identifying the specific types of garments needed in those countries by examining their import
data on apparel
o The industry association engaging with various clusters to design and manufacture the required
products for export to the identified countries.
o Organising trade shows and exhibitions in the target countries to showcase offerings and attract
potential buyers
135
Recommendation – II: Focus on sustainability practices
The mounting environmental concerns have made regulatory support for sustainable production a
necessity, with policies such as the Eco-Design for Sustainable Products Regulation (ESPR) and the
Corporate Sustainability Due Diligence Directive (CSDDD) playing a key role. Moreover, a significant
number of retailers in the US and EU are using sustainability criteria to evaluate suppliers, and major buyers
are increasingly requiring certifications that demonstrate compliance with environmental and social
standards.
Suggestions to implement recommendations
• Promoting sustainable practices: The government's support for sustainable practices in the textile
industry can be instrumental in driving industry-wide change. By offering support, the government may
encourage industry players to adopt environmentally friendly methods, including Closed-Loop
Recycling, green technology adoption, development of advanced sustainable fibers like bamboo fibre,
banana fibre, and hemp, and the use of recycled materials. Textile industry associations should provide
regular updates on the latest sustainable practices and requirements, monitor trends in sustainable
exports, and collaborate with international organizations to support businesses in their green transition
• Certification for sustainable practices in India: To comply with international sustainability standards,
Indian textile exporters must obtain certifications such as OEKO-TEX Standard 100, which ensures
that textiles are chemical-free, Global Organic Textile Standard or GOTS, which is necessary for the
export of organic textiles, and Registration, Evaluation, Authorisation and Restriction of Chemicals or
REACH, which tests the safety conformity of textiles under EU law. These certifications are crucial for
accessing international markets, as most US and EU retailers use sustainability criteria when selecting
suppliers.
Adopting sustainable production practices is crucial to achieve long-term success. A collaborative
framework is also necessary to bring together industry stakeholders, including government, consumers,
manufacturers and investors, to promote eco-friendly practices and reduce India's environmental footprint.
Prioritising sustainability will enable India to tap into the conscious consumer market and become a reliable
and sustainable player in the global market, boosting its competitiveness.
Improving efficiency of labour in the textile sector
Recommendation – I: Improve labour productivity and welfare
The informal nature of India's textile industry creates substantial obstacles in enforcing labour rights and
limits the acquisition of skills required for advanced technologies. The industry is also under pressure from
high attrition, as migrant labourers carry out the bulk of the manufacturing.
Current initiatives
• The government has launched several key initiatives to support labour welfare in the textile sector,
including:
• The Samarth scheme: The scheme offers industry-driven training programmes aligned with the National
Skills Qualifications Framework to boost job creation in the organised textile sector.
• Pradhan Mantri Shram Yogi Maandhan (PM-SYM) Pension Scheme: The PM-SYM scheme is a
voluntary and contributory pension scheme covering unorganised workers, including handloom
136
workers, and provides a minimum assured pension of Rs 3,000 per month after the age of 60. The
scheme has a 50:50 contribution structure between the beneficiary and the central government
• Pradhan Mantri Suraksha Bima Yojana (PMSBY): Introduced in 2015, the scheme offers affordable
insurance coverage to individuals between 18 and 70 years of age. It provides coverage of Rs 2 lakhs
for accidental death or full disability, and Rs 1 lakh for partial disability, benefiting the common people,
including power loom workers
Suggestions to implement recommendations
• Certification for responsible trade practices: The apparel industry has faced criticism for its role in
exploiting workers in developing countries, where low production costs often compromise safety
conditions. In response, international brands are now proactively investigating their entire supply
chains, driving a shift towards greater transparency, due diligence and accountability. To promote
responsible business practices, the Indian government may introduce voluntary certifications for
companies that demonstrate ethical practices and prioritise labour welfare, enabling importers to
identify and partner with ethical suppliers that adhere to stringent human rights standards
• Providing hostels/dormitories to workers: The provision of hostels or dormitories is a critical
requirement in labour-intensive industries such as the garments sector, which largely relies on migrant
workers. These hostels provide shared accommodation, usually situated near the workplace, and are
essential to ensure the well-being and productivity of workers. India has made some progress in this
regard with the launch of the Affordable Rental Housing Complexes in 2020.
The proposed SAFE Accommodation Scheme for Workers is currently under development. The
scheme seeks to address the need for safe, affordable, and dignified accommodation for workers,
particularly migrant labour employed in manufacturing clusters. This scheme may be launched on
priority with the objective of facilitating labour mobility, improving workers' well-being, and enhancing
industrial productivity.
• Training and development:
To boost worker capabilities and elevate output quality, targeted skill development initiatives can be
introduced. As the industry adopts cutting-edge technologies, it is imperative that the traditional textile
workforce acquires new skills and enhances their existing ones to remain relevant. Furthermore,
education and training systems require a significant overhaul to align with evolving industry needs.
Key areas identified for skilling and upskilling include:
o Technical design: Technical designers play a vital role in translating creative concepts into
feasible, functional, and manufacturable products. They serve as liaisons between designers and
factories, ensuring a seamless transition from design to production
o Sustainable manufacturing: Workers require knowledge and expertise in sustainable
manufacturing practices to minimise environmental impact
o Digital technologies: Developing expertise in integrating digital technologies, such as digital
printing and AI-driven design, smart fabrics, and wearable technology with traditional textile
manufacturing is crucial for driving enhancements in fibre quality, production efficiency, and
automation
o Advanced fibre technologies: Developing expertise in the production of advanced fibres that are
high-performance, reliable, and eco-friendly is essential
o Artificial Intelligence and Blockchain: Developing expertise in artificial intelligence (AI) and
blockchain technologies is crucial. AI can play a pivotal role in demand forecasting, inventory
management, and improving customer experiences, while blockchain technologies can improve
traceability across the value chain
137
Effective training strategies:
• Industry-academia Collaboration: Foster partnerships between industry and academic institutions to
provide real-time curriculum updates that align with industry needs
• Hands-on training through apprenticeships: Promote apprenticeships and certification programs in the
aforementioned areas through the National Apprenticeship Promotion Scheme (NAPS)
• Public-private partnerships: Collaborate on setting up training centers near manufacturing clusters,
aligning curriculum with industry requirements, and encouraging young talent to pursue textiles as a
high-growth, technology-driven career path
• Integrating industry-led upskilling initiatives with policy support and infrastructure will help build a skilled
and agile workforce capable of meeting the evolving demands of global buyers.
Recommendation on policy support for branding of Indian textiles
Recommendations - I: Support for global branding in apparel
India is a major apparel manufacturer for global brands such as Decathlon, H&M, and Zara. These retailers
sell the products at a premium, leveraging their established brand value. Despite being a significant player
in the apparel manufacturing industry, India lacks large, globally recognised brands, with a few exceptions
such as FabIndia and Peter England etc. To overcome this, Indian manufacturers must prioritise investing
in brand development in international markets. By shifting their focus to brand development, Indian
manufacturers can transition from being mere contract manufacturers to building global brands, reaping the
benefits of increased customer loyalty and premium pricing
Current Initiatives
• The Export Promotion Mission offers financial support, including interest subvention, export
factoring, collateral guarantees, credit cards, and credit enhancement for market diversification, as
well as non-financial support to enhance market readiness and competitiveness, covering areas
such as export quality and compliance, international branding, packaging, trade fairs, logistics, and
trade intelligence and capacity-building initiatives
• The government promotes “Brand India” in textiles through initiatives such as Kasturi Cotton and
Silk Mark, which ensure quality, transparency, and purity in Indian cotton and silk products
Suggestions to implement recommendations
The government may offer support for developing global apparel brands. This initiative may support Indian
apparel companies in building and promoting their global brands by providing funding for:
• Facilitating bilateral market access: The Indian government may leverage bilateral and
diplomatic channels to ease market entry for Indian apparel brands in international markets. This
could include negotiating preferential access, simplifying regulatory and certification requirements,
and creating platforms for Indian brands to establish a presence in partner countries.
• Strengthening export logistics and supply chain support: The government may assist Indian
apparel brands with logistics and supply chain infrastructure for international expansion, including
support for warehousing, distribution networks, and streamlined export-import processes, thereby
reducing the operational burden of entering and scaling in overseas markets.
• Fostering collaborations between Indian weaves and brands: The initiative may facilitate
partnerships between Indian brands and traditional Indian weaves. By leveraging India's unique
Geographical Indications (GI) tags, such as Kotpad handloom fabric, Kanchipuram Silk, Lucknow
Chikankari, and Kashmir Pashmina, Indian brands can create exclusive, fashion products. This
138
collaboration will not only promote Indian weaves globally but also provide Indian brands with a
unique selling proposition.
Strengthening specific segments of the textile industry
Recommendation – I: Diversification into technical textiles
Technical textiles, comprising specialised textile products designed for applications across sectors such as
automotive, healthcare, agriculture and personal protection, constitute a rapidly expanding market. These
products offer enhanced functional properties, including high strength, durability, and resistance to
chemicals and ultraviolet radiation. Given its manufacturing capabilities and growing domestic demand,
India has considerable potential to expand its footprint in this segment and emerge as a leading global
supplier.
The domestic technical textile market has clocked a 7% CAGR, increasing to $26.8 billion in fiscal 2024
from $19 billion in fiscal 2019, according to the Ministry of Textiles. Additionally, technical textile exports
have risen to $2.59 billion in fiscal 2024 from $1.99 billion in fiscal 2019, as reported by the Directorate
General of Commercial Intelligence and Statistics.
Current initiatives
The Ministry of Textiles has set ambitious targets for India's technical textile sector, aiming for a domestic
market size of $40 billion by 2030, while also targeting total exports of $10 billion by 2030. The government
has introduced various initiatives for the growth and development of technical textiles. One such initiative
is the National Technical Textiles Mission (NTTM), which has a capital outlay of Rs 1,480 crore and aims to
establish India as a global leader in technical textiles by focusing on four key areas. The mission was
extended till fiscal 2026. Refer to annexture II for more details on this initiative.
Secondly, the government has approved a PLI scheme for textiles, with an outlay of Rs 10,683 crore. It
aims to promote the production of man-made fibre (MMF) apparel, MMF fabrics and technical textiles in the
country. This initiative is designed to enable the textile sector to achieve scale and become competitive.
The government has taken a significant step towards promoting technical textiles by identifying 116
products for mandatory use across 10 ministries and departments, with 73 products notified as of June
2025, focusing on high-impact sectors such as healthcare, agriculture, infrastructure and defence to
maximise the benefits of technical textiles.
All these initiatives have significantly strengthened India's domestic production of technical textiles.
However, despite the progress made, the technical textile industry in India still faces several challenges.
These include:
• Over-reliance on imported machinery, which hinders domestic production and increases dependence
on international suppliers, thus undermining the industry's self-sufficiency
• High dependence on the import of essential raw materials, particularly specialty fibres, which disrupts
the supply chain, increases costs and poses a significant risk to the industry's sustainability
• Limited access to cutting-edge technical expertise, which restricts innovation and competitiveness,
making it challenging for Indian technical textile manufacturers to stay ahead of the curve in the global
market
• The research-commercialisation gap, where scientific research is not translated to practical applications
and transferred to MSMEs, limiting the impact and potential of research breakthroughs
139
Suggestions to implement recommendations
• Fostering international partnerships: Partnering and collaborating with foreign governments and
institutions will facilitate the transfer of world-class technical expertise and enhance the knowledge
base of the domestic technical textiles industry. Key players in the technical textiles sector have
undertaken several notable collaborations in the past, including:
o In 2019, the Indian Technical Textile Association (ITTA) signed an MoU with the Taiwan
Technical Textiles Association (TTTA) to promote the technical textile industry in the two
countries. The MoU enables joint ventures in technical textile manufacturing and technical
knowledge sharing between companies in both countries
o Messe Frankfurt India and the Austrian Fibers Institute had partnered to host the Dornbirn
Global Fiber Congress in November 2025, which had provided a unique platform for the
technical textiles industry to explore the latest advancements in fibre technology, sustainable
materials and innovative applications.
To propel the growth of India's technical textile industry, the Ministry of Textiles may prioritise strategic
partnerships with countries, renowned for their expertise and technological advancements. By adopting a
collaborative approach, the Ministry may facilitate knowledge sharing and innovation through joint ventures,
technology exchange MOUs, and other cooperative agreements. Additionally, the Ministry may actively
attract top technical textile manufacturers, proactively identifying and inviting industry leaders to establish
operations in India, and creating a conducive environment for collaborative production. This multi-pronged
approach will enable India to harness global best practices, accelerate industry growth, and emerge as a
significant player in the global technical textile market
• Transparency in R&D: India's technical textile sector can benefit from R&D, but only if the results are
disseminated to the industry. To achieve this, the replication of new developments, as well as training
and skilling related to these developments, are essential. Moreover, research institutes must provide
transparent reports, enabling the industry to adopt and implement the findings effectively. A joint effort
between the government, researchers and relevant ministries is necessary to set up knowledge-sharing
platforms for researchers and industry players to exchange research papers, best practices and new
developments. This can be achieved through collective service centres that provide shared access to
design expertise, product development facilities, testing equipment, thereby accelerating the adoption
of new technologies in the technical textile domain
Recommendation–II: Promoting Indian weaves in the global market
Indian weaves, known for their intricate designs and cultural heritage, are gaining popularity in the slow
fashion and luxury sectors. The global luxury market is showing more interest in traditional Indian textiles
and craftsmanship. One such example is khadi, a well-known Indian fabric, whose exports have increased
significantly from Rs 1.9 crore in fiscal 2017 to Rs 6.5 crore in fiscal 2019, a growth that can be attributed
to:
• Partnerships with organisations such as the Federation of Indian Export Organisations (FIEO), World
Trade Centre (WTC) and the Indian Trade Promotion Organisation (ITPO) to promote khadi in overseas
markets through exhibitions and workshops
• Collaborations with the National Institute of Fashion Technology (NIFT) and other institutions to design
innovative, export-quality khadi products
• Engagement with renowned fashion designers to enhance the competitiveness and appeal of khadi
products in domestic and international markets
• Promotion of the eco-friendly nature of khadi, which aligns with the global sustainability trend
• Positioning KHADI as a high-end and luxury fashion product
140
Current initiatives
Several initiatives have been undertaken by the government and industry to support weavers, including:
• Credit requirements: The Weaver Mudra Scheme provides credit at a concessional 6% to handloom
weavers, with margin money assistance also being provided at 20% of the loan amount, subject to a
maximum of Rs 25,000 per individual weaver
• Education and training: The Ministry of Textiles has signed memoranda of understanding (MoUs) with
the Indira Gandhi National Open University (IGNOU) and the National Institute of Open Schooling
(NIOS) to provide educational facilities for weavers and their families
• Raw material procurement: The Yarn Supply Scheme facilitates the availability of yarn to eligible
handloom weavers and organisations at mill-gate prices, with the objective of ensuring regular and
timely access to essential raw materials.
• Promoting artisans: Artisans and weavers associated with handicrafts and handlooms can register
on the Government e-Marketplace (GeM) to sell their products directly to various organisations without
incurring registration fees. Furthermore, the government has launched initiatives such as Know Your
Weaves, Shilp Didi Mahotsav 2024 and Urban Haats to promote the sale of Indian weaves
• The National Institute of Fashion Technology (NIFT), a renowned institution for design, management
and technology, has been roped in as a knowledge partner to drive design development and strategic
positioning of handlooms and handicrafts, thereby enhancing their market visibility and appeal.
Suggestions to implement recommendations:
• Supporting artisan communities: Government and industry initiatives to support artisans and
preserve traditional skills are vital for boosting exports and improving the employment landscape.
Programmes that facilitate connections between artisans and international markets, as well as establish
premium branding for Indian weaves, can significantly drive demand. A notable example of such an
initiative is Bharat Tex, which showcased sustainable textiles and highlighted traditional crafts, thereby
promoting India's rich textile heritage. Through platforms such as Bharat Tex, artisans can showcase
their skills and products, ultimately enhancing the global visibility and appeal of Indian textiles
• Sustainable production: Promoting sustainable and eco-friendly production processes for these
weaves aligns with global trends toward sustainability, further enhancing India’s appeal in the luxury
textile market
In conclusion, by addressing the challenges and implementing strategic measures, India can
successfully transform its textile industry, thereby enabling it to achieve the ambitious export target of
$100 billion by 2030. A multi-faceted approach, which includes diversification into technical textiles,
preservation of traditional weaves, resolution of structural issues in the MMF sector, addressing gap in
natural fibre and strengthening of trade agreements, will enhance India's global competitiveness and
establish it as a leading textile exporter. Moreover, the textile industry is a significant employment
generator, providing direct and indirect livelihood to a vast number of people. Transforming the textile
sector by implementing strategic measures will create new employment opportunities and also enhance
the livelihood of the current workforce.
141
Annexures
Annexure I:
Country Companies
Bangladesh Desh Garments, Hwa Well Textiles BD Ltd, Evince Textiles
China Shenzhou International Group Holdings Ltd, Luthai Textiles, Huafang Co Ltd
Vietnam Song Hong Garment, TNG Investment and Trading JSC, Viettien Garment and
Thanh Cong Textile Garment
India Arvind Ltd, Bang Overseas Ltd, Cantabil Retail India Ltd, Celebrity Fashions Ltd,
Gokaldas Exports Ltd, Indian Terrain Fashions Ltd, Kewal Kiran Clothing Ltd, Kitex
Garments Ltd, Lovable Lingerie Ltd, Monte Carlo Fashions Ltd, Page Industries
Ltd, Pearl Global Industries Ltd, Zodiac Clothing Company Ltd
Annexure II:
Ranking of high potential market for RMG exports
Rank Country CAGR in imports of
apparel (CY18-24)
Share in global
apparel imports
(CY24)
Estimated GDP
per capita growth
rate (CY25-30)
1 Poland (EU) 12% 3% 6%
2 Mexico 12% 2% 4%
3 Romania (EU) 8% 1% 6%
4 Croatia (EU) 8% 0% 5%
5
Slovak Republic
(EU) 6% 0% 5%
6 Russia* 8% 2% 3%
7 Hungary (EU) 3% 0% 6%
8
Czech Republic
(EU) 5% 1% 4%
9 Malaysia 4% 0% 5%
10 Ireland (EU) 6% 1% 3%
11 UAE 3% 1% 5%
12 Panama 3% 0% 5%
13 Israel 6% 1% 3%
142
Rank Country CAGR in imports of
apparel (CY18-24)
Share in global
apparel imports
(CY24)
Estimated GDP
per capita growth
rate (CY25-30)
14 Brazil 3% 0% 4%
15 Greece (EU) 4% 1% 4%
16 Korea 3% 3% 4%
17 Portugal (EU) 3% 1% 4%
18 Saudi Arabia 4% 1% 3%
19 Thailand 4% 0% 3%
20 Netherlands (EU) 3% 4% 3%
21 Canada 2% 2% 4%
22 Switzerland 3% 2% 3%
23 Australia 3% 2% 3%
24 Denmark (EU) 2% 1% 3%
25 Kuwait 5% 0% 2%
*Data for 2015-2021
Note: Competitiveness is based on a weighted average of two factors: 40% apparel import growth and 60% estimated per capita
GDP growth
Source: ITC Trademap, Crisil Intelligence, IMF World Economic Outlook
Annexure III:
Components of National Technical Textiles Mission
Component Particulars Mission Action Total capital
outlay allocated
under the
scheme*
1 Research,
innovation, and
development
Promote
research and
development
activities in
technical textiles
Research topics include
specialty fibres, geotextiles,
medical textiles, defence
textiles, sports textiles and
environmentally friendly
textiles, for which proposals
have been invited. Guidelines
have been established to:
• Support the indigenous
development of
machinery and equipment
for technical textiles in
India
Rs 1,000 crore
143
• Foster startups and
young scientists in
technical textiles
application areas
2 Promotion and
market
development
Enhance the
application of
technical textiles
across various
industries to
boost the
average growth
rate by
implementing
strategic market
development
initiatives
• The Ministry has
organised conferences
and workshops to
promote technical textiles,
creating awareness and
driving market
development in the
country
• To ensure quality for both
domestic consumption as
well as imports, the
ministry has issued
quality control orders for
57 items, including geo-
tech, protective, agro, and
meditech textiles as of
September 2024
Rs 50 crore
3 Export
promotion
Aims at
establishing
export
promotion
council for
technical textiles
Manmade and Technical
Textiles Export Promotion
Council has been designated
to promote the export of
technical textiles
Rs 10 crore
4 Education and
skill
development
Imparting
advanced
technical
education and
skilling in
technical
textiles, catering
to the
manufacture as
well as the
application
areas
Guidelines have been issued
to support academic institutes
in developing technical
textiles’ programmes,
including:
• New undergrad and
postgrad degree
programmes
• Update programmes
with technical textiles
courses
• Grants for lab
upgrades and faculty
training
• Internship support
through the General
Guidelines for Grant
for Internship Support
in Technical Textiles
(GIST) to enhance
education and
Rs 400 crore
144
industry exposure for
students
*Initially allocated for FY 2021 to FY2024 and extended till FY 2026
Under component I–Research, development and innovation of NTTM
Particulars Jun-23 Sep-23 Jan-24 Nov-24
Number of projects sanctioned till date 109 126 137 168
Valuation of projects sanctioned (Rs crore) 325 371 474 509
Annexure IV:
Indian companies
Arvind
Ltd
Garware
Technical
Fibres Ltd
Pearl
Global
Industries
Ltd
Vardhman
Textiles
Ltd
Filatex
India Ltd
Welspun
Living
Ltd
Raymond
Lifestyle
Ltd
Rs crore FY25 FY25 FY25 FY25 FY25 FY25 FY25
R&D
expenditure
19.2 7.5949 9.8906 8.15 1.4816 39.76 0.248
Revenue
from
operating
income
8329 1540 4,506 9,785 4252 10,697 6176
R&D
expenditure
as % of
operating
revenue
0.23 0.49 0.22 0.08 0.03 0.37 0.004
Chinese companies
Huafang
Co Ltd
Xinfengming
Group Co
Ltd
HLA
group
Corp Ltd
Zhejiang
Hangmin
Co Ltd
Jiangsu
Hongdou
Industrial
Co Ltd
Lancy Co
Ltd
Lu Thai
Textile Co
Ltd
CNY million CY24 CY24 CY24 CY24 CY24 CY24 CY24
R&D
expenditure
141.69 1,209.25 288.13 181.71 17.2 108.62 206.82
Revenue from
operating
income
2,934 67,091 20,957 11,468 1,960 5,691 6,091
R&D
expenditure
as % of
operating
revenue
5 2 1 2 1 2 3
Source: Company data, Crisil Intelligence
145
Annexure V:
Staple fibre and filament yarn production in fiscal 2023 (million kg)
Natural fibre
Silk 37
Jute and mesta 1,690
Wool 34
Cotton 5,712
Man-made fibre and filament
Filament production 1,904
Polyester filament yarn 1,769
Man-made staple fibre 2,152
Polyester staple fibre 1,506
Source: Cotton Corporation of India, Central Silk Board, Ministry of Textiles, Department of Agriculture
146
147
Table of contents
Executive Summary .................................................................................................................................. 149
Introduction to telecom and network equipment ....................................................................................... 153
The Umbrella of TANE .............................................................................................................................. 155
Global TANE industry – an overview ......................................................................................................... 157
Indian TANE industry................................................................................................................................. 158
Strategic alignment ................................................................................................................................... 162
Value chain play ........................................................................................................................................ 164
Benchmarking against competing countries ............................................................................................. 167
China ......................................................................................................................................................... 168
Hungary ..................................................................................................................................................... 171
Policy framework and industry support mechanism ................................................................................. 172
Challenges hindering India’s global competitiveness ............................................................................... 175
Success story: Reliance Jio’s partnership with Sanmina .......................................................................... 181
Success story: Nokia’s India story: leveraging local strengths for global success ................................... 182
Recommendations: Policy initiatives and reforms .................................................................................... 183
Appendix ................................................................................................................................................... 191
148
Telecom and
Network Equipment
149
Executive Summary
Sector Overview
India’s telecom and network equipment (TANE) manufacturing sector stands at a critical inflection point as
the country pursues its vision of becoming a globally competitive manufacturing hub while strengthening
digital infrastructure and technological self-reliance. As the backbone of telecommunications networks,
TANE encompasses radio access network (RAN) equipment, routers and switches, optical fibre
infrastructure, microwave apparatus, and associated networking systems that enable connectivity, digital
services, and emerging technologies such as 5G, IoT, smart cities, and future 6G applications.
India is currently the world’s second-largest telecommunications market with more than 1.2 billion
subscribers, approximately 85% telecom penetration, and nearly 75% internet usage. The telecom sector
contributes an estimated 6–6.5% to national GDP and has attracted nearly USD 40 billion in foreign
investment between 2000 and 2025. Recognizing the sector’s transformative potential, the National
Telecom Policy 2025 (NTP-25) targets doubling the sector’s contribution to GDP, doubling exports of
telecom products and services, creating one million new jobs, and significantly increasing investment and
R&D expenditure by 2030.
While telecom services have expanded rapidly, domestic manufacturing of telecom equipment remains
underdeveloped, resulting in substantial import dependence for critical network infrastructure.
Strengthening the TANE ecosystem therefore represents a key opportunity to enhance economic
resilience, generate skilled employment, deepen value addition, and improve India's position in global value
chains.
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The growth outlook for the industry remains robust, driven primarily by India's ongoing 5G rollout, rapid
digitalisation, increasing data consumption, expansion of broadband infrastructure, emergence of smart city
applications, industrial automation, IoT adoption, cloud computing, and growing enterprise connectivity
requirements.
The Indian TANE market is estimated at approximately USD 25 billion in FY2025 and is projected to nearly
double to about USD 50 billion by FY2032, growing at a compound annual growth rate (CAGR) of 10%.
Several demand-side indicators reinforce this outlook:
• 5G subscriptions are projected to increase from 2.27 billion in 2024 to 6.35 billion by 2030.
• Mobile data traffic is expected to grow from 124 EB per month to 303 EB per month by 2030.
• IoT connections are projected to expand from 13.2 billion to 34.7 billion over the same period.
• Continued fibreisation and broadband expansion will further increase demand for network
infrastructure equipment.
Globally, the telecom equipment market is expected to grow from approximately USD 498 billion in FY2023
to USD 714 billion by FY2030, reflecting a CAGR of 5.28%. India is therefore positioned within a rapidly
expanding global industry with significant export potential.
Current Structure of the Indian TANE Industry
Despite strong domestic demand, India continues to rely heavily on imports for network infrastructure
equipment and critical components. TANE exports remain modest at USD 0.6–1.0 billion annually,
representing only about 0.2–0.3% of India’s total exports. In contrast, imports have remained elevated at
USD 4–5 billion annually.
The industry has achieved meaningful progress under the Production Linked Incentive (PLI) Scheme,
particularly in product segments such as optical fibre cables, customer premises equipment, routers, and
switches. Domestic companies including Tejas Networks, HFCL, and VVDN Technologies have emerged
as important players. Additionally, global manufacturers such as Nokia, Ericsson, Samsung, and Sanmina
have expanded manufacturing operations in India.
However, domestic value addition remains limited because much of the manufacturing activity continues to
be assembly-oriented, with high dependence on imported semiconductors, RF modules, integrated circuits,
processors, and other critical components. Localisation levels for several telecom products remain below
15%, demonstrating the need for deeper ecosystem development.
Lessons from Champion Countries
The study identifies China and Hungary as benchmark countries whose experiences provide valuable
insights for India's telecom manufacturing strategy.
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China has emerged as the global leader in telecom equipment manufacturing, driven by the scale and
technological capabilities of companies such as Huawei and ZTE, which together have enabled Chinese
OEMs to capture more than 42% of the global base station market. The country's success is underpinned
by sustained investments in research and development, strong government support through industrial
policies, dedicated Special Economic Zones (SEZs), rapid deployment of 5G infrastructure, a deeply
integrated component manufacturing ecosystem, and extensive skilling and talent development initiatives.
These interventions have enabled China to develop a highly competitive and self-reinforcing telecom
manufacturing ecosystem spanning design, component production, assembly, and exports. By March 2026,
China had deployed approximately 4.96 million 5G base stations, representing nearly 65% of global
installations. The country has further strengthened its position through the strategic use of joint ventures,
technology transfer, localisation requirements, and cluster-based manufacturing models, which have
helped cultivate globally competitive telecom champions and establish China as a dominant player across
the telecom equipment value chain.
Hungary represents a contrasting model of telecom equipment manufacturing that is centred on high-value
production, advanced manufacturing capabilities, and strong integration with European markets. The
country has emerged as one of Europe’s leading telecom equipment export hubs and hosts Nokia’s largest
5G manufacturing facility, underscoring its importance within the regional telecom ecosystem. In 2024,
Hungary’s telecommunications equipment exports increased by 31.4% to reach approximately USD 5.5
billion, reflecting the sector’s growing competitiveness. This success has been supported by a combination
of policy and structural advantages, including one of the lowest corporate income tax rates in Europe at
9%, sustained investments in telecommunications infrastructure, supportive spectrum management
policies, the availability of a highly skilled technical workforce, and deep integration with European supply
chains. Together, these factors have enabled Hungary to attract global telecom manufacturers and
establish itself as a key production and export base for advanced telecom equipment
Key Challenges Limiting Global Competitiveness
Despite favourable demand conditions, several structural bottlenecks continue to constrain India's
competitiveness.
First, high import dependence persists across critical electronic and telecom components, resulting in
limited domestic value addition and higher production costs. Localisation levels for key telecom products
remain low, particularly in high-value technologies such as 4G and 5G radio access equipment.
Second, domestic manufacturers face limited market access. Nearly 98% of telecom equipment demand
originates from private telecom service providers, which continue to prefer established global OEMs owing
to technological maturity, scalability, and certification standards.
Third, Indian manufacturers operate with lower profitability and weaker economies of scale compared with
global competitors, limiting their ability to invest in innovation and capacity expansion.
Fourth, skill gaps and lower labour productivity continue to hinder the sector’s development. Productivity
in telecom equipment manufacturing remains substantially below both the national manufacturing average
and the electronic components sector, while employability challenges persist across technical disciplines.
152
Strategic Recommendations
The report proposes a targeted policy framework to transform India from an assembly-based
manufacturing destination into a globally competitive telecom equipment ecosystem.
i. Deepen Localisation Through Component Manufacturing
A localisation-linked incentive framework is likely to encourage manufacturers to progressively source
a greater share of bill-of-materials (BOM) components domestically. Focus may initially be placed on
non-semiconductor, plastic, insulation, and electro-mechanical components, before gradually
extending to higher-value components.
ii. Promote Joint Ventures and Technology Transfer
Drawing lessons from China's telecom industry, India may actively promote joint ventures between
global OEMs and domestic firms to facilitate technology transfer, enhance local capabilities, and
accelerate ecosystem development. Successful models such as Reliance Jio's partnership with
Sanmina demonstrate the potential of this approach.
iii. Develop Industrial Clusters
Cluster-based manufacturing ecosystems similar to those observed in China and Taiwan can generate
scale economies, facilitate supplier integration, strengthen innovation networks, and improve
competitiveness. Emerging telecom manufacturing hubs such as Madhya Pradesh's Telecom
Manufacturing Zone provide a potential template.
iv. Focus on High-Potential Export Segments
India should prioritise export promotion for radio infrastructure equipment, including antennas, remote
radio heads, baseband units, optical fibre cables, and microwave apparatus. Global imports in
antennas, RRH, and BU alone exceeded USD 219 billion in 2024, while India’s exports in these
categories were less than USD 1 billion, indicating substantial untapped potential.
v. Strengthening Testing, Certification, and Skill Development
The establishment of centralised testing facilities, internationally aligned certification systems, and
stronger industry-academia partnerships can improve product credibility, workforce readiness, and
innovation outcomes.
Conclusion
India possesses strong domestic demand, policy support, demographic advantages, and increasing
manufacturing capabilities that position it favourably to emerge as a major global telecom equipment
manufacturing hub. However, achieving this ambition will require a strategic shift from assembly-led
manufacturing towards deep localisation, component ecosystem development, technology transfer, export
orientation, and workforce strengthening. With focused implementation, the sector can significantly
contribute to employment generation, export expansion, technological self-reliance, and India's broader
objective of becoming a globally competitive manufacturing economy.
153
Introduction to telecom and network equipment
India is the second-largest telecommunications market globally with a subscriber base over 1,200 million.
With approximately 85% of the population using telecom services regularly and approximately 75%
leveraging internet services, digitalisation continues to permeate consumer-centric industries such as e-
commerce, travel and tourism. India’s relatively young population (median age of 28 years) and technology-
driven governance, social change and service delivery, present an opportunity for the telecom and network
equipment (TANE) manufacturing industry to benefit from favourable demand advantages and establish a
domestic ecosystem for growth.
Figure 53: TANE contribution to Indian economy
Source: DPIIT
Currently, the telecom sector contributes around 6-6.5% to the nation’s GDP and policies such as National
Telecom Policy 2025 aim to leverage this potential to drive growth across investments, employment and
export. The NTP-25 aims to accomplish the following strategic objectives in telecom sector by 2030:
1. Universal and Meaningful Connectivity for all.
2. Double the contribution of the sector to India’s GDP.
3. Achieve an annual investment of Rs 1,00,000 crore
4. Double the export of telecom products and services.
5. Double the number of telecommunications startups.
6. Double the sectoral R&D spending on emerging telecom technologies.
7. Create 1 million new jobs
8. Upskill/reskill 1 million workers to meet the future demand.
9. Strengthen security by adopting quantum resistant cryptography.
10. Reduce carbon footprint by 30%.
As the industry providing underlying infrastructure for these objectives, ensuring growth of TANE
becomes critical for the country.
TANE
Contributes 1-1.5% to India’s GDP
Employment:
a)Mobile phone manufacturing: 1.3L
b)TANE equipment manufacturing: 20,000-25,000
c)Tower infrastructure: 2-2.5L
d)Telecom services: 1.5-2L
e)IT/Software and digital services linked to
telecom: 10-20L
Telecom sector attracted inflows of
nearly 40 billion USD (2000-2025)
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Growth drivers
From 2018 to 2022, the Indian market was largely driven by the need to modernise legacy networks and
deploy new hardware to support the rollout of 4G services. However, from 2023 to 2027, the scale and
momentum of the 5G rollout, adoption of 5G-enabled enterprise services, including smart city initiatives,
IoT applications, mission-critical communications and other emerging use cases are expected to drive the
demand for telecom equipment. As 5G technology becomes more widespread, there is likely to be
significant demand for telecom equipment that can support innovative applications such as smart city
infrastructure, industrial automation, remote healthcare and immersive technologies such as augmented
reality (AR) and virtual reality (VR), thereby driving growth in the Indian telecom equipment market. The
Indian TANE market size is estimated at nearly $25 billion in fiscal 2025 and is expected to reach $50 billion
by 2032, growing at a CAGR of 10%.
However, the equipment required to modernise existing telecom infrastructure as well as the equipment
required for rollout of new services such as the 5G rollout in 2022 has been traditionally imported from
countries such as China, Taiwan and other countries.
Table 16: India's trade position in telecom and network equipment manufacturing
Note: All figures are in USD billion
Source: DGFT, Crisil Intelligence, E: Estimate
India's telecom and network equipment (TANE) sector stands at a pivotal juncture, poised to fuel the
National Telecom Policy 2025 (NTP-25) ambitions of universal connectivity, doubled GDP contribution, and
$1 trillion in exports by 2030. Yet stark trade imbalances underscore an urgent need for targeted
intervention: domestic TANE exports languish at a mere 0.2-0.3% share of total exports ($0.6-1.0 billion
annually from 2020-2024), while imports dominate at USD 4-5 billion yearly, constituting 0.7-1.1% of total
imports, with over 80% sourced from China for critical components like 4G/5G antennas and signal
processors. This heavy import reliance exposes the economy to supply chain vulnerabilities, geopolitical
risks, and currency fluctuations, stifling self-reliance (Atmanirbhar Bharat).
Robust government intervention will go a long way in catalysing domestic manufacturing, aligning with NTP-
25's 150% output surge and 50% import substitution goals.
The sector has benefitted from interventions such as the Production Linked Incentive (PLI) scheme and
similar supportive measures could double TANE's GDP share to 1-1.5%, generate 500,000 skilled jobs,
and position India as a $50 billion export hub by 2035, transforming vulnerabilities into global leadership.
all figures are in USD billion
2020 2021 2022 2023 2024
India total exports 275 395 453 431 442
India TANE exports 0.6 0.8 1.1 0.9 1.0
TANE share in exports 0.23% 0.20% 0.25% 0.22% 0.23%
India total imports 368 570 733 674 703
India NATE imports 4.0 4.4 5.1 4.6 3.6
TANE share in imports 1.1% 0.8% 0.7% 0.7% 0.5%
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The Umbrella of TANE
The Telecom and Network Equipment (TANE) ecosystem forms the backbone of modern global connectivity,
enabling voice, data, and video services across mobile, fixed-line, and enterprise networks. The following
illustration categorizes the wide range of products and services offered by a telecom equipment manufacturer
into three core pillars:
Figure 54: Products and services offered by telecom equipment manufacturer
Source: Crisil Intelligence
For the purposes of this study, we are focusing on the network infrastructure equipment, as handsets have
been covered in a separate analysis. Additionally, services have been excluded from this study
1. Handsets: These are end-user devices that allow individuals to access telecom networks.
Key Products:
• Smartphones: Advanced mobile devices with internet, apps, multimedia, and cellular connectivity (e.g.,
4G/5G).
• Pads/Tablets: Larger touchscreen devices used for productivity, entertainment, and mobile computing.
• Data Cards: USB or embedded modems that provide internet connectivity to laptops or IoT devices via
cellular networks.
2. Network Infrastructure Equipment: This is the physical and functional foundation of telecom networks,
responsible for signal transmission, routing, and connectivity.
Table 17: Network Infrastructure equipment and their functions
Type Equipment Function
Radio access
network (RAN)
hardware
Base Transceiver Stations
(BTS)
Traditional macro cell towers housing radio transceivers.
Antennas
Transmit and receive radio signals; include directional, omnidirectional, and MIMO
types.
156
It is noteworthy that network infrastructure equipment accounts for ~50% of total TANE market value, with
highest growth in 5G RAN and optical transport, making it a key enabler to profitability of manufacturing
companies worldwide.
3. Supporting Systems and Services: These ensure reliability, scalability, and operational efficiency of the
network.
Table 18: Key service offerings by TANE companies
Strategic focus of the study
For the purposes of this study, we are focusing on the network infrastructure equipment, as handsets have
been covered in a separate analysis. Additionally, services have been excluded from this study to keep
focus on equipment manufacturing.
Thus, the core analytical lens is on:
• Radio access network (RAN) hardware (BTS, RRH, BBU, antennas)
• Routers & Switches
• Transport Infrastructure (OFC, Microwave)
These segments are capital-intensive, technology-driven, and central to 5G rollout, edge computing, and
fibreization trends. Domestic manufacturing of network infrastructure equipment is foundational to building
a complete telecom equipment ecosystem in India. By producing core items like base stations, routers, and
antennas locally, it creates steady demand for indigenous components such as RF modules,
semiconductors, and PCBs, thereby nurturing ancillary industries and a robust supply chain. This localised
production enables seamless design integration, customization, and rapid innovation in emerging 5G and
6G technologies. It also fosters skilled workforce development, R&D clusters, and attracts startups and
global OEM partnerships, creating a self-sustaining cycle that transforms India from an import-reliant market
into a fully integrated, competitive telecom manufacturing hub.
Type Equipment Function
Remote Radio Heads (RRH)
& Baseband Units
(Bbaseband units (BU)
Modern split-architecture design: RRH near antenna handles RF; BBU processes
baseband signals centrally (enables C-RAN).
Routers and Switches
Direct data traffic within and between networks; support IP/MPLS routing and Layer 2/3
switching.
Transport Infrastructure
High-capacity backbone linking RAN to core network.
Transport
Infrastructure
Optical Fibre Cables (OFC)
High-speed, low-latency medium using light pulses; supports DWDM for massive
bandwidth.
Microwave Apparatus
Point-to-point wireless backhaul using microwave frequencies; ideal for remote or rapid
deployment areas.
Cloud Computing Infrastructure
Virtualized network functions (vRAN, SDN/NFV), servers, storage,
and orchestration platforms.
Operating Support Systems (OSS)
Software for network monitoring, fault management, performance
analytics, and automation.
Maintenance & IT Integration Services
On-site support, remote troubleshooting, system upgrades, and
integration with enterprise IT.
Telecom Power Systems
Reliable power supply solutions including rectifiers, batteries, and UPS
(Uninterruptible Power Supply).
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Global TANE industry – an overview
The global telecom equipment manufacturing landscape is characterized by a high degree of
consolidation, with a small group of original equipment manufacturers (OEMs) holding a significant majority
of the market share. Notably, industry leaders such as Huawei, Nokia, Ericsson, ZTE, Ciena, and Cisco
collectively account for approximately 80% of the global market. The strong market presence and
comprehensive product and service offerings of these established players create a substantial barrier to
entry for Indian Telecom and Networking Equipment (TANE) manufacturers seeking to expand into
international markets.
The global telecom equipment market is expected to increase from USD 498 billion in FY23 to USD 714
billion by FY30, at a compound annual growth rate (CAGR) of 5.28% over the period
Figure 55: Global TANE market size
Source: TRAI, Frost & Sullivan, TRAI, Crisil Intelligence, E: Estimate
The manufacturing of TANE products relies on a collaborative and interconnected global supply chain,
where regions specialize in distinct high-value components, such as Taiwan’s dominance in advanced
semiconductors and South Korea’s expertise in OLED displays and memory chips.
For instance, a 5G base station assembled in India integrates Taiwanese TSMC-fabricated chipsets,
Japanese optical transceivers, and US-designed IP cores, enabling cost efficiency, rapid innovation, and
resilience through diversified sourcing.
This interdependence means any disruption in one part can lead to supply chain interruptions in other
locations. During the Covid-19 pandemic, widespread lockdowns, border closures, and social distancing
measures disrupted the global supply chain of electronics components, including semiconductors, printed
circuit boards, and other critical parts. Similarly, a severe drought in Taiwan in 2020, home to major
semiconductor manufacturers such as TSMC affected the production of chips used in electronic products
such as smartphones and laptops.
(USD bn)
CAGR 5.28%
498
529
562
590
619
649
681
714
FY23 FY24 FY25 FY26 E FY27 E FY28 E FY29 E FY30 E
158
Indian TANE industry
India’s Telecom and Networking Equipment (TANE) industry has evolved into a cornerstone of the nation’s
digital economy. This segment focuses on producing hardware like base stations, routers, optical fibre
cables, antennas, and IoT devices that power mobile networks, broadband, and 5G ecosystems. Driven by
government initiatives like “Make in India” and the Production Linked Incentive (PLI) scheme, the industry,
coupled with the rapid rollout of 5G, now covering over 90% of districts and surging data consumption, the
sector is poised to support India’s ambition of becoming a global telecom export hub.
Table 19: Increasing uptake of digital services indicates a strong demand for TANE growth
Source: TRAI, Ericsson, Crisil Intelligence
The demand for TANE is expected to sustain in the Indian market
Figure 56: Indian TANE market size
Source: Ericsson, TRAI, Crisil Intelligence, E: Estimate
The three large Indian telecom service providers have historically met their network infrastructure
equipment, including RAN hardware requirements through long-term deals with companies such as
Huawei, Ericsson, and Nokia. This is in line with the trend around the globe as these companies are the
market leaders, with sustained market dominance established by years of reliable service, product
innovation, and quality standards. Innovation is at the core of the TANE industry, and to sustain this edge
these original equipment manufacturers (OEMs) in regions such as South Korea, Europe, and the United
States are collaborating with start-ups that specialise in cutting-edge technologies such as 5G, IoT,
cybersecurity, cloud computing, AI, big data and analytics, and network functions virtualisation (NFV).
Notably, companies like SK Telecom in South Korea, Deutsche Telekom and Nokia in Europe, and T-Mobile
in the US have established their own accelerator programmes, which offer funding, product development
support, and commercialisation guidance to start-ups, fostering innovation and driving growth in the telecom
industry. Such initiatives enable start-ups to bring new ideas and solutions to market and let established
players stay at the forefront of technological advancements.
S. No. Key performance indicators 2024 2030F CAGR
1 Smartphone (million) 7,160 8,330 3%
2 Mobile data traffic (EB/month) 124 303 16%
3 Fixed broadband connections (million) 1,590 1,890 3%
4 5G subscriptions (million) 2,270 6,350 19%
5 IoT connections (billion) 13.2 34.7 18%
CAGR 10%
(USD bn)
23
25
27
30
33
37
41
45
50
FY24 FY25 FY26E FY27E FY28E FY29E FY30E FY31 E FY32E
159
Figure 57: Breakup of TANE equipment market in India
Source: DGFT, TRAI, Crisil Intelligence
Based on the nature of use, and to understand the import dependency along with the progress made by
the domestic manufacturing across telecom and networking equipment product family, we can categorise
the network infrastructure equipment (globally the most demanded as well as the key to successful 5G
deployment and going forward, 6G introduction) in four subsets:
1. Antennas, remote radio heads (RRH), and baseband units (baseband units (BU)
2. Routers and switches
3. OFC and microwave apparatus
4. Base stations
Below is a detailed description of each category and how domestic manufacturing has evolved in recent
years:
1. Antennas, RRH, and BU constitute a critical subset of network infrastructure equipment that facilitates
radio frequency (RF) signal transmission and reception in wireless communication systems. These
components collectively enable the conversion of digital signals to RF signals, amplification, and
transmission over the air interface, using technologies such as beamforming and massive Multiple-Input
Multiple-Output (MIMO).
While exports of this subset have increased, the import dependency persists with a lack of substitutes
made in India.
2. Routers and switches are fundamental components of network infrastructure, that enable efficient routing
and switching of data packets across local area networks (LANs), wide area networks (WANs) and the
Internet. They facilitate communication between devices, servers, and applications, ensuring reliable and
high-speed data transfer.
Since the inception of telecom Production Linked Incentive (PLI) scheme in 2021, imports have reduced
to 50% from 2020 levels with Indian companies such as VVDN Technologies, Tejas Networks emerging
as prominent manufacturers.
3. OFC and microwave apparatus: Companies such as Himachal Futuristic Communications Ltd (HFCL)
have developed optical fibre cable and other related transport apparatus and indigenous capabilities. India
Base stations, 1%
Antennas,
RRH and BU,
87%
Routers and
switches, 11%
Optical fibrecables and
microwave apparatus 1%
Break up by imported equipment type
Imported,
98%
Manufactured locally, 2%
Break up by origin of equipment
160
has achieved self-sufficiency in the production of common grades of optical fibre cables, particularly all-
dielectric self-supporting (ADSS) and GYTC8S cables.
4. Base stations are the most commonly known among network infrastructure equipment. Base stations
facilitate wireless communication between mobile devices and the core network. They transmit and
receive radio signals, acting as a bridge between mobile devices and the larger network
infrastructure. They are key to network deployment and were historically imported by India for all its
requirements. A ban on Chinese gear in critical infrastructure saw the telecom companies procuring base
stations manufactured in India by global OEMs such as Ericsson and Nokia. However, base stations
manufactured by Indian OEMs still aren’t competitive in terms of pricing, quality and technological
capability. Companies such as Tejas Networks have made developments in domestic manufacturing, but
a weak order book is a hurdle.
Following graphs show the import-export trend for each subcategory:
Figure 58: Antennas, RRH and BU
Source: DGFT, ITC Trade Vision
Figure 59: Routers and switches
Source: DGFT, ITC Trade Vision
3369
3873
4654
4266
3337
559
678
996
836 920
2020 2021 2022 2023 2024
$ million
ImportsExports
490
383
309
295
244
34 32
61 57 56
2020 2021 2022 2023 2024
$ million
ImportsExports
161
Figure 60: OFC and microwave apparatus
Source: DGFT, ITC Trade Vision
Figure 61: Base stations
Source: DGFT, ITC Trade Vision
Overall, the sector’s trade dynamics reflect a gradually maturing ecosystem driven by the Production-Linked
Incentive (PLI) scheme, yet persistent import dependence underscores the need for targeted assessments.
In this context, it is imperative to evaluate India’s import-export balance, its alignment with global trade
frameworks, and opportunities to export products aligned with surging international demand, while building
domestic manufacturing capabilities.
By focusing on globally demanded, domestically scaled products, India can achieve atmanirbharta with a
dedicated telecom equipment export promotion policy. This assessment is vital for navigating geopolitical
headwinds toward sustainable, geopolitically resilient growth.
41
37 36 36
28
42
68
62
43
57
2020 2021 2022 2023 2024
$ million
ImportsExports
123
77
58
6 41 2 3 2 1
2020 2021 2022 2023 2024
$ million
ImportsExports
Imports fell with Govt. putting
restrictions on Chinese gear- telcos
switched to procure Base stations from
Indian units of Ericsson
162
Strategic alignment
With this context, India’s ambition to emerge as a global hub for telecom equipment manufacturing,
encompassing 5G/6G base stations, routers, antennas, handsets, and network infrastructure must be
evaluated through the lens of strategic geopolitical alignment. This necessity arises from the industry’s
inherently fragmented and interdependent global value chain (GVC), where no single nation dominates all
stages. Unlike commoditised sectors, telecom manufacturing involves high-value, technology-intensive
processes distributed across geographies, creating vulnerabilities to supply disruptions, intellectual
property (IP) risks, export controls, and geopolitical leverage. For India, a late entrant with a USD 20+ billion
domestic market and “Make in India” incentives, misalignment with key GVC partners could derail self-
reliance goals under the Production-Linked Incentive (PLI) scheme, while over-dependence on adversarial
suppliers risks national security in critical information infrastructure (CII).
Availability of raw materials
The telecom and network equipment manufacturing industry relies heavily on a complex network of
specialised suppliers for sub-assembled units and components. These components, such as printed circuit
boards, antennas, and radio frequency (RF) modules, are crucial to make base stations, routers, and
switches, among others. As the import dependency is high for these components, domestic manufacturers
have to face 10-15% higher costs than global original equipment manufacturers (OEMs).
Indian companies making generic TANE equipment face up to 26% higher fiscal disability compared with
their global peers in high-value-added telecom manufacturing. Further, the disability rises to 29% in product
categories where buyer’s credit is available against imports for an extended period.
Table 20: Raw material availability for TANE sector
Key components required Amplifiers Mixers Oscillators RF filters
Supplier country 1 China Vietnam China China
Supplier country 2 Singapore China Singapore USA
Supplier country 3 Japan Thailand Japan Israel
Domestic availability Yes Yes Yes Yes
Import dependence High High High High
Reason for India’s high
import dependence
Indian components are expensive, and it is cheaper to import
Table 21: Major suppliers of telecom equipment and degree of India’s import dependence
Key component required Processors
Integrated
circuits
Static
converters
Diodes Transistors
Supplier country 1 China China China China China
Supplier country 2 Singapore Singapore Singapore Singapore Singapore
Supplier country 3 South Korea
South
Korea
Germany Japan Germany
Domestic availability No No Yes Yes Yes
Import dependence High High High High High
Reason for India’s high import
dependence
Not manufactured in India
Indian components are expensive, and it is
cheaper to import
Source: Crisil Intelligence
Geopolitical relationship Positive Neutral
163
Apart from taking up a substantial portion of the production cost, these sub-assembled units and
components play a critical role in determining the performance and quality of the final product. Furthermore,
the lead times for sourcing these components can be lengthy, and any disruptions to the supply chain can
have a ripple effect on the manufacturing process. As a result, telecom equipment manufacturers must
carefully manage their relationships with suppliers, monitor inventory levels and develop strategies to
mitigate risks associated with component shortages or quality issues. This is necessary to ensure a stable
and efficient production process. The Indian telecom equipment sector is dependent on imports for key
components such as integrated circuits, diodes, transistors and amplifiers.
164
Value chain play
The telecom and networking equipment industry has a complex value chain with several stages, from
conceptualisation to product delivery. The domestic industry has seen significant growth and localisation,
and the country has emerged as a major hub for assembly of telecom and networking equipment.
Figure 62: Parts of the global collaborative chain
OBM: Original Brand Manufacturers
Source: Crisil Intelligence, COAI, Ministry of Trade and Industry, government of Singapore
Focus area: The value chain illustrates that no country is self-sufficient in isolation when it comes to end-
to-end value chain. Countries have become successful by leveraging their domestic strengths for specific
parts of the value chain, gained expertise in adjacent areas and later pivoted to build scale.
Product design: The stage involves the conceptualisation and development of telecom and networking
equipment, focusing on functionality, performance and regulatory compliance. It demands expertise in radio
frequency (RF) engineering, digital signal processing, and software development, among others.
Historically, companies from the US and Israel have made significant breakthroughs in product design. That
helped them design and develop many products for global markets.
The design stage involves creating detailed technical specifications, simulations, and prototypes to test and
validate the product’s performance. Companies such as Cisco of the US, Bell Telephone Manufacturing
(BTM) of Belgium (now part of Alcatel), and Siemens of Germany were the pioneers in designing and
developing new products and telecom equipment technologies. This trend continued until Chinese and
Korean firms mastered reverse engineering, then invested heavily in R&D to develop proprietary
technologies, for instance Huawei’s breakthrough in 5G baseband chips and single RAN architecture,
evolving from imitators into global innovators and market leaders.
Component manufacturing: This critical phase involves the production of key components such as radio
frequency (RF) modules, amplifiers, filters and connectors. It demands high-precision engineering, cutting-
edge manufacturing techniques, and stringent quality control processes to guarantee that components
meet the exacting specifications required for reliable and efficient telecom systems.
165
Companies that specialise in telecom component manufacturing, such as Huawei, ZTE, Qorvo and
Broadcom, possess the expertise and capabilities to design and produce these complex components. Other
notable players in this field include Texas Instruments, STMicroelectronics and Analog Devices.
These companies offer a wide range of telecom components, including power amplifiers, low-noise
amplifiers, and switches. For instance, Huawei is a leading provider of RF modules and amplifiers, while
Qorvo is renowned for its expertise in filter and switch technology. Broadcom, on the other hand, offers a
broad portfolio of telecom components, including optical and copper connectivity solutions. These
companies, along with others, play a vital role in enabling the production of advanced telecom equipment,
such as base stations, routers and switches, which are essential for modern communication networks.
Notably, many companies that originated in China, Thailand and Taiwan hold expertise in component
manufacturing.
Board manufacturing: The board manufacturing stage is where printed circuit boards (PCBs) are
designed, fabricated, and assembled with precision. This stage demands expertise in PCB design,
fabrication, and assembly, as well as the use of advanced manufacturing techniques such as surface mount
technology (SMT) and through-hole technology (THT) to assemble components on a PCB.
Companies that specialise in telecom-related board manufacturing, such as Foxconn, Pegatron
and Wistron (all Taiwan), possess the capabilities to design and manufacture complex PCBs for telecom
and networking equipment. Foxconn has expertise in SMT and THT assembly. Pegatron specialises in
designing and manufacturing complex PCBs for telecom and networking applications, including 5G and IoT
devices. Wistron offers a range of board manufacturing services, including PCB design, fabrication and
assembly, for telecom and networking equipment.
Other notable players in this field include Jabil, Flex and Sanmina (all USA). These companies offer a range
of board manufacturing services, including PCB design, fabrication, and assembly, for telecom and
networking applications. In Asia, Uniflex, BYD (China) and Tripod Technology (Taiwan) are among the
prominent players in this space with expertise in producing high-quality PCBs. These companies leverage
their advanced manufacturing facilities, cutting-edge technologies and rigorous quality control processes to
meet the requirements of the telecom industry.
Assembly: The final stage of telecom equipment production involves the meticulous integration of
components and boards into a cohesive unit. This intricate process requires a deep understanding of
mechanical engineering, thermal management and electromagnetic compatibility (EMC), as well as the
utilisation of cutting-edge manufacturing techniques such as robotic assembly and automated testing. By
leveraging these advanced methods, manufacturers can ensure that the finished product meets the
stringent specifications required by the telecom industry.
A number of companies have established themselves as experts in telecom-related assembly, including
Foxconn, Pegatron (Taiwan), and Flex (USA). These industry leaders possess the requisite expertise and
capabilities to assemble complex telecom equipment, such as base stations, routers and switches, with
precision and accuracy. Other notable players in this field include Jabil, Sanmina and Kimball Electronics
(USA).
In the Asian region, Wistron, Inventec and Quanta Computer (Taiwan) have developed a reputation for
producing high-quality telecom equipment that meets the exacting standards of leading OEMs. By
combining advanced manufacturing facilities, cutting-edge technologies, and rigorous quality control
processes, they are able to deliver reliable and efficient telecom equipment that meets the evolving needs
of the industry.
These large global OEMs have established units in India for two primary reasons: as a China+1 production
site and to take benefit of the cheap labour in the country. Ericsson, Nokia, Sanmina, and Samsung are
companies with notable Indian presence.
In the European region, Elmatica (Norway) and Note (Sweden) provide specialised assembly services for
telecom equipment, including PCB assembly, cable assembly, and testing. These companies have shown
they can meet the exacting standards of leading OEMs, and score high on reliability, quality, and timely
delivery.
166
Packaging and testing: Here the product is packaged, software and firmware are installed, and rigorous
testing is conducted to ensure that the product meets the required specifications. This stage demands
expertise in software development, testing and validation, as well as the use of advanced testing equipment
and methodologies such as automated testing and simulation.
Companies that specialise in telecom-related packaging and testing possess the expertise and capabilities
to ensure that telecom equipment meets the required standards. The notable players are Keysight
Technologies, Spirent Communications, Ixia (USA), Anritsu (Japan), Rohde & Schwarz (Germany) and
EXFO (Canada). These players offer a range of testing and validation services, including automated testing,
simulation and certification, for telecom equipment.
India’s telecom and network equipment (TANE) manufacturing remains largely confined to low-value
assembly operations, with firms importing high-cost sub-assemblies and components to meet PLI
localisation thresholds through final integration and packaging. This model yields minimal domestic value
addition which is often below 20%, leaving critical design, R&D, and core component fabrication abroad,
as evidenced by persistent import reliance on RF modules, chipsets, and optical transceivers. Stakeholders,
including industry bodies and global OEMs, have consistently emphasised the need for ecosystem-centric
manufacturing—encompassing end-to-end capabilities from silicon design and PCB fabrication to software
integration and certification testing, to shift India from a mere assembly hub to a strategic partner in global
value chains. Only by building such integrated clusters can India ensure that multinational firms establish
deep-rooted operations driven by competitive advantage, not transient policy incentives, thereby securing
sustained investment, technology transfer, and resilience against incentive withdrawal.
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Benchmarking against competing countries
Selection of champion countries
China and Hungary are strategically chosen as champion countries for studying the global telecom
equipment manufacturing industry due to their distinct yet complementary strengths. China, a powerhouse,
commands over 40% of the market through giants like Huawei and ZTE, leveraging unmatched scale, state-
backed R&D, and extensive supply chains exporting to 170+ countries. Its cost efficiencies and 5G
dominance offer critical lessons for India’s self-reliance goals. Conversely, Hungary, Europe’s telecom
manufacturing hub, hosts Nokia’s largest 5G factory in Komárom, producing 2.5 million units annually, and
Huawei’s key R&D center. Its skilled workforce, EU market proximity, and focus on high-tech precision
manufacturing highlight diversified, quality-driven models. Together, they provide a comprehensive
blueprint comprising China’s volume-driven approach and Hungary’s innovation-centric ecosystem for India
to enhance its ESDM sector, reduce import dependency, and boost export competitiveness under
Atmanirbhar Bharat.
Table 22: Champion countries and their share in global exports
Source: UN World Trade Statistics
Telecom equipment Country Export value ($ billion, FY25) % share in global exports
Base stations
China 1.9 53%
Hungary 0.28 8%
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China
China is the world’s largest manufacturer of base transceiver stations (BTS), an essential component in
cellular networks to facilitate wireless communication. This dominance is driven by a combination of
advanced manufacturing capabilities, significant investment in research and development and supportive
government policies. Huawei and ZTE lead the global market, contributing to China’s manufacturing
prowess in the sector. Chinese OEMs have over 42% share of the global BTS market. These OEMs include
Huawei, ZTE Corp, Datang Telecom and FibreHome Networks.
Research and development (R&D): In 2018, R&D spending by multinational corporations in this industry
was $15 billion-$20 billion. It supported innovation and technological advancements. The R&D focus helped
Chinese firms develop proprietary technologies.
Skilling initiatives: Technology experts and foreign scientists have helped to enhance human resource
development and competitiveness. Educational programmes, training workshops and collaborations with
foreign experts have developed the skills and knowledge of domestic employees
Tax incentives: The Chinese government provides tax incentives and subsidies to domestic industries and
researchers to increase production and innovation.
Infrastructure incentives: Telecommunication Regulation of PRC-The Decree of the State Council No.
291 of 2000 states that telecom equipment connected to public networks must meet licensing system set
by the state. The licensing system, known as Network Access License (NAL), is a network access licence
agreement that applies to telecom equipment connected to the public telecom network using wired or
wireless technology. After obtaining the NAL, some devices also need to get the China Compulsory
Certification (CCC), a national security and quality mark.
Regulatory environment
The regulatory environment in China for telecom equipment manufacturing is shaped by various
government bodies and policies. These aim at technological advancement and maintaining security
standards.
• Ministry of Industry and Information Technology (MIIT): The MIIT oversees the allocation and
management of radio frequencies used by BTS. This ensures efficient use of the spectrum and
minimises interference. The ministry sets the guidelines and enforces the requirements for network
security, including the implementation of security protocols in BTS equipment to protect against cyber
threats. These standards cover aspects such as signal strength, data transmission rates and energy
efficiency.
• China Communications Standards Association (CCSA): CCSA is responsible for creating detailed
technical standards for telecommunications equipment. These standards ensure that BTS
manufactured in China meet international quality and performance benchmarks. CCSA works with
global standardisation organisations to harmonise Chinese standards with international practices,
facilitating global interoperability of Chinese-made BTS equipment.
Government policies
The Chinese government has implemented several policies to support the growth and global
competitiveness of its BTS manufacturing sector. These include:
• Made in China 2025: This strategic policy aims to upgrade manufacturing capabilities, with a focus on
high-tech industries, including telecommunications. It promotes innovation, quality improvements and
the development of advanced manufacturing technologies.
• 5G development plan: China launched its 5G technology in October 2019, significantly ahead of India,
establishing a robust digital infrastructure that fuelled domestic demand. The Chinese government
prioritised the deployment of 5G networks, which boosted demand for advanced BTSs substantially.
Significant investments have been made in infrastructure development, research and international
cooperation to establish the country as a leader in 5G technology.
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Investment
The government’s commitment to promoting the construction of the new infrastructure as a national strategy
of China is highly valued.
The Ministry of Industry and Information Technology (MIIT) of China officially issued commercial 5G licences
in 2019, initiating a nationwide 5G rollout. Approximately a year later, the ministry unveiled measures to
accelerate the pace of construction of 5G infrastructure and to improve the capabilities to support innovation
in 5G technologies.
This approach not only created a strong domestic market for 5G services but also set the stage for China
to lead the global 5G landscape.
Infrastructure
In 2022, Chinese telcos and China tower built approximately 887,000 5G base stations, with an investment
exceeding RMB 180 billion ($26 billion).
As of March 2026, China had achieved a remarkable feat in 5G infrastructure by establishing a total of
4.958 million 5G base stations, forming 65% of the world’s total. As a result, over 70% of mobile users in
the country are now utilising 5G services, positioning the country as a global leader in this technology,
according to MIIT.
• Special Economic Zones
China started setting up special economic zones (SEZs) with the government establishing the first
four SEZs in Shenzhen, Xiamen, Zhuhai and Shantou between 1979 and 1980. Shenzhen is a
world leader in shipping and supply chain. Shenzhen was selected to set up the first SEZ in the
country primarily to facilitate international trade and investment.
Some of the policies under Shenzhen SEZ:
i. Corporate income tax rate
Corporate income tax (CIT) rate for telecom equipment manufacturers located in China's SEZs
is significantly lower than those outside. The tax rate for telecom equipment manufacturers in
these zones is 15% while that for players outside is 25%.
ii. Tax reductions
• Export enterprises: If export value is more than 70% of their total annual production, they
are offered a reduced 10% enterprise income tax rate
• Manufacturing enterprises: If established for more than 10 years, they could get two
years of income tax exemption
• High-tech enterprises: Income tax rate of 10% for an additional three years if established
for more than 10 years
• High-tech industries - integrated circuits (IC) manufacturing enterprises:
o A refund will be applied to value-added tax (VAT) exceeding 6% for sales of self-
produced IC products.
o General taxpayers will pay VAT at 17%
Refunded tax shall be used for R&D related to IC products and expanded production. It
shall not be subject to the levy of corporate income tax.
Free trade agreements – China-ASEAN Free Trade Area (CAFTA)
CAFTA is a trade agreement between China and the 10 members of the Association of Southeast Asian
Nations (Asean).
The agreement eliminated tariffs on 90% of goods traded between China and Asean countries. By
eliminating tariff on telecom equipment, CAFTA reduced cost for manufacturers, encouraging production.
170
The FTA has significantly boosted the supply chain for telecom equipment, with many components and raw
materials sourced from Asean countries.
Training, learning and development – Huawei ICT Academy:
The Huawei Information and Communications Technology (ICT) Academy was established in 2013 as part
of Huawei's commitment to developing ICT talent globally. The academy has trained over 150,000 students,
of which a significant portion is Chinese. The academy collaborates with more than 900 universities and
colleges in China and abroad to integrate the company’s courses into their curriculums. This academy
includes a wide range of specific technologies, of which 5G technology is one. There are courses on
development, architecture and applications of 5G networks.
Land policies
Export-oriented and high-tech enterprises need to pay only half the industrial land-use fees for the first five
years.
Newly purchased properties for establishing production facilities and operations for high-tech enterprises
and projects are exempt from property tax for five years starting from the date of completion of the purchase.
171
Hungary
In 2024, the country’s telecommunication equipment export increased 31.4% to $5.5 billion making it one
of the most important exporters after China.
Regulatory developments
• Spectrum auctions:
In May 2023, the Hungarian telecom regulator, National Media & Infocommunications Authority (NMHH)
auctioned the 32 GHz spectrum for HUF 970 million for 15-year entitlements until May 23, 2038, to
facilitate 5G mobile broadband services and promote competition and technological advancement in
the sector.
• Support for mobile device upgrades:
As of end-2021, 95% of mobile internet traffic and 62% of voice traffic in Hungary was 4G. NMHH
decided against phasing out 2G due to its importance for some users and critical services. To ensure a
smooth 3G phase-out, NMHH launched the "NetreFel" programme, including a subsidy for upgrading
to 4G/5G phones. By March 2023, 120,000 phones were replaced with a HUF 4.2 billion budget, leading
to a complaint-free 3G switch-off by December 2023.
Government policies
Infrastructure development
• 5G network expansion: Major telecom operators, particularly Magyar Telekom, are investing heavily in
upgrading mobile networks to 5G, including by expanding fibre-optic connections to enhance service
delivery.
• Fixed broadband growth: In 2021, the number of fixed broadband subscribers in the country increased
2.8%, supported by the wider availability of fibre network. By the end of 2022, Magyar Telekom provided
1Gb/s service to over 3.4 million premises.
• Consolidation of services: The acquisition of Vodafone Hungary by 4iG has led to a more unified service
offering, combining mobile and fixed broadband services to enhance customer experience.
Tax measures
Introduction of an additional tax on telecom revenue is aimed at bolstering state finances. It, however,
impacted operators’ profitability but also ensured continued investment in infrastructure. These reflect
Hungary's commitment to modernising its telecom infrastructure.
• Utility tax abolition
The Hungarian government abolished the utility tax payment obligation for electronic
telecommunications providers starting January 2024. Additionally, the supplementary
telecommunications tax was eliminated from January 2025. This move was aimed at boosting the
financials of telecom operators and encouraging investment in infrastructure
• Corporate income tax
Hungary has one of the lowest CIT rates in Europe at 9%. This applies to telecom companies, making
it an attractive location for investment.
• Local business tax (LBT)
Telecom companies are subject to an LBT imposed by municipalities. However, the rate has a ceiling
of 2% of the calculated LBT base.
• Other corporate tax
Telecommunications service providers in Hungary are subject to another specific tax — for private
individuals, HUF 2 per minute for calls and also per message; for other entities, HUF 3 per minute for
calls and also per message.
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Policy framework and industry support mechanism
Production linked incentive scheme for promoting telecom and networking products
manufacturing in India
The Government of India had introduced the Production Linked Incentive (PLI) Scheme to promote the
manufacturing of telecom and networking products in India, with the objective of boosting domestic
production, attracting investments, and increasing exports of "Made in India" products. The scheme aims
to incentivize companies to set up or expand their manufacturing facilities in India, creating a robust
ecosystem for the production of telecom and networking products.
The scheme, with an overall financial outlay of 12,195 Crore came into effect from 1st April 2021 for a period
of five years. Support under the Scheme is provided to companies who manufacture specified telecom and
networking products in following 4 product categories in India:
1. Core transmission Equipment
2. 4G/5G, Next Generation RAN and Wireless Equipment
3. Access & CPE, IoT Access Devices and Other Wireless Equipment
4. Enterprise Equipment: Switch and Router
Incentive structure: The incentive is provided as a percentage of the incremental sales of manufactured
goods, net of taxes, over the base year (FY 2019-20).
The scheme has helped achieve landmark progress towards the overall “Make in India” objective across
investment, sales and employment statistics:
Figure 63: PLI for Telecom
(INR Crore)
(₹ Crore)
50,214
32,371
8,540
Sales
GlobalDomesticMSME
1295
2728
492
Investment
GlobalDomesticMSME
173
Note: Scheme performance as on July 2025
Source: PLI Dashboard
However, the domestic manufacturers face three major challenges with the current PLI scheme design-
1. A challenge for local manufacturers, particularly component manufacturers, is that they typically operate
at smaller scales compared to finished goods manufacturers, with many small and medium-sized
players in the component manufacturing ecosystem. As a result, they struggle to meet the eligibility
criteria for the Production-Linked Incentive (PLI) scheme, which requires a certain level of Global
Manufacturing Revenue during the base year and minimum new domestic investment. To support these
local manufacturers, it is essential to have more lenient eligibility criteria, tailored to their specific needs
and scale of operations.
2. Domestic manufacturers are of the opinion that the scheme lacks requirements for domestic value
addition or the development of downstream industries, allowing beneficiaries to import up to 100% of
the components, simply assemble them, and still qualify for the Production-Linked Incentive (PLI)
benefits, without contributing to the growth of the local ecosystem.
3. At present, the minimum investment threshold for all categories remains uniform. However, the
investment requirements vary significantly across categories, with core transmission equipment, 4G/5G
radio access network, and wireless equipment likely requiring substantial investments, whereas the
production of customer premises equipment (CPEs) and Internet of Things (IoT) devices may
necessitate relatively lower investments.
Other notable schemes include:
• Scheme for financial assistance to select states for skill development in ESDM sector
Overview and Impact: Approved in November 2013 with Rs 113.77 crore (Rs 100 crore grant-in-aid),
this scheme targets 90,000 candidates in 9–10th standard frameworks across states like Odisha and
Uttar Pradesh. It provides 100% funding for SC/ST/EWS and 75% for general categories via NIELIT,
ESIC, and state agencies, focusing on IoT, 5G, and robotics. By 2025, it certified 263,624 individuals,
boosting employability in manufacturing/services through industry-linked curricula in 10 key states/UTs,
per NIELIT’s ESDM-Skill portal.
Limitations and Gaps: MeitY’s HRD Division evaluations indicate uneven state implementation due
to limited private-sector tie-ups, resulting in placement rates below 60% in non-metro areas. The
scheme’s focus on entry-level skilling overlooks advanced R&D needs, with gaps in monitoring long-
term job retention. Resource constraints in select UTs have capped outreach to only 70% of targeted
90,000, per 2024 NIELIT reports, underscoring the need for broader geographic expansion and digital
tracking tools.
• Chips to startup scheme
Overview and Impact: Initiated in 2021 as an umbrella under National Policy on Electronics (NPE)
2019, C2S allocates Rs 250 crore to train 85,000 professionals in VLSI/embedded design over five
(Number of jobs)
(₹ Crore)
14601
3068
140
Export Sales
GlobalDomesticMSME
4415
19270
5432
Employment
GlobalDomesticMSME
174
years. It fosters academia-industry collaborations via C-DAC, funding IP cores, SoCs, and startups. By
July 2025, MeitY committed Rs 2.34 billion to 22 projects (total cost Rs 6.9 billion), supporting
hackathons and RFPs.
This has accelerated chip design startups, aligning with India’s semiconductor ambitions.
Limitations and Gaps: MeitY’s Detailed Project Report (2023) identifies system-level challenges like
inadequate fab access and high prototyping costs, limiting output to prototypes rather than commercial
chips. With only 22 funded projects against 100+ applications, selection biases toward established
entities exclude nascent MSMEs. Gaps in post-training incubation (e.g., funding beyond Rs 1–2 crore
per project) have slowed commercialisation, with official data showing under 30% of trainees entering
ESDM jobs, per 2025 MeitY evaluations.
• Special Manpower Development Programme (SMDP)
Overview and Impact: Building on SMDP phases (9th–10th Plans targeting 5-15% global VLSI share),
this MeitY initiative (launched ~2014) equips thousands via 60 institutions like IITs and NITs with hands-
on labs, courses, and prototypes in VLSI/embedded systems. It has broadened R&D through
networked PhDs and IP protection, fostering innovation in full-spectrum chip-to-system development,
as detailed on SMDPC2SD.gov.in and IIT implementation reports.
Limitations and Gaps: MeitY’s capacity-building reviews (2024) highlight dependency on imported
tools (e.g., Synopsys/Mentor suites), inflating costs and restricting access for non-elite institutions. Skill
gaps persist in full-spectrum deployment, with only ~70% utilization of sanctioned labs due to
maintenance funding shortfalls (Rs 1.69 crore per site often insufficient). The program’s phased
structure limits scalability, achieving under 50% of 15% market share goals by 2020, per historical MeitY
assessments, due to weak industry-academia linkages.
Overall Gaps Across Schemes
While these initiatives have certified over 300,000 professionals and spurred Rs 80,000 crore in PLI-
linked sales, MeitY’s 2025 HRD synthesis reveals systemic shortcomings: over-reliance on grants
without sustained funding for scaling (e.g., no dedicated venture capital for ESDM startups), fragmented
monitoring across states, and insufficient focus on women/non-engineering inclusion (under 20%
participation).
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Challenges hindering India’s global competitiveness
1. High import dependence faced by TANE manufacturers for components
Figure 64: Bill of materials – BTS/Access components manufacturing
Source: TRAI, Crisil Intelligence
India's telecom equipment manufacturing sector grapples with vulnerabilities stemming from an
underdeveloped domestic ecosystem for critical components like semiconductors, PCBs, and specialty
chemicals.
A deep dive into specific telecom products and components helps us understand the status of localisation
across different products:
Table 23: Underdeveloped ecosystem limiting localization across TANE products
S. No.
Specified Telecom &
Networking Products
Total electronic BOM
as % of sales
Total Other
BOM as % of
sales
Localization
excluding
electronics
Localization
overall
1 4G/LTE RAN Base Station 55% 13% 15% 4%
2 5G RAN Base Station 64% 9% 19% 5%
3 Switches 51% 21% 9% 3%
4 GPON ONT 61% 30% 34% 12%
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S. No.
Specified Telecom &
Networking Products
Total electronic BOM
as % of sales
Total Other
BOM as % of
sales
Localization
excluding
electronics
Localization
overall
5
Wi-Fi Access Point and
Controller
48% 29% 15% 5%
6 Internet Set Top Box 57% 25% 15% 5%
Source: Department of Telecommunication
Initiatives like the Production Linked Incentive (PLI) scheme, have boosted production, reduced overall import
dependency by 60% as of 2024 in imports of antennas, GPON (Gigabit Passive Optical Network) & CPE
(Customer Premises Equipment), and base stations. However, the import dependency for components
persists with import of Baseband unit and Remote Radio Units (key components required to manufacture
Base Stations) increasing by 24% and 36% respectively in 2024 as majority of the PLI goods are
manufactured by importing components and assembling them in India. The absence of localised sourcing
forces manufacturers into heavy reliance on component imports, predominantly from China. This gap arises
from historical neglect of indigenous R&D, insufficient infrastructure for high-precision fabrication, and skill
shortages, leaving domestic firms unable to scale component production economically.
In the current form of PLI, as on July 31, 2025, 42 beneficiary companies had invested INR 4,518 crore,
generating INR 91,125 crore in sales, including INR 17,809 crore in exports, and creating 29,117 jobs. Even
with these commendable outcomes, the scheme’ s impact remains concentrated in assembly-led
manufacturing, with comparatively limited progress on deeper localisation across the component value chain.
Localization is pivotal for three primary reasons:
1. It facilitates the progressive deepening and diversification of the domestic value chain.
2. It strengthens the global competitiveness of Indian manufacturers by enabling them to capture a
larger share of value within the supply ecosystem.
3. It serves as a strategic safeguard, mitigating risks associated with global supply chain disruptions
and geopolitical uncertainties. Nonetheless, realizing meaningful localisation necessitates the
realignment of global supply chains and the creation of targeted incentives to attract component
and sub-component manufacturing to India.
2. Limited market access for domestic TANE manufacturers
Figure 65: Telecom equipment demand is dominated by private telecom service providers
• The majority (98%) of domestic TANE demand is from private telecom service providers
• These players prefer buying from large global OEMs as their products are certified, globally tested and
economical unlike domestic manufacturers
98%
2%
Private TSPs
BSNL and Govt.
procurement
177
There exist numerous examples of private telecom service providers (TSPs) in India favoring global OEMs
over domestic TANE manufacturers. In 2022 during the initial 5G rollout phase, a major private TSP signed
multi-year supply agreements worth approximately $2.5 billion (over Rs 19,750 crore) with Ericsson (Sweden),
Nokia (Finland), and Samsung (South Korea) for radio access network (RAN) equipment, including base
stations and core infrastructure, to deploy 5G services starting in key cities like Delhi and Mumbai. These
contracts explicitly excluded domestic players like Tejas Networks or HFCL, despite their PLI-eligible 5G
offerings, due to TSPs’ emphasis on globally certified, interoperable gear with proven scalability, leaving local
firms sidelined to minor or future-proofing roles. Similarly, another TSP awarded major RAN deals to Nokia
and Ericsson for its nationwide 5G expansion, further illustrating how TSPs prioritize reliability and vendor
ecosystems from established global players, perpetuating the 98% market lockout for unproven domestic
alternatives.
3. Financial viability
Figure 66: Indian companies operating at lower profitability margins
Note: Indian companies considered are HFCL and Tejas Networks
Source: Company reports, Crisil Intelligence
Operating margin and return on capital employed (ROCE) of international players are consistently higher
than Indian players, indicating higher input costs and intense competition in India. The extensive distribution
network and strong brand recognition of international players enable them to command premium pricing.
Additionally, international firms benefit from cost efficiencies through global sourcing, optimised supply
chain, and advanced manufacturing technologies.
4. Lack of skilled workforce
Employee productivity
Employee productivity in India's telecom and network equipment (TANE) manufacturing sector, as
measured by Gross Value Added (GVA) per person engaged, lags significantly behind comparable
segments, according to the Annual Survey of Industries 2022. At Rs 6.27 lakh per person for TANE (NIC
2630, encompassing IT hardware, computers, electronics, and optical products), productivity is about 53%
13
8 8 8
31
35
34
27
FY21 FY22 FY23 FY24
ROCE
Indian companies CISCO
12%
10% 10%
12%
28% 27%
26%
24%
FY21 FY22 FY23 FY24
Operating margin
Indian companiesCISCO
178
of the national manufacturing average (Rs 11.89 lakh) and 44% of the electronic components sub-sector
(NIC 2610, at Rs 14.12 lakh). This underperformance highlights structural inefficiencies, including skill gaps
favoring semi-skilled labor, limited automation, and heavy import reliance for high-value inputs, which dilute
value capture domestically. In contrast, electronic components, earlier in the value chain benefit from higher
specialization and scale, underscoring the need for targeted upskilling and ecosystem investments in TANE
to bridge this gap and align with Atmanirbhar Bharat objectives.
Figure 67: GVA per person engaged
Notes: For telecom equipment National Industrial Classification (NIC2630) has been referred to
Telecom equipment includes IT hardware, computer, electronic and optical products
Source: Crisil Intelligence, Annual Survey of Industries 2022
Skill requirement
The telecom sector Skill Council (TSSC), jointly set up by The Cellular Operators Association of India (COAI),
Indian Cellular Association (ICA) & Telecom Centres of Excellence (TCOE) to ensure adequate availability
of skilled manpower to boost growth and productivity in the telecom sector. The ‘Telecom Talent in 5G Era’
report highlights the following challenges-
The chart below shows the skill level required in the telecom equipment sector. Semi-skilled workers are
those with some specialised training but not with extensive expertise. They can perform tasks such as
operating machinery, perform basic equipment maintenance or work with standard telecom systems. Skilled
workers possess a higher level of technical expertise and are capable of handling tasks such as installing
advanced telecom equipment, troubleshooting or managing systems. Minimally skilled workers handle tasks
like general labour, simple assembly work or play supporting roles in production and maintenance of telecom
equipment.
(Rs. Lakh)
14.12
11.89
6.27
Electronic Components (NIC
2610)
National Manufacturing average TANE (NIC 2630)
179
Figure 68: Skill-level distribution
Source: Crisil Intelligence, National Skill Development Corporation
Their talent requirement can be segregated according to the NSQF (National Skills Qualification Framework)
into levels of ranking based on knowledge, skills, and aptitude. The overall Telecom talent has been
bifurcated into Blue-Collar, and corporate talent, where the corporate talent represents the
executive/leadership workforce and Blue Collar represents support-related functions.
The growth of the sector is dependent on the way telecom talent is utilised as well as the availability across
different roles is triggered and undertaken by employers and agencies alike.
Only 40% of India's graduates in computer science, IT and telecommunication are employable in the
technology sector owing to the mismatch between academics and industry demands, as per the telecom
sector Skill Council’s 2023-24 report, Telecom Talent in 5G era.
The table below details the primary factors contributing to China’s effective cost advantage in telecom
equipment manufacturing:
Table 24: Factors that lead to cost reduction in Telecom and Network Equipment manufacturing
S. No. Factors resulting in cost reduction India China
1 Fiscal incentives based on incremental production (PLI) 4% -7% 1%-2%
2 Corporate income tax exemption/reductions 0.73% - 0.95% 2%
3 State subsidies in India for capital investments 0.6%-1.2% NA
4 R&D subsidy 0.15% 2%
5 Industrial land development support 0.40% 0.60%
6 Infrastructure development cost (Building etc.) Negligible 1%
7 Labour subsidy Negligible 2%
8 Cost of power Negligible 1%
9 Subsidy for machinery and equipment 0% 3%
10 Exemption/reduction of the land rental costs 0% 0.60%
Skill-level Distribution
180
11 Interest subvention on working capital 0% 3%-3.5%
12 Logistics 0% 1%
13 Other factors improving the "Ease of doing Business" - 2%-3%
14
Duty-free imports for creating fixed assets and inputs not available
domestically
0% -
Total 5.88% -9.7%
19.2%-
21.7%
Cost disability differential for India vs China -
12%-
13.32%
Source: TRAI, Crisil Intelligence, US-India Strategic Partnership Forum (USISPF)
Note: Percentages represent each government incentive or subsidy as a share of total manufacturer revenue, based on ICEA
estimates (2018). Each figure is calculated by applying the applicable policy benefit rate, such as a tax exemption, interest subsidy, or
direct grant to the assumed share of that cost item in a manufacturer’s total revenue. For instance, India’s R&D subsidy of 0.15%
reflects the weighted tax deduction under Section 35(2AB) of the Income Tax Act applied to an estimated R&D spend of ~1% of
revenue at prevailing corporate tax rates.
As observable from the table, TRAI assessments and industry analyses, India’s overall production costs
remain 12–13% higher than China’s even after PLI adjustments-due to persistent gaps in scale,
infrastructure reliability, and supply chain depth, though India’s labour edge and policy reforms are narrowing
the divide to potentially under 10% in targeted segments like 5G components.
Despite the numerous challenges that have hindered the growth of India's telecom equipment manufacturing
industry, a few pioneering companies have managed to navigate these obstacles and achieve success,
demonstrating that domestic manufacturing is not only possible but also profitable. By examining these
examples, we can gain valuable insights into the strategies and innovations that have enabled these
companies to thrive and explore how they can be replicated and scaled up to drive industry-wide growth.
181
Success story: Reliance Jio’s partnership with Sanmina
Reliance Jio, one of the leading players in the Indian telecom services space, has been at the forefront of
4G deployment as well as 5G rollout across the country. The telecom hardware requirements for its network
services, including MIMO antennas and RRH, were historically fulfilled by awarding multi-billion-dollar
contracts to large global OEMs such as Ericsson and Nokia.
This comprised one of the largest components of the company’s network capex spend, with overall network
capex spend estimated at nearly $3.15 billion in fiscal 2023.
In a bid to develop an in-house solution for its 5G equipment requirements as well as to lower dependence
on global vendors such as Ericsson and Nokia, Jio developed plans to deploy its own network products.
In 2022, Reliance Industries’ subsidiary, Reliance Strategic Business Ventures, entered into a joint venture
with Sanmina Corporation, a US-based integrated manufacturing solutions provider.
The joint venture aims to build a world-class electronic manufacturing hub in India, in line with the Hon’ble
Prime Minister’s “Make in India” vision. The joint venture will prioritise high technology infrastructure
hardware for growth markets and across industries such as communications networking (5G, cloud
infrastructure, hyperscale datacentres), medical and healthcare systems, industrial and cleantech, and
defence and aerospace. In addition to supporting Sanmina’s current customer base, the joint venture will
create a state-of-the-art ‘manufacturing technology centre of excellence’ that will serve as an incubation
centre to support the product development and hardware startup ecosystem in India, as well as promote
research and innovation of leading-edge technologies.
This partnership, which aims to leverage Sanmina’s advanced manufacturing experience and Reliance
Industries’ expertise and leadership in the Indian business ecosystem, has been paying off:
• In-house shift: Reliance Jio has started deploying its own 5G small cells and radio units, moving
away from foreign suppliers to reduce costs and increase control over its network infrastructure
• Local production: The new equipment is manufactured near Chennai through a joint venture
between Reliance Industries and Sanmina Corp
• Cost advantages: By using domestically produced components, Jio aims to cut 5G deployment
costs by up to 60%, driven by lower import duties, fewer licensing fees and reduced reliance on
global manufacturing
An imported small cell (a type of radio access telecom equipment) typically costs ~$4,000. By using its own
small cells, Jio could cut costs by 50-60%.
How can more such partnerships be encouraged?
The growth of TANE manufacturing on cluster model in Madhya Pradesh
• Madhya Pradesh is actively developing its telecom sector, with a focus on attracting investment and
fostering innovation. A Telecom Manufacturing Zone (TMZ) is being established in Gwalior, and Indore
is emerging as a hub for IT and telecom-related activities.
• The TMZ in Gwalior is designed to attract investments of Rs 12,000 crore and create 5,000 jobs. It will
focus on manufacturing telecom equipment, including SIM cards, chips, and antennas, as well as
research and development in 6G technologies.
• Tech Growth Conclave 2025 in Indore: This event, organized by the Department of Science and
Technology, will focus on translating investment commitments from the Global Investors Summit into
tangible projects. It will include the unveiling of new policy guidelines, and the launch of an AI-based
Centre of Excellence.
182
Success story: Nokia’s India story: leveraging local strengths
for global success
Figure 69: Telecom equipment visual
183
Recommendations: Policy initiatives and reforms
Recommendation I - Scheme for localisation of Telecom & Networking Products and
Ecosystem Development
India may adopt a phased approach to promote domestic manufacturing of components essential for telecom
equipment production. Given the current lack of robust local suppliers for semiconductors and certain electro-
mechanical components, the government can introduce localisation incentives for the procurement of plastic,
mechanical, and select electro-mechanical components that are already produced within the country
To identify scope for localisation, the Department of Telecommunications (DoT) had held stakeholder
discussions with manufacturers operating on a diverse scale- domestic and foreign OEMs (original equipment
manufacturers) and EMS (Electronics Manufacturing Service). Stakeholders expressed concerns that a
localisation requirement based on a list of specific components to be sourced from Indian suppliers may be
challenging to implement, as many of these components are not available in the local market
The optimum way forward would be evaluating manufacturers on a Bill of materials-based criteria, where
companies get certified from designated auditor/certification bodies that attest to the percentage of BoM that
has been procured locally by manufacturers of telecom equipment (final products). The manufacturers can
procure non-semiconductor components to begin with (such as plastics and insulation components), and in
a phased manner, when electro-mechanical and semiconductor component manufacturing picks up in India,
the localisation qualification for availing scheme benefits can be increased to higher localisation percentages.
This will help the current plastics and insulation component manufacturers to gain scale and attract other key
component manufacturers to set up shop as well.
Ministry of Electronics and Information Technology’s Electronic Component Manufacturing Scheme (ECMS)
already provides incentives for several components including electro-mechanicals such as connectors,
switches, heat sinks, antennas and filters, multi-layer Printed Circuit Boards, enclosures, passive
components, and supply-chain inputs used in electronics manufacturing. It also provides turnover-linked,
capex and hybrid incentives across these eligible segments, with a telecom-specific sub-assembly category
currently covering Optical Transceiver - SFP. Accordingly, the proposed localization scheme is intended to
complement ECMS by covering the remaining telecom equipment Bill of Materials from the demand side,
particularly components and materials used in final telecom/networking products such as 4G/5G RAN,
switches, GPON ONT, CPE/STB equipment, RF cables, insulation materials, plastics, mechanical parts and
other non-semiconductor inputs that may not be fully addressed through ECMS as final-equipment-level
procurement support. The proposed mechanism would therefore incentivise telecom OEMs/EMS players to
source a certified share of their BoM domestically and provide price-gap support for eligible components that
are costlier to procure locally, thereby creating assured demand for domestic component manufacturers while
avoiding duplication with ECMS.
Scheme features:
• Phased Increase in Localization: Achieving higher localisation will require companies to make
substantial investments and/or promote domestic component manufacturing. This approach
demands greater and more immediate investments towards developing component ecosystems
compared to current PLI schemes that do not mandate localisation.
• Targeted support to produce essential telecom equipment: Financial incentives should be
strategically directed toward procurement for manufacturing of high-demand products such as
4G/5G RAN, switches, GPON ONT, and CPE/STB equipment. Gradually localizing components
for these products will boost local value addition, strengthen global competitiveness, and foster the
development of a robust domestic manufacturing ecosystem.
184
Let’s take an example of providing benefits for Polytetrafluoroethylene (PTFE)
Polytetrafluoroethylene (PTFE) is a special type of plastic used in telecom equipment. In telecom networks,
PTFE is mainly used in RF cables, Connectors, and High frequency circuit boards to help signal travel
smoothly without interference
In terms of pricing, PTFE is cheaper in China and other Northeast Asian countries compared to India. The
price difference is approximately 30-35% lower in China than in India, making it more economical for
telecom components manufacturers in India to import PTFE from China rather than procure it locally.
However, if Indian equipment manufacturers are provided support of the price difference as incentive, they
will be encouraged to procure locally. After compensating the price gap, the effective price becomes
comparable to that of China’s.
Table 25: Effective PTFE pricing after price-gap support
Category Imported PTFE (China) Domestic PTFE (India)
Domestic PTFE with
Support
Base price ($/kg) 7.3 11 11
Price Difference Support - - 3.7
Final effective price ($/kg) 7.3 11 7.3
The benefit may be extended to companies that source at least 20% of their Bill of materials (BOM)
components from domestic suppliers. Price gap funding may be provided exclusively for those components
that are more expensive to procure locally yet have been sourced domestically by the company.
This benefit should be aimed at being phased out in a period of five years as the domestic component
manufacturers achieve scale
Recommendation II - Promoting joint ventures with established players to build
domestic capability
Rationale: Case study of China:
In the early 1980s, China's communication infrastructure was weak. Furthermore, the industry was not
geared to design or manufacture digital communication products, such as stored program controlled (SPC)
switches, which were at that time considered to be relatively advanced equipment. The government realised
that the only way forward was to import foreign technologies and to adapt, innovate and develop Chinese
products on the basis of these technologies. In order to achieve this, the former Ministry of Posts &
Telecommunications drew up a three-pronged strategy: to import, to establish joint ventures with foreign
counterparts and, in parallel, to conduct independent research and development (Peng 1999).
In the early stages of China's opening up to the West, the government encouraged foreign companies to
establish joint ventures in China. Shanghai Bell Co, Ltd, which was the result of a partnership between
China Posts and Telecommunications Industry Corporation and BTM of Belgium (now part of Alcatel),
became the first telecom equipment joint venture, manufacturing SPC switches. Production at Shanghai
Bell started in 1985 and, by 1998, it had produced a total of 33 million lines of its System-12 SPC switch –
about a quarter of all switches sold in China. By then, its component localisation rate had reached 74% and
software development, 90%. Total sales revenue over 1985-1998 reached $28.2 billion.
185
Opportunity for India:
India is currently positioned in a comparable situation. With a supportive government vision of ‘Atmanirbhar
Bharat’ and favourable demographics, there is an opportunity to develop domestic capability. Over time, as
India’s component ecosystem deepens, domestic firms can increasingly capitalise on anchor investments
by global OEMs, driving technology and know-how transfer, productivity spillovers, and a broader base of
local manufacturing across product categories. This evolution broadly reflects the path seen in China and
several Southeast Asian economies, where foreign OEMs first accelerated localisation, and domestic
players subsequently moved up the value chain from low-value assembly toward higher-value design,
engineering, and ultimately branding.
Figure 70: Roadmap to developing domestic capability via tech transfer and partnerships with global players
Takeaway for India
Figure 71: The cluster model followed by China and Taiwan can be replicated in India
186
This cluster in Tainan city, Taiwan, brings together companies involved in various aspects of telecom
equipment manufacturing, from design and development to packaging and testing. The presence in the
same city of multiple suppliers and buyers, who share knowledge, facilities and infrastructure, reduces
cost and provides linkage benefits.
Recommendation III - Focus on Radio infrastructure equipment to unlock the
export potential
Market Overview
Global trade in telecom infrastructure components presents a lucrative opportunity for India, with world
imports totaling USD 219 billion in 2024 (antennas, Remote Radio Heads (RRH), and Base Units (baseband
units (BU)) and USD 9 billion (Optical Fibre Cables (OFCs) and microwave apparatus). India's current
exports stand at $0.9 billion for the former and $0.5 billion for the latter, capturing less than 1% of the
market.
187
Figure 72: Trade of Antennas, RRH, and BU as of calendar year 2024
Source: ITC Trade Map
Top importers like the US, China, and EU nations dominate the global demand driven by 5G rollout, data
center expansion, and digital infrastructure investments. By targeting these high-volume markets, India can
scale exports to $5-10 billion annually within 3-five years, leveraging its manufacturing ecosystem under
the Production Linked Incentive (PLI) scheme.
188
Figure 73: Trade of OFCs and microwave apparatus
Note: Charts not to scale
Source: ITC Trade Map
Current key target markets
Table 26: Current key target markets
Category Top Importers (Share %)
Import Value (USD
billion)
Opportunity for India
Antennas, RRH &
BU ($219B)
US (20%), China (18%), Hong
Kong (8%), Netherlands (7%),
Germany (5%)
US:43.8, China:
39.4
High-volume 5G base stations; align with US
Federal Communications Commission (FCC)
specifications for duty-free access via
Generalized System of Preferences (GSP)
restoration
UK (3%), Japan (5%),
Singapore (3%), Mexico (3%)
UK: 6.6, Japan: 11
Post-Brexit UK FTA; Japan's semiconductor
ties for joint ventures.
India exports- $ 57 million
World imports- $ 9 billion
189
Category Top Importers (Share %)
Import Value (USD
billion)
Opportunity for India
OFCs & Microwave
($9B)
China (28%), US (25%), Hong
Kong (26%)
China: 2.5, US: 2.3
Fibre-optic backbone for data centers; US
CHIPS Act subsidies for suppliers.
Netherlands (10%), UAE (5%),
Mexico (5%)
Netherlands: 0.9,
UAE: 0.5
EU Green Deal for sustainable cabling; UAE's
smart city projects.
Note: CHIPS: Creating Helpful Incentives to Produce Semiconductors
The roadmap below outlines phased strategies to target $10–15 billion combined exports by 2030 (5-year)
and $40–50 billion by 2035 (10-year), capturing 5–7% global share in these categories. It focuses on policy
leverage, capacity building, innovation, and market access, assuming sustained government support (e.g.,
PLI extension) and private investments.
Figure 74: Telecom and network equipment export promotion roadmap
Manufacturing sectors like telecom equipment have significant spillover effects, including jobs in supply
chains (e.g., components, logistics, R&D), services, and ancillary industries. Based on broader electronics
manufacturing data in India, indirect job multipliers range from three to five times direct jobs. With focused
execution, India can triple exports to USD 3 billion by 2028, creating 200,000 jobs and boosting forex
reserves by $2.5 billion. This estimate assumes continued PLI incentives, supply chain localisation
(increasing value addition from ~30-40% to 50%), and ecosystem growth.
190
Recommendation IV - Establishing a centralised testing agency for all companies /
access to trial / testing beds:
Access to telecom networks for field-level test / trial of products under development remains a challenge
for Indian companies, making it difficult to get quality certifications. Accordingly, to enhance the credibility
and global acceptance of domestically manufactured TANE, the centralised testing agency should establish
partnerships with renowned international certification bodies to align domestic standards with global testing
benchmarks.
Recommendation V - Offer financial support to prestigious institute-manufacturer
partnerships to incentivise skill development of the workforce and promote
practical product development experience
• Incentivise AICTE-affiliated advanced technical institutions that are offering advanced courses in
electronics design, fabless products design and VLSI engineering
• The topic for research can be selected in consultation with industry stakeholders (TANE manufacturers
and component manufacturers). A programme for scaling research into practical products can be
facilitated via institute-industry collaboration
• Financial incentives can be given by the government as well as TANE companies; the products
developed as part of the research can be commercialised by TANE manufacturers
191
Appendix
Table 27: Tariffs relevant to Telecom and Network Equipment Manufacturing
S.
No.
Tariff item Description of goods Rate of duty Import policy
1 8517
Telephone sets, including telephones for cellular
networks or for other wireless networks; other
apparatuses for the transmission or reception of voice,
images or other data, including apparatus for
communication in a wired or wireless network (such as a
local or wide area network), other than transmission or
reception apparatus of heading 8443, 8525, 8527 or
8528
0% Free
2 85176
Other apparatus for transmission or reception of voice,
images or other data, including apparatus for
communication in a wired or wireless network (such as a
local or wide area network)
0% Free
3 851770
Other apparatus for transmission or reception of voice,
images or other data, including apparatus for
communication in a wired or wireless network (such as a
local or wide area network)
4 8518
Microphones and stands; therefore, loudspeakers,
whether or not mounted in their enclosures; headphones
and earphones, whether or not combined with a
microphone, and sets consisting of a microphone and
one or more loudspeakers; audio-frequency electric
amplifiers; electric sound amplifier sets
0% Free
5 8525
Transmission apparatus for radio broadcasting or
television, whether or not incorporating reception
apparatus or sound recording or reproducing apparatus;
television cameras, digital cameras and video camera
recorders
Free
85255030
Transmission apparatus for radio broadcasting or
television, whether or not incorporating reception
apparatus or sound recording or reproducing apparatus;
television cameras, digital cameras and video camera
recorders; Transmission apparatus; Broadcast
equipment sub-system;
7.5%
6 8535
Electrical apparatus for switching or protecting electrical
circuits, or for making connections to or in electrical
circuits (for example, switches, fuses, lightning arresters,
voltage limiters, surge suppressors, plugs and other
connectors, junction boxes), for a voltage exceeding
1,000 volts
10% Free
192
193
Table of contents
Executive summary ............................................................................................................................. 194
Introduction ......................................................................................................................................... 199
Global PV industry – An overview ........................................................................................................ 202
Indian PV manufacturing industry – A detailed profile ........................................................................... 203
Value chain .......................................................................................................................................... 204
Value chain play .................................................................................................................................. 205
Manufacturing Process (TOPCon Solar Cell) ....................................................................................... 207
Strategic Alignment .............................................................................................................................. 212
Financial Viability ................................................................................................................................. 218
Case Studies and Global best practices ............................................................................................... 220
China .................................................................................................................................................. 221
Vietnam ............................................................................................................................................... 225
India .................................................................................................................................................... 228
Basic custom duty ............................................................................................................................... 230
Anti-dumping investigation in India ....................................................................................................... 232
Production Linked Incentive (PLI) Scheme: ............................................................................................. 237
Approved List of Models and Manufacturers (ALMM) ........................................................................... 239
Challenges and recommendations ....................................................................................................... 248
194
Executive summary
Sector overview
The solar photovoltaic (PV) manufacturing sector is becoming strategically important as global renewable-
electricity demand rises and solar remains one of the key technologies supporting decarbonisation. The
report notes that the share of renewable energy in electricity is expected to increase from 30% in 2023 to
46% by 2030, largely driven by solar and wind power.
China continues to dominate global PV manufacturing, with over 85% of global supply capacity and a highly
integrated presence across polysilicon, wafers, cells and modules. Its scale advantage, early policy push,
low-cost finance, tax incentives, R&D support, skilling programmes and 23 free trade agreements have
allowed Chinese manufacturers to build cost leadership and strong export competitiveness.
India’s PV manufacturing sector has grown rapidly, especially in downstream modules and cells. Solar
module manufacturing capacity enlisted in ALMM rose to 100 GW by August 2025, from nearly 2.3 GW in
2014, while solar cell capacity increased to 25 GW by March 2025, from less than 1.2 GW in 2014. However,
the sector remains dependent on imports for upstream inputs such as polysilicon and wafers, with only
limited domestic wafer capacity.
Domestic demand is structurally strong. India had installed 106 GW of solar capacity by March 2025 and
needs to add about 174 GW to meet the 2030 target of 280 GW solar capacity. The domestic PV market,
estimated at Rs 32,400 crore / $3.7 billion, is expected to grow at a 17-20% CAGR between fiscal 2023
and fiscal 2030, supported by utility-scale solar, rooftop solar, open-access projects and green hydrogen-
linked demand.
Industry structure
The PV value chain comprises four broad stages: polysilicon production, ingot and wafer production, cell
fabrication, and module assembly. The report highlights that value-chain integration is critical because
players operating from polysilicon to module are less exposed to supply disruptions and raw-material price
volatility.
195
India’s manufacturing base is currently concentrated in cells and modules, while the upstream ecosystem
remains underdeveloped. India has domestic availability in modules, cells and limited wafers, but polysilicon
import dependence remains close to 100%, wafer import dependence is above 90%, cell import
dependence is above 60%, and module import dependence is above 40% of available supply after exports.
China’s dominance is visible across the global supply chain. In 2024, China accounted for 93-98% of
installed and new polysilicon production, 95% of wafer capacity, 91% of cell capacity and 82% of module
capacity, while India’s share was comparatively stronger only at the module stage.
India’s export profile has improved but remains concentrated. PV exports in fiscal 2025 were eight times
those in fiscal 2018, driven by higher cell-to-module capacity under the PLI scheme. However, the US
accounted for 97% of India’s PV exports in fiscal 2025, exposing Indian manufacturers to geographic
concentration risk.
Financially, domestic manufacturers have benefited from policy-driven support such as ALMM and BCD,
alongside record solar additions in India. Domestic players showed stronger resilience in fiscal 2025, while
international players faced pressure from global oversupply, lower prices and margin compression.
Global case studies and best practices
Case study Key policy / strategy levers Outcomes / evidence Implication for India
China: Long-term
industrial strategy
Identified solar PV
manufacturing as a strategic
industry in 2009; supported the
sector through low-cost debt,
subsidies, tax incentives, R&D
programmes, industrial
incentives and skilling support.
China scaled PV
manufacturing by over
18,000x between 2004 and
2024 and continues to
dominate the global PV value
chain.
India should treat PV
manufacturing as a long-term
industrial policy priority, not
only as a renewable-energy
deployment objective.
China: Trade-led
export
competitiveness
Used 23 FTAs with 30
countries / regional blocs,
including FTAs with Iceland,
Switzerland, RCEP members
and Serbia, to improve market
access and reduce trade
barriers.
China led the global PV export
basket with about 57% share
in 2024, supported by large-
scale production and
preferential market access.
India should align
manufacturing policy with
trade-market access,
especially for major importing
regions.
Jinko Solar: Tax
and R&D
incentives
Benefited from preferential
corporate income-tax rates,
including “High and New
Technology Enterprise”
incentives and other
encouraged-industry tax
benefits.
Jinko Solar’s R&D allocation
rose from RMB 461.6 million
in 2021 to RMB 911.9 million
in 2023; it achieved 11%
global market share in 2024,
with large module, cell and
wafer capacities.
India can link tax and fiscal
incentives more directly to
technology upgrading, R&D
intensity and domestic IP
creation.
Vietnam:
Emerging-market
manufacturing hub
Leveraged FTAs, tax incentives,
import-duty exemptions,
streamlined approval processes,
PPA incentives and skilling
programmes; proximity to China
reduced input-material delivery
timelines from weeks to days.
Vietnam accounted for 10% of
global PV exports in 2024
and became a key
manufacturing base for global
and Chinese PV players.
India can draw lessons on
combining policy certainty,
trade access, skilling and
logistics efficiency to build
export competitiveness.
India: Policy
foundation for
scale-up
Implemented PLI, ALMM, BCD,
domestic content requirements,
safeguard duties and
international cooperation
platforms such as the ISA.
PLI has a total outlay of Rs
24,000 crore / $2.7 billion
and awarded around 48 GW /
48.3 GW of integrated PV
India has created a strong
downstream manufacturing
base; the next phase must
deepen upstream integration,
196
Case study Key policy / strategy levers Outcomes / evidence Implication for India
manufacturing capacity across
two tranches.
R&D, skills and export-
market access.
Key challenges and recommendations
Challenge Why it matters Recommended actions Expected
strategic
outcome
Upstream
import
dependence
India has expanded module
and cell capacity, but upstream
segments remain
underdeveloped. Polysilicon
import dependence is close to
100%, wafer import
dependence is above 90%, cell
import dependence is above
60%, and module import
dependence is above 40% of
available supply after exports.
Provide long-term policy clarity;
consider future BCD on polysilicon
and wafers; extend ALMM to
wafers; incentivise polysilicon-to-
module integrated manufacturing;
encourage alternative sourcing and
strategic partnerships.
Reduces supply-
chain vulnerability,
captures more
domestic value and
improves resilience
against raw-material
price volatility.
Limited access
to machinery
and capital
goods
Capital goods for polysilicon,
wafer and cell manufacturing
are concentrated largely in
China, creating access
constraints for Indian
manufacturers and risking
delays in PLI commissioning
timelines.
Encourage JVs, acquisitions and
global partnerships; diversify
capital-goods sourcing beyond
China; support bilateral technology
engagement; develop
manufacturing clusters with shared
infrastructure.
Improves access to
critical production
technology and
accelerates upstream
capacity creation.
Low R&D
intensity
Indian players’ R&D spend is
negligible compared with
Chinese peers, where average
R&D spend is around 3% of
revenue and can reach 6% for
some players. MNRE R&D
disbursement till December
2024 was only about $19
million, compared with $1.4
billion in grants received by
Chinese players.
Create a dedicated solar R&D fund;
increase MNRE’s R&D allocation;
introduce performance-linked R&D
incentives; strengthen academia-
industry partnerships; fast-track IP
protection; encourage firms to raise
R&D spend towards global
benchmarks.
Supports technology
upgrading, domestic
IP creation and
competitiveness in
TOPCon, HJT,
perovskite and
tandem technologies.
Skilled-labour
availability
India’s employee productivity
per MW is about one-third of
global peers, partly due to
lower scale and limited process
integration. The shift from
Mono PERC to TOPCon, HJT
and tandem cells will increase
manufacturing complexity.
Establish an industry-led solar skills
development council; expand grants
beyond two institutes per year;
create curricula for polysilicon,
wafer, cell and module
manufacturing; mandate
apprenticeships; partner with global
solar leaders for advanced training.
Builds a skilled
workforce capable of
supporting advanced,
integrated PV
manufacturing.
Export
concentration
India’s PV exports have grown
sharply but remain highly
concentrated in the US. The
US accounted for 97% of
India’s PV exports in fiscal
Negotiate trade agreements and
MoUs with key importers; provide
market-development support;
extend export credit lines; organise
trade missions; support overseas
Diversifies export
markets, reduces
single-market risk
and positions India as
197
2025, while India has limited
exposure to major importers
such as Brazil, the
Netherlands, Germany and
Spain.
assembly/manufacturing bases in
target markets.
a larger global PV
manufacturing hub.
6. Ease of doing
business and
manufacturing
clusters
Scaling PV manufacturing
requires access to land,
utilities, clean power, testing
facilities, logistics and faster
approvals. India’s upstream
expansion will be capital-
intensive and needs supportive
state-level ecosystems.
Develop solar manufacturing hubs;
provide single-window clearance;
identify suitably sized land parcels;
enable affordable open-access
renewable energy; co-locate R&D
and testing facilities; classify solar
manufacturing as a priority sector.
Lowers entry barriers,
improves
manufacturing
economics and
supports multi-GW
scale hub
development.
198
Photovoltaic
manufacturing
199
Introduction
The global shift towards sustainable and renewable energy is anticipated to drive a substantial increase in
solar energy demand, presenting a significant opportunity for nations to emerge as leading manufacturers
of photovoltaic (PV) systems. India is poised to leverage this trend, given its aggressive renewable energy
goals and expanding manufacturing capabilities.
The global PV industry is dominated by China, which accounts for over 80% of the global supply capacity.
China's success in expanding its PV manufacturing base can be attributed to its early push in the industry,
strategic trade agreements, and government policies that have enabled economies of scale and cost
reduction. The country's tax incentives, research and development (R&D) initiatives, and skilling programs
have also played a crucial role in driving growth. China's dominance in the global PV industry is evident
from its large-scale manufacturing presence, and its ability to conclude 23 free trade agreements (FTAs)
which involve 30 countries (including regional blocs), which has helped the country to tap export potential.
The global PV market is expected to experience significant growth, driven by increasing demand for
renewable energy and decreasing costs. The industry is experiencing a shift towards technological
advancements, with the adoption of high-efficiency solar cells and modules. The use of TOPCon (Tunnel
Oxide Passivated Contact) cells and HJT (Heterojunction) cells are becoming increasingly popular, and the
industry is also seeing a trend towards larger wafer sizes and new geometries. Other countries such as the
United States, India, and Southeast Asian nations are emerging in the global PV market. The United States
is seeing significant growth in domestic module production, while India is emerging as a potential export
hub for PV modules. The International Solar Alliance is playing a key role in promoting solar energy
solutions and reducing global carbon emissions. The alliance has set a goal of mobilizing $1 trillion in solar
investments by 2030 and promoting low-carbon growth trajectories, particularly in underserved segments
and geographies across Africa.
Other countries such as Vietnam, Thailand, and Malaysia are also emerging as significant suppliers, driven
by the diversification of the supply chain and the imposition of anti-dumping duties on Chinese products.
These countries have increased their production capacity in recent years, with Vietnam, Thailand, and
Malaysia accounting for over 10% of global production of solar cells and modules in 2022. India has made
significant progress in advancing solar cell materials, solar inverters, and PV deployment and reliability
through research and development initiatives. The National Centre for Photovoltaic Research and
Education (NCPRE) has implemented several projects, including the development of perovskite-silicon
tandem solar cells, medium voltage direct grid connect inverters, and the study of degradation of solar
panels in hot and humid climates.
China has invested heavily in research and development, with a focus on improving the efficiency and
quality of solar photovoltaic products. The country has collaborated with renowned institutes and agencies
to improve its research and development capabilities.
Vietnam has become a hub for solar photovoltaic manufacturing, driven by its business environment,
including skilling programs, free trade agreements, tax incentives, and end-user drivers. The country has
signed several free trade agreements, such as the Comprehensive and Progressive Agreement for Trans-
Pacific Partnership (CPTPP) and the European Union-Vietnam Free Trade Agreement (EVFTA), which
have reduced tariffs and simplified trade procedures, making it an attractive destination for solar
photovoltaic manufacturers. Additionally, Vietnam offers tax incentives, such as corporate income tax
exemptions and import duty exemptions, to encourage investment in the solar photovoltaic sector. The
country has also implemented skilling programs, including government-funded training centers and
subsidized courses, to develop a skilled workforce for the industry.
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The global PV industry is characterised by a significant trade imbalance, with China, Vietnam, Thailand,
and Malaysia dominating the export market due to their large manufacturing bases. The USA, India, and
Germany are among the major importers of PV products, driven by their renewable energy targets and
policies. The country has implemented various policies, such as trade agreements, tax exemptions, and
reductions, to support the growth of industry. China has provided various incentives to the solar photovoltaic
manufacturing industry, including tax exemptions and reduced rates, to encourage investment and
innovation. These incentives have enabled companies, such as Jinko Solar, to invest in research and
development and gain a competitive edge in the market.
India has introduced several research and development (R&D) incentives, including collaborations with
international partners, such as the United States of America (US) and Germany, to develop advanced solar
photovoltaic technologies. These initiatives aim to improve the efficiency and competitiveness of domestic
manufacturers. India has introduced several industrial incentives, including the PLI scheme, to promote the
growth of its solar photovoltaic manufacturing industry.
The Indian PV manufacturing industry has witnessed significant growth in recent years, driven by
comprehensive government initiatives and policies. The solar manufacturing capacity has increased to 100
GW by August 2025, up from less than 3 GW in 2014. However, much of this growth has occurred over the
past four fiscal years, following the introduction of Approved List of Models and Manufacturers (ALMM) and
Production Linked Incentive (PLI) scheme. Furthermore, capacity expansion has been largely concentrated
on the downstream value chain, with the upstream chain still heavily reliant on imports.
The industry is a crucial component of India's renewable energy landscape, driven by increasing demand
for clean energy, decreasing technology costs, and supportive government policies. The industry is heavily
dependent on imports for upstream components such as polysilicon and wafers due to a lack of domestic
manufacturing capacity. China is the largest supplier of these components, accounting for over 59% of
India's cell and module imports in 2024. The industry is expected to play a crucial role in achieving India's
target of 500 GW of non-fossil fuel energy capacity by 2030. However, the industry will need to address its
dependence on imports and develop domestic manufacturing capacity for upstream components to achieve
sustainable growth.
The Indian government has implemented various measures to protect the domestic solar photovoltaic
manufacturing industry, including safeguard duties and basic custom duty (BCD). Safeguard duties were
imposed in 2018 to protect the domestic industry from influx of imports, and the BCD was introduced in
2022 to bring parity between domestic and international prices. Safeguard duties were imposed in 2018 to
protect the domestic industry from cheap imports. The duties were applicable for two years, with a rate of
25% from 30th July 2018 – 29th July 2019 in the first year, 20% from 30th July 2019 – 29th January 2020
and 15% From 30th January 2020 – 29th July 2020 in the second year. SGD was further extended wherein
its rate was 14.9% from 30 July 2020 to 29 January 2021 and 14.5 from 30 January 2021 to 29 July 2021.
The purpose behind the same was to protect the domestic solar manufacturing industries.
The BCD was introduced on April 1, 2022, to bring parity between domestic and international prices. The
duty is applicable on imported solar cells and modules, with a rate of 25% for cells and 40% for modules.
Furthermore, from 2
nd
February 2025 the tariff rate for solar cells decreased from 25% to 20%, while the
tariff rate for solar modules decreased from 40% to 20%. The Agriculture Infrastructure and Development
Cess replaced the Social Welfare Surcharge from 2.5% to 7.5% for solar cells and from 10% to 20% for
solar modules.
The government introduced a PLI Scheme initiative to promote the domestic manufacturing of high-
efficiency solar PV modules in India. The scheme has two tranches, with the first tranche having an outlay
of Rs. 4,500 crore ($510 million) and the second tranche having an outlay of Rs. 19,500 crores ($2.2 billion).
In all the scheme awarded 48 GW of integrated PV capacity.
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The ALMM is a comprehensive list of approved models and manufacturers of solar PV modules, cells, and
wafers. The list is maintained by the MNRE and is updated regularly. The government has introduced
guidelines for open access projects and net-metering, which require the use of modules, cells, and wafers
from the ALMM list. The guidelines promote the use of domestically manufactured components and reduce
reliance on imported components for renewable energy projects. The government has accelerated its push
for creating domestic manufacturing capacities across the solar value chain by proposing to mandate the
use of India-made wafers under the ALMM starting June 1, 2028. The MNRE has issued a draft amendment
to the ALMM order, which proposes creating an ALMM List-III for wafers.
The International Solar Alliance (ISA), initiated by India, had a well-defined governance structure, with the
ISA Assembly serving as the supreme decision-making body. The Assembly was responsible for making
key decisions, such as selecting the Director General, overseeing the functioning of the ISA, and approving
the operating budget. The ISA launched several initiatives, including the Solar Technology Application
Resource Centre (STAR C) program, the Indian Technical and Economic Cooperation (ITEC) Scheme, and
the One Sun, One World, One Grid (OSOWOG) initiative. These initiatives aimed to promote solar energy
deployment, enhance energy access, and reduce carbon emissions. The ISA launched a fellowship
program for mid-career professionals, aiming to enhance the long-term development capabilities of its
member countries by creating a pool of skilled and qualified professionals who could effectively manage
solar energy projects, programs, and policies. The ISA worked to increase access to affordable and
sustainable energy solutions through various projects, including mini-grids, solar-powered agriculture
pumps, solar rooftop installations, and solar water heaters, among others. The ISA played a vital role in
promoting clean energy globally, with a primary objective of advancing the use of solar energy as a clean,
renewable, and sustainable source of energy. The ISA's efforts helped reduce carbon emissions, promote
energy access, and contribute to a more sustainable and equitable future for all.
India's solar manufacturing sector faces challenges due to limited access to capital goods, primarily
controlled by Chinese companies, which may delay expansion plans and hinder growth. The PLI scheme's
timelines are at risk due to slow progress in commissioning polysilicon, wafer, and cell manufacturing
facilities, with high import dependence and capital expenditure requirements. This may result in missing
renewable energy targets and perpetuating dependence on imports, ultimately impacting the nation's self-
reliance and economic growth.
India's solar industry faces challenges due to low employee productivity, with average productivity per MW
being lower than global players, mainly due to scale and integrated processes. The industry's rapid
technological evolution and need for skilled labor to drive innovation in R&D exacerbate the issue, making
labor availability crucial for scaling manufacturing technologies. Limited government support for human
resource development and training, as well as increased training hours, can raise costs and delay projects
for solar module and cell manufacturers.
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Global PV industry – An overview
The share of renewable energy in the electricity sector is expected to expand significantly, from 30% in
2023 to 46% in 2030. This growth will be largely driven by solar and wind energy. As a result, the increased
use of renewable electricity will have a positive impact on other sectors, such as industry, building heating,
and transportation, by reducing their carbon footprint. Additionally, renewable electricity will be used to
produce renewable hydrogen, which will be used in various applications, including materials, chemicals,
and power generation, accounting for nearly three-quarters of the demand for renewable hydrogen by 2030.
Solar has already emerged as the largest component of the global renewable power-capacity basket. At
the end of 2025, solar accounted for approximately 46% of installed renewable power capacity globally,
compared with around 25% each for hydropower and wind.
Figure 75: Global installed renewable power capacity by technology, 2025 (%)
Source: IRENA
Solar’s leading share of renewable capacity, together with expectations of continued capacity additions
through 2030, is likely to support sustained demand across the PV manufacturing value chain. China leads
the PV manufacturing capacity with over 85% share in the global base. However, manufacturing remains
highly geographically concentrated. China accounts for more than 85% of global PV manufacturing capacity
and has maintained a dominant position across key stages of the value chain owing to early policy support.
Infact, China has dominated the PV manufacturing market from early 2010s. The government of China
identified PV manufacturing as a strategic industry in 2009 and attempted to accelerate its growth principally
through a combination of low-cost debt and subsidy. By 2010, China accounted for nearly half of global
production of PV
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.
China’s success in expanding PV manufacturing base also enabled it to become leading exporter. Its share
in global PV exports (cell and module) in CY2024 and H1 2025 was 59% and 64%
62
respectively.
Other Asian countries such as Vietnam, Malaysia, Thailand, Cambodia, Indonesia, Laos and India
collectively contributed 28% of exports.
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C-STEP
62
ITC Trademaps
Hydropower ,
25.2%
Marine
Energy, 0.0%
Wind Energy,
25.1%
Solar Energy,
46.4%
Bioenergy, 3.0%
Geothermal
Energy, 0.3%
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Indian PV manufacturing industry – A detailed profile
ALMM List-I drove module manufacturing capacity additions; solar cell capacity is
following suit
The Indian PV manufacturing industry is largely concentrated in the solar cell and module stage of the value
chain. The total solar module manufacturing capacity enlisted in ALMM increased to 100 GW in August
2025 from nearly 2.3 GW
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seen in 2014. India’s solar cell manufacturing capacity increased to 25 GW in
March 2025
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from less than 1.2 GW in 2014. Consequently, India’s share in exports of solar cells and
module was 3% and 4% in 2024 and H12025 respectively from less than 1% in 2014. The PV manufacturing
industry is crucial component of the India’s renewable energy landscape, driven by the increasing demand
for clean energy, decreasing technology costs, and supportive government policies.
Between FY2015 and FY2025, India added 103 GW of solar capacity, implying a conservative minimum
solar-module demand of 103 GW(factoring 1.1 times
65
DC overloading in solar rooftop and 1.4-1.5
66
times
DC overloading in groundmounted solar projects).
Figure 76: Fiscal 2025 sees recording breaking 24 GW of solar additions
Source: MNRE
These installations have helped the solar energy base to reach 106 GW
67
in March 2025. India is expected
to add 174 GW to achieve the target of 280 GW in 2030
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. This is expected to generate significant demand
(after factoring DC overloading).
While India’s PV module and cell capacity has grown significantly in between 2014-2025, the industry is
import dependent for upstream components such as polysilicon and wafer (2 GW) owing to lack of
manufacturing capacity.
The below section highlights major producers of the value chain and India’s dependence on nations.
63
PIB MNRE (Aug 2025)
64
PIB Energy & Environment (Aug 2025)
65
Technical specification
66
Based on player benchmarks
67
Installed capacity MNRE (Mar 23)
68
MNRE
1
3
6
10
7 7
6
13 13
15
24
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25
Solar energy installations (GW)
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Value chain
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Solar PV module
The PV module can be manufactured using multiple process – multi-crystalline, polycrystalline and thin-
film. The most commercially available PV module relies on crystalline silicon as the absorber material.
These modules have several manufacturing steps that typically occur separately from each other.
Figure 77: Crystalline PV module manufacturing value chain
Source: Industry
Polysilicon Production
Polysilicon, a highly pure and fine-grained form of silicon, is produced in various shapes, including rods and
beads, depending on the manufacturing method. The production process typically involves the use of highly
reactive gases, which are synthesized from metallurgical-grade silicon, hydrogen, and chlorine. One such
method, known as the Siemens process, involves the decomposition of a silicon-hydrogen-chlorine gas
mixture on a heated silicon filament, resulting in the formation of a large, U-shaped polysilicon rod. This
process features a closed-loop system, where the hydrogen and chlorine atoms are recycled and reused.
To prevent contamination, the filament is made of pure silicon. An alternative method involves the use of
small silicon beads in a cone-shaped vessel, where a silicon-hydrogen gas mixture is introduced, causing
the beads to float near the surface. As the vessel is heated, the silicon atoms deposit onto the beads,
increasing their weight until they sink to the bottom, where they can be collected and used.
Ingot and Wafer Production
To transform polysilicon into wafers, it is melted in a container to form a liquid mass. The Czochralski
process is one method used to create a large, cylindrical ingot of single-crystal silicon, where a small seed
crystal is introduced to the liquid surface and slowly lifted upwards, allowing the crystal to grow. Alternatively,
the directional solidification process involves gradually cooling the liquid mass from the bottom up, resulting
in a large-grained, multi-crystal silicon ingot. The ingots are then cut into extremely thin wafers using
diamond-edged saws, producing silicon dust known as kerf in the process. However, kerfless production
methods also exist, such as removing cooled silicon layers from a molten bath or depositing silicon atoms
onto a crystalline template using gaseous silicon compounds, allowing for the creation of thin wafers without
generating waste.
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US department of energy (Solar Photovoltaic Manufacturing Basics)
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Cell Fabrication
The silicon wafers are then transformed into photovoltaic cells through a series of fabrication steps. The
initial step involves chemically texturing the surface of the wafer to remove any damage caused by the
sawing process and to enhance its ability to absorb sunlight. The subsequent steps vary depending on the
specific design of the device. Typically, the wafer is exposed to a gas that contains an electrically active
dopant, and layers are deposited on the surface to improve the cell's performance. Additionally, many cell
types require the application of silver metallization through screen printing to create electrical contacts.
Solar Module Assembly
At a module assembly facility, cells are connected together using copper ribbons with solder to link the
silver busbars on the front of one cell to the back of another, a process called tabbing and stringing. The
connected cells are then arranged face-down on a glass sheet coated with a polymer encapsulant, and
another layer of encapsulant is added on top. A durable backsheet or additional glass is placed on top, and
the entire stack is sealed in an oven to make the module waterproof. The module is then framed with
aluminum, sealed with edge sealant, and equipped with a junction box that houses diodes to prevent
reverse electricity flow. Finally, electrical cables from the junction box transmit the modules’ generated
current to adjacent modules or the system's power electronics.
Value chain play
The financials of the players are closely influenced by the presence in the value chain. It is observed that
players active across all four stages of the value chain have registered better financials.
Figure 78: Importance of value chain presence in player's financials
Note: EBITDA and ROE are averages of FY24 and FY25 owing to full year of large-scale cell to module operations for Indian
players. Financials of international players are considered on Calendar Year. CY2024 is compared with FY25.
Formula used for above ratios are below
1. EBITDA = Total income – (Total expenses – interest and finance cost - depreciation and amortization)
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2. EBITDA Margin = EBITDA / total income
3. ROE = Profit after tax / total equity
Players considered for financials are below
1. India = Waaree Energies, Vikram Solar, Premier Energies, TP Solar, Emmvee Power Photovoltaic, Rayzon Solar, Adani
Mundra PV and Solex
2. International = Longi Green, Canadian Solar, Jinko Solar, Trina Solar, JA Solar and GCL Poly
Source: Crisil Intelligence, Company Reports
The above figure indicates EBITDA and ROE for integration of value chains for Indian and international
players. It is observed that the returns increase as the level of integration increases. Players operating in
all the stages of the value chain (polysilicon to module) gain cost competitiveness over those operating in
cell to module and only module segment as they are less exposed to supply chain disruptions and volatility
in the raw material prices.
While globally, a few players operate in polysilicon to module stages of the value chain, India has limited
presence in ingot-wafer to module stage.
Over CY2023 and CY2024, the returns of the international players have been impacted owing to oversupply
in the PV component market resulting in pricing pressures. The fall in prices resulted in a fall in revenue of
29% on year in CY2024 for the sample of international players considered. Consequently, absolute EBITDA
shrunk by 85% on year for the same period. The reduction in EBITDA further impacted the profit after tax,
ultimately impacting the ROE of the international players in CY2024.
On the other hand, the returns of the Indian manufacturers improved owing to implementation of domestic
tariff and non-tariff barriers in form of BCD and ALMM I. This, coupled with increasing solar additions in the
country, boosted sales. Revenue from operations for the sample set considered increased nearly 1.8 times
in fiscal 2025 as India witnessed a record breaking 24 GW of solar additions. A few players also gained
benefits with exposure to the export market as pricing of Indian make remained favourable compared to
the US make. This further amplified the returns for the Indian players.
The globally low raw material prices (solar cells for standalone module manufacturers and wafers for solar
cell manufacturers) also enabled improvement in returns. However, as Indian manufacturers’ presence
remained limited largely to cell to module stage, they are also exposed to volatility in prices.
In fiscal 2026/CY2025, the Chinese government has driven intervention to consolidate the outdated and
low competitive capacity. The result of this initiative may drive consolidation of capacity to 2 million tons
from 3.25
70
million tons resulting in upward movement in prices. Additionally, the US investigation of Foreign
Entities of Concern (FEOC) may also increase demand for non-China, Russia, North Korea and Iran
polysilicon resulting in upward movement in the prices. Therefore, any increase in raw material prices will
impact the prices of Indian made modules until backward integration is achieved.
Thus, while the current oversupply dynamics coupled with timely policy intervention by the government of
India have favoured the Indian manufacturers, the returns in the stable scenario favour integrated value
chain players that the global players exhibited. Therefore, it will be critical to expand in the polysilicon to
cell manufacturing stage in the future.
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Reuters
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Manufacturing Process (TOPCon Solar Cell)
71
The TOPCon solar cell manufacturing process revolves around creating an advanced cell structure that
boasts higher efficiency and reduced degradation compared to traditional solar cells. This innovative
technology features both front and back electrical contacts, which minimizes resistance losses and
enhances current collection. As a result, TOPCon cells offer superior performance and reliability, making
them a preferred choice among photovoltaic (PV) manufacturers seeking to optimize energy output.
The key aspect of TOPCon technology lies in its unique contact configuration, which distinguishes it from
conventional cells with rear contacts only. By incorporating both front and back contacts, TOPCon cells
achieve lower resistance and increased current collection, ultimately leading to higher efficiency and
reliability. This design advancement has contributed to the growing adoption of TOPCon technology in the
solar industry, as manufacturers strive to produce high-performance solar cells that can maximize energy
generation.
Silicon Wafer Preparation
The initial stage of TOPCon solar cell production involves preparing silicon wafers, which commences with
slicing silicon ingots into thin discs using a wire saw. The resulting wafers, typically 180-200 microns thick,
then undergo a series of treatments to refine their surfaces. Chemical etching, employing solutions such as
sodium hydroxide or potassium hydroxide, is used to remove sawing damage and smooth the wafer
surfaces. An alternative acidic etching solution may also be utilized for this purpose.
Following etching, the wafers are subjected to a rigorous cleaning process to eliminate any residual
contaminants. This involves a combination of cleaning methods, including SC1 cleaning with ammonium
hydroxide, hydrogen peroxide, and water, as well as RCA cleaning using hydrochloric acid, hydrogen
peroxide, and water to remove organic impurities. The final step in wafer preparation entails surface
planarization, which can be achieved through either polishing with polyurethane pads and slurry or chemical
mechanical planarization (CMP). Upon completion of these steps, the silicon wafers are rendered extremely
flat and level, making them suitable for the subsequent stages of solar cell fabrication.
Surface Texturing
Surface texturing is a vital step in the TOPCon solar cell manufacturing process, aimed at enhancing cell
efficiency by reducing reflectivity and increasing light trapping. This is achieved by creating micrometer-
scale pyramids on the silicon wafer surface, which helps to minimize the amount of light that reflects off the
surface and instead allows it to enter the cell. The pyramid structures accomplish this through two primary
mechanisms: increasing the likelihood of light entering the wafer at an angle, rather than reflecting off, and
expanding the surface area to provide more opportunities for light absorption.
The texturing process involves anisotropic etching of the silicon wafer surface using solutions such as
potassium hydroxide (KOH) or sodium hydroxide (NaOH). By carefully controlling factors like solution
temperature, concentration, and etching time, the optimal surface structure can be achieved. The resulting
pyramids, typically 5-10 μm in height and 10 μm in base width, strike a balance between effective
antireflective properties and minimizing recombination of electron-hole pairs within the cell. Ultimately,
surface texturing plays a crucial role in boosting solar conversion efficiencies by enabling more light to enter
the cell.
The anisotropic etching process selectively etches the silicon wafer, creating pyramids with precise
dimensions. This controlled etching process is critical in achieving the desired surface texture, which is
essential for maximizing light absorption and minimizing reflectivity. By optimizing the texturing process,
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manufacturers can significantly improve the efficiency of TOPCon solar cells, making them more effective
at converting sunlight into electrical energy.
Doping
Doping is a crucial step in the manufacture of TOPCon solar cells, involving the intentional introduction of
impurities into the silicon wafer to create regions with different electrical properties. This process utilizes
dopants such as phosphorus and boron to create n-type and p-type semiconductor regions, respectively.
Phosphorus introduces excess electrons, resulting in a negatively charged n-type region, while boron
introduces electron holes, creating a positively charged p-type region.
The intersection of these n-type and p-type regions forms a p-n junction, which is essential for separating
photogenerated electrons and holes, thereby enabling the flow of current when the cell is exposed to light.
The precise control of the doping process allows manufacturers to optimize the electrical properties of the
cell, including open-circuit voltage and short-circuit current, which are directly influenced by doping profiles
and concentrations.
Advanced doping techniques, such as selective emitter doping, further enhance efficiency by heavily doping
the front emitter region while lightly doping the rear emitter. This selective approach minimizes
recombination losses, particularly near the front contacts, leading to improved overall performance. The
doping process is fundamental to creating an efficient solar cell capable of reliably converting sunlight into
electricity, and careful optimization of doping parameters is essential for maximizing the performance of
TOPCon cells.
By carefully controlling the doping process, manufacturers can create a highly efficient p-n junction that
effectively separates charge carriers and enables the generation of electrical current. This, in turn, allows
to produce high-performance TOPCon solar cells with optimized electrical properties, ultimately leading to
increased energy conversion efficiency and reliability.
While the doping step is described here prior to tunnel oxide formation, the precise sequence may vary
across TOPCon manufacturing routes. Some manufacturers may perform certain doping or dopant
activation processes after the formation of the tunnel oxide and/or polycrystalline silicon layers, depending
on the specific cell architecture and production technology employed.
Edge Isolation
Edge isolation is a crucial step in the manufacturing of TOPCon solar cells, aimed at preventing electrical
shunting between the front and back surfaces at the cell's edges. This shunting can significantly reduce the
overall efficiency of the solar cell, making edge isolation essential to minimize electrical losses and ensure
optimal performance.
The primary objective of edge isolation is to eliminate any conductive paths around the cell's perimeter,
which is achieved by creating narrow trenches that disconnect unwanted lateral conduction paths. Several
techniques are employed for edge isolation in TOPCon cells, including laser isolation, plasma etching, and
mechanical scribing.
Laser isolation involves using a laser to ablate narrow trenches around the cell edges, effectively cutting
through conductive layers to isolate the front and back surfaces. This method is fast and precise, making it
a popular choice. Plasma etching, on the other hand, utilizes an etching plasma to selectively remove
material along the cell edges, creating isolation trenches without causing collateral damage. Mechanical
scribing involves using a diamond or carbide tip to mechanically scribe isolation lines along the edges,
cutting through the layers to isolate the surfaces.
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The dimensions of the isolation trenches, including width and depth, are carefully optimized to balance
processing time and ensure the complete removal of shunting paths. Following the creation of the trenches,
a dielectric material is typically applied to fill the trenches and guarantee robust long-term isolation. Proper
edge isolation is vital for TOPCon cells to operate at maximum efficiency, and this step is usually performed
after metallization to electrically isolate the entire cell.
By implementing effective edge isolation, manufacturers can significantly reduce electrical losses and
improve the overall performance of TOPCon solar cells. The choice of edge isolation technique depends
on various factors, including the specific cell design, materials, and manufacturing requirements.
Regardless of the method used, the goal of edge isolation remains the same: to prevent electrical shunting
and ensure that the solar cell operates at its maximum potential.
Tunnel Oxide Layer Formation
The tunnel oxide layer is a vital component in the production of TOPCon solar cells, and its formation is a
critical step in the manufacturing process. This extremely thin layer of silicon dioxide (SiO2) is grown on the
surface of the silicon wafer, and its quality has a significant impact on the overall efficiency of the solar cell.
The most common method for growing the tunnel oxide layer is thermal oxidation, which involves exposing
the silicon wafers to oxygen at high temperatures, typically between 800-1200°C, to produce a uniform and
defect-free layer of SiO2.
To ensure the formation of a high-quality tunnel oxide layer, it is essential to carefully control the oxidation
conditions, including temperature, pressure, flow rates, and time. Any impurities or defects in the layer can
negatively impact the tunneling of charge carriers and ultimately affect the performance of the solar cell.
The thickness of the tunnel oxide layer is also critical, typically ranging from 10-30 nm, as it determines the
electrical properties of the interface between the silicon and the oxide layer.
The growth of the tunnel oxide layer requires meticulous attention to detail, as any imperfections or defects
can compromise the quality of the layer. Advanced analytical techniques are employed to characterize the
chemical composition and structural quality of the tunnel oxide, ensuring that it meets the required
standards. The formation of a high-quality tunnel oxide layer is essential for manufacturing highly efficient
TOPCon solar cells, and its quality has a direct impact on the overall performance and efficiency of the cell.
By carefully controlling the oxidation process and ensuring the formation of a defect-free tunnel oxide layer,
manufacturers can produce TOPCon solar cells with optimized electrical properties and improved efficiency.
The tunnel oxide layer plays a critical role in enabling the efficient tunneling of charge carriers, and its
quality is a key factor in determining the overall performance of the solar cell.
Deposition of Polycrystalline Silicon Layer
The deposition of the polycrystalline silicon layer is a crucial step in the TOPCon solar cell manufacturing
process, as it serves as the emitter layer responsible for collecting electrons generated by light absorption
in the cell. This layer is deposited using a chemical vapor deposition (CVD) process, where silane gas
(SiH4) is used as the silicon source and is mixed with hydrogen and nitrogen. The silane gas mixture is
then introduced into a CVD chamber, along with a dopant gas such as phosphine (PH3) or diborane (B2H6),
which provides the necessary phosphorus or boron atoms to create a highly doped polycrystalline silicon
layer.
The CVD chamber is equipped with heating coils that provide the energy required for the silane gas to
decompose into silicon atoms, which then deposit onto the silicon wafer surface. The dopant gas ensures
that the deposited polycrystalline silicon layer is highly doped, either n-type or p-type, depending on the
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specific requirements of the solar cell. To achieve a uniform and highly doped polycrystalline silicon layer
of the desired thickness, precise control over the silane gas flow, dopant gas flow, chamber pressure, and
temperature is essential.
The deposited polycrystalline silicon layer acts as the emitter in the finished solar cell device, playing a
critical role in extracting charge carriers efficiently. The quality and properties of this layer have a significant
impact on the overall performance and efficiency of the solar cell. By carefully controlling the CVD process
and depositing a high-quality polycrystalline silicon layer, manufacturers can produce TOPCon solar cells
with optimized electrical properties and improved efficiency.
The polycrystalline silicon layer is a critical component of the TOPCon solar cell, and its deposition requires
careful attention to detail to ensure that it meets the required standards. The use of advanced CVD
techniques and precise control over the deposition process enables the production of high-quality
polycrystalline silicon layers, which are essential for manufacturing efficient and reliable TOPCon solar cells.
Passivation and Anti-Reflective Coating
The passivation and anti-reflective coating step are a crucial stage in the TOPCon solar cell manufacturing
process, aimed at enhancing cell efficiency. Following the deposition of the polycrystalline silicon layer, the
cell surface undergoes passivation to minimize recombination of electron-hole pairs. This is achieved by
depositing a thin layer of silicon nitride using plasma-enhanced chemical vapor deposition (PECVD).
The silicon nitride layer serves a dual purpose: passivation and anti-reflection. As a passivating layer, it
reduces surface recombination velocity, resulting in higher carrier lifetimes, and provides chemical
passivation by shielding the silicon surface from impurities. Additionally, the silicon nitride layer acts as an
effective anti-reflective coating due to its lower refractive index compared to silicon, increasing the amount
of light absorbed in the cell and further boosting efficiency.
The thickness of the silicon nitride layer is carefully optimized to provide minimal reflectivity across a broad
range of wavelengths. This step is essential for reducing recombination losses and improving light trapping
in TOPCon solar cells. By incorporating a high-quality silicon nitride layer, manufacturers can significantly
enhance the performance and efficiency of their solar cells.
The passivation and anti-reflective coating process is critical for achieving high-efficiency TOPCon solar
cells. The silicon nitride layer plays a vital role in minimizing energy losses and maximizing energy
conversion. By carefully controlling the deposition process and optimizing the layer thickness,
manufacturers can produce solar cells with improved efficiency, reliability, and overall performance. The
use of silicon nitride as a passivating and anti-reflective layer has become a standard practice in the
industry, enabling the production of high-quality TOPCon solar cells that meet the demands of modern
renewable energy applications.
Metallization
Metallization is a crucial step in the TOPCon solar cell manufacturing process, involving the addition of
metal contacts to the front and back of the silicon solar cell to facilitate current collection. The metallization
process typically employs screen printing to apply a metallic paste in a grid pattern to the front of the cell
and a full-area metal contact to the back. This technique offers precise control over gridline width and
thickness, and is fast, scalable, and cost-effective.
The front contact gridlines are printed using a silver-based metallic paste, while the back contact utilizes
aluminum or silver paste. The pastes contain metal particles, glass frit, and organic binders, which are
carefully formulated to optimize the electrical and mechanical properties of the contacts. The gridlines on
the front of the cell are designed to balance current collection and minimize shading, while the back contact
ensures uniform current collection.
211
Following the printing of the contacts, the cells undergo a high-temperature firing step, which serves to fuse
the contacts into the silicon wafer and remove the organic binders in the paste. This firing process forms a
strong electrical and mechanical bond between the silicon and metal contacts, with the glass frit etching
the silicon and facilitating metal diffusion into the wafer. The resulting metallic contacts exhibit excellent
current collection and low resistance losses, making them ideal for high-efficiency TOPCon solar cells.
The screen-printing metallization process is a reliable, simple, and efficient method for mass-producing
solar cells with consistent quality. The front gridlines and back contact play a critical role in extracting current
and maximizing the efficiency of the TOPCon cell, and the metallization process is carefully optimized to
ensure that these contacts meet the required standards. By using advanced screen-printing techniques and
carefully controlling the metallization process, manufacturers can produce high-quality TOPCon solar cells
with optimized electrical properties and improved efficiency.
Testing and Sorting
The final stage of the TOPCon solar cell manufacturing process involves testing and sorting the completed
cells to ensure that only the highest efficiency cells are shipped to customers. This critical quality control
step assesses several key parameters, including efficiency, open-circuit voltage (Voc), short-circuit current
(Isc), fill factor, series resistance, and shunt resistance. These tests determine the overall performance and
quality of each cell, allowing manufacturers to sort and classify them into different bins based on their
efficiency and characteristics.
The testing process involves measuring the conversion efficiency of each cell under standard test
conditions, which reveals the percentage of sunlight energy that is converted into usable electrical energy.
Cells with higher efficiency are typically sold at a premium price, while lower-grade cells are sold at reduced
prices to budget-conscious buyers. The open-circuit voltage (Voc) and short-circuit current (Isc) are also
measured, as these parameters depend on the quality of materials and interfaces used in the cell. A higher
Voc indicates that the cell can produce more power, while a higher Isc suggests that the cell can produce
more current.
The fill factor, which is a measure of cell quality, is also evaluated, as it depends on both Voc and Isc. A
higher fill factor value indicates higher cell efficiency. Additionally, the series resistance and shunt resistance
are measured, as these parameters can impact the cell's overall performance. Lower series resistance and
higher shunt resistance are generally desirable, as they can improve the cell's efficiency and reduce energy
losses.
After testing, the solar cells are sorted and classified into different bins based on their performance. The
highest-grade cells, which exhibit the highest efficiency and best characteristics, are packaged and sold at
a premium to customers who prioritize maximum efficiency. Lower-grade cells, which may have slightly
lower efficiency or other limitations, are sold at reduced prices to customers who are more budget-
conscious. By properly testing and sorting the solar cells, manufacturers can ensure that each customer
receives cells that meet their specific needs and priorities, whether it be maximum efficiency, cost-
effectiveness, or a balance between the two.
212
Strategic Alignment
Raw Material Availability
Table 28: Malaysia and Vietnam emerging countries in PV value chain
Source: Crisil Intelligence
PV grade polysilicon, wafer, solar cell and glass are the key raw materials for the solar photovoltaic
manufacturing industry. The table above shows the top 3 source countries for each of the raw materials for
the global solar photovoltaic manufacturing industry.
The Indian solar photovoltaic manufacturing sector relies on imports for key raw materials such as solar
wafers, cells and modules. Imports of polysilicon are limited owing to lack of operational wafer
manufacturing capacity (2 GW as of March 2025) in the country. Furthermore, India had sufficient
production capacity of solar glass (~15 GW
72
in June 2025) resulting in limited imports.
Table 29: India's presence in upstream value chain limited
Note: The above data is for fiscal 2025. * Share of imports in total available supply post exports. ^ Wafer’s Exim is excluded due to
lack of data in the public domain.
Source: Crisil Intelligence
India relies on import on solar cells and modules in the value chain while imports of wafer and polysilicon
remain limited over to lack of wafer and low capacity for cell manufacturing capacity respectively. Nearly
59% of the photovoltaic (cell and module) exports in 2024
73
was attributed to China alone. This is owed to
the large-scale manufacturing presence of China with over 80% share in global supply capacity by
December 2024 set up in China. Early decadal push to the industry in form of tax and power charge
exemptions, R&D and skilling incentives and free trade (refer to section on China) agreements has enabled
economies of scale resulting in high-quality-low-priced offerings.
72
Borosil Renewables
73
ITC Trademap
Raw Materials
PV grade
polysilicon
Wafer Solar cells Module Solar glass
Raw material
intensity
High High High High Medium
Producer 1 China China China China China
Producer 2 Malaysia Vietnam Vietnam Vietnam India
Producer 3 Germany Malaysia Malaysia Malaysia -
Raw Materials PV grade polysilicon Wafer^ Solar cell Module
Supplier Country 1 China China China China
Supplier Country 2 Taiwan Vietnam Malaysia Vietnam
Supplier Country 3 US Other APAC nations Thailand Malaysia
Domestic availability No Yes Yes Yes
Import share ~100% >90% >60% >40%*
Geopolitical relationship Positive Neutral
213
However, India has also imported from Vietnam, Thailand and Malaysia owing to diversification of supply
chain which together account for 14%
74
of the photovoltaic imports in fiscal 2025. The production in Vietnam
and Thailand has increased in recent years as major Chinese solar cell manufacturers have built production
bases in these countries to circumvent the USA antidumping duties (AD) and countervailing duties (CVD)
imposed on Chinese products. Further, increase in the domestic demand for solar installation to attain
renewable energy goals in electricity has also created demand for Chinese photovoltaic manufacturers in
these economies. Thus, the share of Vietnam, Thailand and Malaysia in global production of solar cells and
modules was over 10% in 2022 post imposition of duties on China in 2022. The production capacity in 2024
stood over 40 GW
75
for Vietnam, Thailand and Malaysia.
For eg1: Trina Solar
76
, a Chinese photovoltaic manufacturer’s unit with an investment of $203 million
became operational in August 2023 in the northern city of Thai Nguyen, Vietnam. This unit produces
industry leading 210 m-m monocrystalline silicon wafers. The factory, with 700 workers, has seen its
workforce more than double to 1,500 workers by August 2024 and commenced production of solar cells
and modules. It is steadily ramping up to its maximum annual production capacity of 6.5 GW of wafers, 4
GW of solar cells and 5 GW of modules.
Consequently, these economies also play a crucial role in global exports.
SOLAR R&D
Solar Photovoltaics
77
The Ministry of New and Renewable Energy (MNRE) has funded several Solar Photovoltaic (SPV) R&D
projects, and the highlights of the progress achieved under these projects are listed below. The National
Centre for Photovoltaic Research and Education (NCPRE) implemented Phase III of the Ministry's flagship
project in solar photovoltaics. This flagship project had several workstreams, and the main highlights of the
progress made are briefly described below.
Advancements in Solar Cell Materials: The National Centre for Photovoltaic Research and Education
(NCPRE) had been working on addressing the challenges associated with scaling up perovskite-silicon
tandem solar cells. The team had investigated new laser-cutting processes to prevent the loss of cell
efficiency and stability due to edge shunting. They demonstrated a 4T-tandem solar cell with an efficiency
of 29.2% at 17.5 mm
2
and 26.9% at 108 mm
2
, with a bottom silicon solar cell efficiency of 25%. Furthermore,
third-party laboratory testing had shown that the perovskite absorber had remained unaffected for up to 750
hours under damp-heat testing conditions. The team had also developed near-infrared (NIR) transparent
solar cells with a power conversion efficiency of approximately 18.8%.
Advancements in Solar Inverters for Grid Integration: The grid integration group at NCPRE had focused on
developing a medium voltage (MV) direct grid connect inverter using high voltage Silicon Carbide (SiC)
MOSFETS. The team had worked on developing the entire inverter indigenously at the lab, with a focus on
improving efficiency, power density, and reliability.
PV Deployment and Reliability: The National Centre for Photovoltaic Research and Education (NCPRE)
conducted field surveys to study the degradation of solar panels in hot and humid climates. The surveys
had identified the root cause of degradation as inner layer cracks in the backsheet, which led to accelerated
potential-induced degradation (PID) and corrosion. The team had designed a weather station to collect data
on the performance of solar panels and had discovered a vulnerability in commercial PV modules under
74
Ministry of Commerce
75
Taiyangnews
76
TrinaSolar
77
Annual Report MNRE 2025
214
high temperature reverse bias operation of bypass diodes. They had also developed a setup to assess this
vulnerability and had studied the effect of load applied during cleaning on the durability of anti-soiling
coatings.
Overall, the NCPRE has made significant progress in advancing solar cell materials, solar inverters, and
PV deployment and reliability, which will contribute to the growth of the solar energy sector in India.
World Trade
Figure 79: Major PV exporting nations
215
Figure 80: Major PV importing nations
Note: The above data includes Exim for Polysilicon – 280461, Solar cells and modules (2017) – 854140, Solar cells (2024 and H1
2025) – 854142 and solar modules (2024 and H1 2025) – 854143. Wafer’s Exim is excluded due to lack of data in the public
domain.
Source: Trade Map
China, Vietnam, Thailand and Malaysia dominate the PV export market due to their large manufacturing
base. China led the global export basket with a 57%
78
share in 2024 driven by players GCL Polytech,
TrinaSolar, Jinko Solar, JA solar and Longi Solar. These players cumulatively had a module and wafer
manufacturing capacity of over 300 GW
79
and over 150 GW of cell manufacturing capacity as of December
2024. The country’s tax and skilling incentives enabled savings for the players, which were then invested
in R&D over the last three decades leading to cost reduction and increased efficiency of technology.
Furthermore, the ability to conclude 23 FTAs
80
with 30 countries has also helped the country to tap export
potential. Vietnam accounted for 10%
81
of the exports in 2024. Apart from the presence of local players
such as SolarBK, Vsun, VinaSolar, the Vietnamese photovoltaic manufacturing is largely being driven by
entry of the Chinese photovoltaic manufacturers resulting in Vietnam gaining 6% share in last 7 years.
Players such as TrinaSolar, JA solar and Jinko Solar have increased their presence over the years. Lately,
TrinaSolar was awarded an investment certification for a project in the northern province of Thai Nguyen
78
ITC Trademap
79
Company filings
80
China Briefing
81
ITC Trademap
216
worth $454 million
82
to produce solar modules and batteries. This has raised the total amounted invested
in Vietnam by Chinese firms to $932 million. Similarly, Thailand and Malaysia have seen a surge in their
installed base driven by domestic and international players such as Solartron, Risen Energy, Yingli Green,
TS Solartech, JA solar, JinkoSolar and First Solar.
On the import side, the USA led with 30%, driven by Energy efficiency and Renewable Energy (EERE)
mission. The country aims to install an average 30 GW
83
of solar capacity each year till 2025 and 60
GW
per year from 2025-2030 to generate 80% energy through renewable sources by 2030. The country
imported 48.5 GW
84
of modules in 9 months 2024 with over 75%
85
coming from Vietnam, Malaysia and
Thailand. Similarly, India’s import share of 8% in global imports is driven by Panchamrit goals of 50%
86
energy requirement from renewable fuels by 2030. India’s import in 11 months of fiscal 2025 were driven
by modules and cell to the extent of Rs 322 billion/$ 3.8 billion
87
, from Rs 515 billion / $6.2 billion in fiscal
2024. Imports fell in fiscal 2025 owing to the reimposition of ALMM. On the other hand, Germany’s import
share accounted for 3% in 2024 driven a 215 GW
88
of solar energy target by 2030. The country needs to
add 22 GW of solar per annum by 2030. Annual production capacity of 3.5 GW
89
coupled with a sharp fall
in prices of PV led to imports in 2024.
Figure 81: Major Indian PV export nations
Note: The above data includes ExIm for Polysilicon – 28046100, Solar cells and modules (FY18) – 85414011, Solar cells (FY24) –
85414200 and solar modules (FY24) – 85414300. Wafer’s ExIm is excluded due to lack of data in the public domain.
Source: DGFT, Crisil Intelligence
India’s PV exports in fiscal 2025 were 8 times of those in fiscal 2018. The increase was driven by increased
capacity in the cell to module part of the value chain under the production linked incentive scheme. The
geographic concentration over the years has changed with the US accounting for 97% of exports in fiscal
82
VCCI
83
NREL
84
NREL
85
US office of energy efficiency and renewable energy
86
Ministry of Environment, Forest, and Climate Change
87
Ministry of Commerce and Industry
88
Bundeswirtschaftministerium
89
Fraunhofer
28%
21%
10%
8%
7%
6%
20%
FY18
USA Turkey DenmarkBelgium
GermanyNiger Others
$0.14 billion
99%
1%
FY25
U S AOthers
$1.2 billion
217
2025. The high concentration was driven by the USA’s ban on import of production from China’s Xinjiang
province owing to inhumane treatment of the province’s Uyghurs and other Muslim majority communities.
The ban enforced in June 2022, restricted entry of all goods and services that used materials or workers
from the Xinjiang Uyghur Autonomous Region. With over 39% of the global polysilicon manufacturing base
installed in Xinjiang province by 2022, the Chinese module supply to the USA hit a roadblock resulting in
an increased demand for modules from countries other than China, especially India. The premium offered
by the US market drove Indian manufacturers to focus on exports to the country resulting in geographic
concentration.
As of fiscal 2025, India had limited exposure to other top importing countries such as Germany, Brazil,
Netherlands owing to high traded price difference of $0.1-0.12/watt between Indian modules vis a vis
Chinese module. Further, the lack of a free trade agreement has also been a challenge to increase exports.
Increasing PV manufacturing capacity, free trade agreements and exploring new export markets will be key
to harnessing India’s export potential.
Technology Readiness
India’s readiness in the PV manufacturing value chain differs in downstream and upstream components.
While module and cell ecosystems have seen development, the polysilicon and wafer ecosystems have
been slow to pick up.
Figure 82: Technology readiness
Source: Crisil Intelligence
218
Financial Viability
Figure 83:Financial viability of domestic and international players
Note: Financials of international players FY25 denotes CY2024. Companies considered for domestic sample are Adani Solar
Mundra, Waaree Energies, Tata Power Solar Systems, Vikram solar, Renewsys and Premier Energies. They accounted for over
28% and 59% of the module and cell installed base respectively as of September 2025. International players considered include
GCL Polytech, Jinko Solar, Canadian Solar and Longi Solar that account for over 23% of the global capacity as of December 2023)
The above ratios are calculated as follows:
1. EBITDA = Total income – (Total expenses – interest and finance cost – depreciation and amortization)
2. EBITDA margin = EBITDA / Total income
3. PAT margin = Profit after tax as reported by the companies / Total income
4. ROCE = (EBITDA – depreciation and amortization) / (Total assets – total current liabilities)
5. Capex to sales = Investment in fixed assets and/or capital expenditure / total income
Source: Crisil Intelligence, Company Reports
The financial comparison between domestic and international players highlights a clear divergence in
performance over FY22–FY25. International players have experienced a material decline in profitability, as
reflected in sharply falling EBITDA and net margins in FY25. This downturn is largely attributable to
oversupply in global solar markets, which triggered intense pricing pressure, eroded realisations, and
compressed operating spreads. The impact of this margin contraction is further evident in the significant
drop in Return on Capital Employed.
In contrast, domestic players demonstrated relatively steady and resilient financial performance across all
profitability metrics. Policy-driven non-tariff measures particularly India’s Approved List of Module
Manufacturers (ALMM) created a protective market environment that limited foreign competition and
prevented aggressive price competition. Additionally, rising solar additions boost the revenue. As a result,
domestic firms were able to garner improved earnings, and returns on capital.
9%
11%
15%
22%
12% 11%
13%
3%
FY22 FY23 FY24 FY25
EBITDA Margins -International vs Domestic
DomesticInternational
1% 1%
8%
12%
6%
7% 7%
-5%
FY22 FY23 FY24 FY25
Net Margins -International vs Domestic
DomesticInternational
12%
15%
18%
28%
11%
16%
13%
-5%
FY22 FY23 FY24 FY25
ROCE -International vs Domestic
DomesticInternational
12%
17%
22%
16% 17%
12%
10%
16%
14% 13%
FY22 FY23 FY24 FY25Avg. of 4
years
Capex to sales
DomesticInternational
219
The CAPEX-to-sales ratio further reinforces this structural difference. Domestic manufacturers show
consistently higher capital expenditure intensity, reflecting expansion-led investments to cater to a rapidly
growing Indian solar market. Meanwhile, international players operating in more mature global markets
allocated relatively lower incremental capital, signaling slower industry growth and reduced expansion
appetite.
Sector Outlook
The domestic PV market size (Rs 324 bn / $3.7 billion
90
) is estimated to grow at a CAGR of 17-20% between
FY23 and FY30, supported by government policies to achieve the Panchamrit goal. Along with the utility
scale ground mounted additions, the government interventions to further other solar segments such as
rooftop solar under PM SuryaGhar Yojana scheme is also expected to boost demand. Additionally, positive
intervention by states on adoption of Green Energy Open Access rules 2022 will also drive demand for
solar photovoltaic manufacturing. Lastly, expansion of green hydrogen will also result in demand for solar
modules over 2030. In contrast the international market (Rs 12.1 tn / $137 billion) is expected to grow at a
moderate 6-8% CAGR driven by China’s domestic demand and decarbonization targets of the US, EU and
Asia pacific by 2030.
Figure 84: Photovoltaic industry growth (CY23-CY30 CAGR)
Note: Market size in USD has been arrived using an exchange of 88.3 (average of fiscal 2026).
Source: Crisil Intelligence, Company Reports Note: The number represents the market size as of CY2023. Solar module prices
considered are as of CY2023.
90
Market size in USD arrived using average exchange rate of 88.3 INR to USD in fiscal 2026.
Rs 324 billion , $ 3.7
billion
Rs 12.1 trillion , $ 137
billion
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Domestic International
CAGR
220
Case Studies and Global best practices
The global solar PV manufacturing landscape is highly concentrated, with China retaining the majority share
across all upstream segments of the value chain. By the end of 2025E, global polysilicon manufacturing
capacity expanded to 1,360 GW, adding 28 GW year over year. The chart also shows that China
controlled 67–93% of both installed and new polysilicon production, underscoring a highly skewed
production geography.
A similar pattern emerged in wafer production. Global manufacturing capacity increased to 1,189 GW in
2025E, up 79 GW from 2023. China accounted for 95% of the installed base and 94% of new additions.
This scale advantage has enabled China to maintain cost leadership, technological integration, and
uninterrupted supply-chain control. Meanwhile, India held less than 1% of wafer capacity, highlighting the
early stage of its ecosystem development.
Global solar cell capacity reached 1,212 GW, with China accounting for 87% of the global total. However,
unlike polysilicon and wafers, the cell segment shows early signs of geographic diversification, particularly
in India. This is driven by industrial policy support, import substitution, and rising domestic solar deployment.
In the module segment, global capacity reached 1,450–1,500 GW. China continued to lead with 78% of
global share, while India accounted for 12%, making it comparatively stronger at the end of the supply
chain.
Figure 85:PV manufacturing concentration across countries
Note: *Global capacity is of CY 2025, India capacity is of March 2026.
Source: IEA renewable energy outlook, Crisil Intelligence
221
China
The decades of Chinese march
The rising global demand for solar energy, coupled with the domestic push for solar manufacturing, has
elevated China to a leading position. Since 2004, China’s production march on all fronts of the solar
ecosystem began – polysilicon, wafers, cells and modules. By 2008, the growth of solar industry became
formidable as the Chinese firms started reaping economies of scale in production of purified silicon. By
then, China had become the largest PV manufacturer in the world, with 98%
91
of its product shipped
overseas. In 2009, the government identified solar manufacturing as a strategic industry and attempted to
accelerate its growth principally through combination of low-cost debt and subsidies. While this was the
beginning, over the years the government policy support has enabled a meteoric growth of over 18,000x
between 2004 to 2025E.
Years of free trade agreements with European and Asian blocs has helped the country to develop strategic
ties for exports. This couple with tax incentives enabled the players to invest in research and development,
increasing the efficiency of the existing module technologies and mass development of new technologies.
The below are measures driven the solar photovoltaic market in China.
Regulatory environment and government policies in China
Trade agreements – China currently has 23
14
FTAs with 30
14
countries and regional blocks (including
ASEAN), which include provisions for various sectors, including solar products. Notable agreements that
explicitly cover solar modules are
Table 30: China's push to PV manufacturing industry
China-Iceland 201392 & China-Switzerland 2014 Signed amid escalating tensions over EU’s
investigation into dumping of Chinese solar panels
proved crucial to improve economic diplomacy
with European countries over the years. The FTAs
enabled tariff reduction on 99.7%25 of the
Chinese exports. While the share of Switzerland
and Iceland was low in China’s photovoltaic
export basket, the partnership of these two
European nations in EFTA agreement, opened
doors for China. The share of China in Europe’s
PV imports photovoltaic was 37%93 in 2024.
Regional comprehensive economic partnership
(RCEP) 202094
Includes 14 other Asia Pacific nations other than
China. While tariff cuts varied among countries,
the FTA meant that 85% of Chinese products,
including solar products, becoming eligible for
zero tariffs. Furthermore, a substantial 98.3% of
these products would be exempt from Australian
tariffs over time, effectively eliminating trade
barrier. China accounted for 80%26 of the solar
cells and module imports for RCEP members in
2024.
91
CSTEP
92
Aqsiq
93
ITC Trademap
94
RCEP
222
China-Serbia 202395 Albeit a small market, Serbia exempts tariffs on
approximately 90% of the products traded
between the nations, while over 60% of them
enjoy zero tariffs. Inclusion of PV modules in the
zero-tariff category opened China’s door to first
central and eastern European country.
Tax Exemptions and Reductions:
200396 A tax rebate system introduced in 1985 which
refunds some of its indirect taxes paid by the local
manufacturers on production and distribution of
exports. PV products were included in list from
2003. However, lately in 2024, the export rebate
was reduced from 13% to 9%.
201197 Full exemption of corporate income tax (CIT) for
first two years, profitable years and a 50%
reduction for the subsequent three years for
qualified solar enterprises to encourage investment
and innovation
201398 Offered tax rebates to solar manufacturers, aiming
to enhance competitiveness and reduce production
costs
201399 Continued support through VAT refunds and
preferential CIT policies for advanced technology
enterprises in the solar sector
R&D incentives:
Industrial incentives:
2011-20 Objectives
1. Expand and modernize PV industry with
large scale production capacity
2. Strengthen domestic production and
supply chain of components
3. Promote technical innovations to improve
conversion efficiency and product quality
95
The State Council - The People’s Republic of China
96
Taiyangnews
97
China Briefing
98
BBC
99
AECEA
100
China Briefing
101
China Briefing
2008
100
Establishment of National High-Tech R&D Program
(863 Program), which provided significant funding
for R&D projects in high-tech sectors, including
solar
2023
101
Super deduction, which allows companies to
deduct up to 100 percent of their R&D costs.
223
4. Increase share of non-fossil energy in
total energy consumption to 25%
Outcomes
1. China on track to achieve its target of
non-fossil. It has increased its target to
30% in 2025102
2014103 Launched Solar Energy for Poverty Alleviation
Program to systematically deploy 10 GW solar
photovoltaic projects to benefit more than 2 million
citizens. This helped improve demand for
manufacturers
2015104 Preferential policy under “Made in China 2025”
initiative, focusing on technological upgrading and
quality improvement of solar manufacturing
Skilling incentives:
Vocational training programs Specifically tailored to the need of the solar PV
industry, aimed at providing technical skills and
required manufacturing, installation, and
maintenance of solar PV systems. China National
Solar Energy vocational education alliance
(CNSVEA)105 partnered collaborates with
industry partners and vocational schools to
develop curriculum and training program
specifically for solar PV.
University and research collaboration Collaboration between universities, research
institutions and industry players to develop
specialized courses, research projects and
academic programs focusing on solar PV
technology and applications. The Tsinghua
university and the Chinese academy of
sciences106 have established research centres
dedicated to Solar PV. They collaborate closely
with industry leaders and government to conduct
research on advanced PV materials, efficiency
enhancement techniques and integration of solar
PV systems with grid infrastructure.
Government sponsored training programs These include initiatives aimed at enhancing the
skills of workers and technicians involved in
various aspects of solar photovoltaic technology.
The China National Solar Energy Training and
Education Center107, established by the chinese
renewable energy industries association and
supported by government agencies conducts
training sessions and workshops across various
provinces, focusing on equipping participants with
the latest knowledge and skills required for
working in the solar PV industry
102
Down to earth
103
Institute of Development studies
104
European Chamber
105
China Briefing
106
CSTA
107
Ministry of Science and Technology – The People’s Republic of China
224
The above incentives have enabled growth stories in PV industry. One of which is highlighted in the form
of a case study below:
Case Study on incentives provided to Jinko solar by the Chinese Government
Jinko Solar Holding Co, Ltd, a Chinese PV manufacturer, has benefited from various tax incentives provided
by the Chinese government over the years. The company has received tax exemptions and reduced rates,
including a two-year exemption from corporate income tax (CIT) and a reduced CIT rate of 12.5% for the
subsequent three years, starting from 2009.
Several of Jinko Solar's subsidiaries benefit from the preferential tax rate of 15% across years under the
“High and New Technology Enterprises” incentive. Subsidiaries including Jiangxi Jinko, Zhejiang Jinko,
Haining Jinko, Yiwu Jinko, Shangrao Jinko, Zhejiang New Materials, and Anhui Jinko, were designated as
"High and New Technology Enterprises" by local authorities, making them eligible to a preferential tax rate
of 15% from 2021 to 2023. Additionally, subsidiaries such as Jiangxi Jinko, Haining Jinko, Shangrao Jinko,
and Zhejiang New Materials were designated as "High and New Technology Enterprises" in November and
December 2022 and benefited from the preferential tax rate of 15% from 2022 to 2024. Anhui Jinko was
also designated as a "High and New Technology Enterprise" in November 2023 and will benefit from the
preferential tax rate of 15% from 2023 to 2025.
Other subsidiaries, including Jinko Jinchang, Sichuan Jinko, Leshan Jinko, Qinghai Jinko, and Chuxiong
Jinko, were designated as "Enterprises in the Encouraged Industry" and are eligible for a preferential tax
rate of 15% until December 31, 2030, as per the "Announcement on Continuation of CIT Policies for Large-
scale Development in the Western Region" published on April 23, 2020.
These tax incentives have enabled Jinko Solar to invest heavily in research and development (R&D). The
company has collaborated with renowned institutes and agencies to improve its R&D capabilities. For
instance, in December 2013, it partnered with Beijing University's Solar Power Engineering Center to
construct an experimental PV power plant on campus, which was used to collect and analyze data on the
power generation capabilities of PV modules under various conditions.
In subsequent years, Jinko Solar established a long-term cooperative relationship with several institutions,
including the State Key Laboratory of Silicon Materials of Zhejiang University, the Australian National
University, Sun Yat-Sen University, and the National University of Singapore. These collaborations focus
on cutting-edge cell technologies, solar modules, and solar cells. In 2017, the company partnered with TÜV
Rheinland to develop standardized testing methods for bifacial PV technology. In 2018, it participated in
three projects with the Institute of Electrical Engineering of the Chinese Academy of Sciences, Zhejiang
University, and Nanchang University, focusing on module recycling, high-efficiency P-type poly, and N-type
bifacial cells.
In 2019, Jinko Solar signed a memorandum of understanding with the Shanghai Institute of Space Power
Sources to co-develop high-efficiency solar cell technology for space and terrestrial applications. The
company led two national key R&D programs in China, relating to the decline of the N-type multicrystalline
cell industry and the recycling of end-of-life solar products.
As a result of its R&D collaborations, Jinko Solar Holding Co., LTD increased its budget allocations over
the years, with RMB 461.6 million ($72.4 million), RMB 724.8 million ($105.1 million), RMB 911.9 million
($128.4 million), RMB 920.5 million ($126.1 million) and RMB 896.9 million ($128.3 million) allocated in
2021, 2022, 2023, 2024 and 2025 respectively. This has enabled the company to gain a competitive edge
in the market.
Source: Jinko Solar Holding Co., LTD annual report 2025
225
Vietnam
Emerging nation
Vietnam has emerged as a HubSpot for expansion of PV manufacturing. It accounted for 3% of the module
global capacity in 2024. It was responsible for 10%
108
of the global PV exports. The factors driving the share
are skilling programs which have enabled the country to gain edge over its south Asian neighbours. Further,
the country’s land border with the PRC is perceived as a significant benefit as delivery time for input
materials is reduced from weeks to days.
Free trade agreements:
Table 31: Vietnam's push to PV manufacturing industry
European Union-Vietnam
109
Eliminates tariffs on a wide range of goods,
including solar panels and components. The
agreement also encourages European companies
to invest in Vietnam, bringing advanced solar
technologies and expertise.
ASEAN-Vietnam
44
Benefits from reduced tariffs and simplified trade
procedures within the region. Players have
benefitted from duty free access to raw materials
like polysilicon from Malaysia and Thailand,
reducing production cost and ensuring a steady
supply.
Vietnam-Korea
44
Provides tariff reductions on solar PV products and
related components. The FTA has allowed Vina
solar to import cutting-edge solar manufacturing
equipment from South Korea at reduced cost,
enhancing their production capabilities and product
qualities.
Regional Comprehensive Economic
Partnership
44
Includes 14 other Asia Pacific nations other than
China. While tariff cuts varied among countries, the
harmonized standards facilitate smoother trade
and regulatory compliance making exports easy
Vietnam-Japan Economic Partnership
Agreement
44
Provides access to Japanese market for
Vietnamese solar PV products. Has helped foster
joint ventures and collaborative projects in RE,
encouraging technology sharing and innovation.
Japanese firms like Sharp have engaged in JVs
with Vietnamese companies, sharing the PV
technology and contributing to local capacity
building.
108
ITC Trademap
109
Vietnam Briefing
226
Tax incentives:
Corporate Income Tax
110
Corporate income tax (CIT) incentives for solar PV
projects, including a reduced tax rate of 10% for 15
years (extendable to 30 years) and full exemption
for the first 4 years followed by a 50% reduction for
the next 9 years. These tax incentives have helped
attract significant investment in the solar PV sector.
As of 2023, Vietnam had an installed solar PV
capacity of around 17,077 MW, up from just 134
MW in 2018
Import Duty Exemptions
45
Solar PV projects are exempt from import duty for
5 years on raw materials and components that
cannot be produced domestically. This imports duty
exemption has made it more affordable for solar
PV manufacturers to import necessary inputs,
reducing production costs and improving
competitiveness. As a result, Vietnam is home to
many major solar panel producers, including First
Solar, HT Solar, Irex Solar, Trina Solar, Vina Solar,
and Ja Solar
End user drivers:
Streamlined Approval Process Streamlined the approval process for solar PV
projects, reducing the time and bureaucracy
involved. In 2020, the Vietnamese government
approved a 450 MW solar PV project developed
by Trung Nam Group in Ninh Thuan province in
just 102 days111
Power Purchase Agreement (PPA) Incentives Offers attractive PPA incentives for solar PV
projects, including a fixed tariff of
$0.0935/kWh112 for projects connected to the
grid before June 30, 2019, and a competitive
bidding process for projects after that date. These
PPA incentives have helped drive the rapid growth
of the solar PV sector in Vietnam. As of 2023, the
country had over 17 GW of installed solar PV
capacity, making it a regional leader in solar
energy
Skilling incentives:
Government funded training centers Specialised training centers that offer courses in
Solar PV installations, maintenance, and
manufacturing techniques. The Vietnam-Germany
Renewable Energy Training Center113 provides
comprehensive training programs tailored to the
needs of the solar industry
110
VILAF
111
PV magazine
112
ADB
113
VietnamNewsMagazine
227
Subsidised courses Companies sending employees to these training
programs can benefit from subsidies covering up
of the training costs, making it affordable for firms
to upskill their workforce.
Industry Academia Collaboration Encourages collaboration between solar PV and
academia for curating specialized curricula that
include hands-on training in solar PV technology.
Boviet Solar114 has partnered with local
universities and technical schools. They offer
internships and apprenticeships to students,
providing real-world experience.
International collaboration Partnerships with international organisations and
agencies to provide training and knowledge
transfer. The German development agency
GIZ115 has partnered with the Vietnamese
Ministry of Industry and Trade to provide technical
training programs for solar PV technicians.
Additionally, Vietnam is uniquely positioned to extract benefits in PV manufacturing from trade agreements
like EVFTA and CPTPP. First, EVFTA commits to the elimination of over 99%
116
of tariffs between Vietnam
and the EU over a ten-year schedule, offering Vietnamese solar equipment (modules, hardware,
components) much lower trade barriers into one of the world’s premium markets.
These agreements also imbibe strong legal, regulatory, and institutional commitments that reduce risk for
long-term capital investment in green manufacturing. For example, EVFTA’s binding provisions on
standards and trade facilitation help ensure smoother conformity, transparent and efficient paths for solar
products. Despite this, the US accounted for 85% of the Vietnam solar cell and module exports in 2024.
However, after the US initiated an antidumping and countervailing investigation on Vietnam in 2024, the
export from the country were impact. The share of US in Vietnam’s exports basket fall to 70% in H1 2025.
The tariffs of 68% to 543%
117
on Vietnam’s manufacturers were ratified and imposed in June 2025. This is
expected to impact the exports from Vietnam to the US.
114
Boviet Solar
115
GIZ
116
Trade.ec.europa
117
FederalRegister US
228
India
The march for next decade
India’s PV chapter picked up pace in the 2010-20 decade with incorporation of Solar Energy Corporation
of India. The capacity in March 2014 touched 2,821 MW
118
and has grown to 1,05,646 GW
119
as of March
2025. However, this growth in capacity was largely fueled by imported modules as solar manufacturing
remained muted till 2014 with an operational 1,300 MW of module and 300 MW of cell capacity. This was
on account of availability of cheaper modules from China. Further, absence of upstream capacity also
exposed India to exchange rate fluctuations and diplomatic risks. Over the years, the module, cell and wafer
capacity has grown to 1,00,000 MW
4
, 25,000 MW
5
and 2000 MW
5
respectively resulting in a rise in export
opportunities. A slew of measures has enabled this growth over the period.
Regulatory environment and government policies in India
The journey of Indian solar PV manufacturing has witnessed several government interventions to protect
the domestic base and enhance the demand. While some of the measures’ relevancy remained challenged,
the journey and lessons through the years have resulted in implementation of relevant measures in the
recent period. Thus, despite the sector’s activeness since 2010, it is now truly at the cusp of multifold
expansion becoming one of the sunrise sectors in India.
Imposition of safeguard duties
120
India's solar energy sector has experienced rapid growth during fiscal 2018, with annual deployment
increasing from 3 GW in 2015-2016 to 9.4 GW in 2017-2018. Despite this growth, the country's solar
photovoltaic (PV) manufacturing industry has struggled to compete with imported modules, which
accounted for over 90% of the market share between 2015 and 2018. To address this issue, the Indian
government-imposed safeguard duties on imported cells and modules to protect the domestic industry from
foreign competition.
The imposition of safeguard duties aims to provide Indian PV manufacturers with protection against cheap
imports and facilitate structural improvements to enhance their competitiveness. However, the effectiveness
of these duties depends on their interaction with other policies and market developments. The duties are
intended to address the underlying reasons for the competitive disadvantage of the local PV industry, but
their impact on industry’s competitiveness remains to be seen.
The impact of safeguard duties on the Indian solar energy ecosystem, including the challenges faced by
the PV manufacturing industry and the effectiveness of the duties in protecting the industry. The analysis
also considers the potential negative effects of the duties on project deployment, including regulatory
uncertainty and higher module costs, which could lead to higher tariffs and resistance from distribution
companies (discoms). The study provides a comprehensive picture of the impact of safeguard duties on
the Indian solar energy sector, including the legal framework, international trade protection measures, and
the challenges facing the PV manufacturing industry.
It would be interesting to understand the circumstances under which Safeguard Duties are permitted in
order to protect the domestic industries.
118
Yearly achievements MNRE
119
Installed Capacity MNRE (Mar 25)
120
Ceew
229
The World Trade Organization (WTO) allows for several trade protection measures to be implemented
under certain circumstances. This section provides an in-depth examination of the legal framework
governing safeguard duties, a specific trade protection measure that has been utilized in India.
Table 32:Motivations for applying various trade protection measures
Anti-dumping duty Countervailing duty Safeguard duty
What strategies
does it utilize to
protect the
domestic industry?
Seeks to eliminate the
effects of dumping,
which refers to the sale
of an imported product
at a price lower than
that in its domestic
market.
Seeks to eliminate the
effects of subsidies
provided in the domestic
market for the imported
product.
Seeks to safeguard
the local industry from
an influx of imports of
a rival product.
Source: World Trade Organization
The WTO regime on safeguard duties
Under the World Trade Organization (WTO) regime, safeguard duties are governed by the WTO Agreement
on Safeguards and Article XIX of the General Agreement on Tariffs and Trade (GATT) 1994. These
emergency measures allow member countries to protect their domestic industries from a sudden surge in
imports of similar or competing products. The increase in imports that justifies the application of safeguard
measures can be either absolute or relative, such as in a shrinking market where imports gain a larger
market share without an actual increase in quantity.
To impose safeguard measures, an investigation must be conducted by the relevant authorities. The
process for initiating an investigation varies by country; in India, for example, an investigation can be started
by a petition from a domestic producer or by the authorities themselves. Safeguard measures can only be
imposed if the investigation finds that increased imports have caused or threaten to cause significant harm
to the domestic industry, as evidenced by changes in market share, profitability, sales, and production.
Moreover, safeguard measures can only be employed if the increase in imports is due to unforeseen
developments that could not have been anticipated when the import tariffs were set. The party initiating the
investigation must also submit a plan outlining the steps the domestic industry will take to become more
competitive. Safeguard measures can take the form of quantitative import restrictions, higher tariffs, or a
combination of both, but are supposed to be applied non-discriminatorily to all countries. However, imports
from developing countries that account for less than 3% of the product are exempt, as long as these
countries collectively do not account for more than 9% of imports.
If safeguard measures are imposed for more than a year, they must be gradually reduced at regular
intervals. The maximum duration of safeguard measures is four years, or six years for developing countries.
However, this period can be extended if a new investigation finds that the measures are still necessary to
prevent or remedy harm, and if the domestic industry can demonstrate evidence of structural adjustments.
The total period of application, including extensions, cannot exceed eight years for developed countries or
ten years for developing countries.
230
The Indian regime on safeguard duties
Following the withdrawal of an anti-dumping petition against solar imports from China, Taiwan, and Malaysia
in 2017, Indian solar manufacturers turned to safeguard duties as their primary trade remedy. In December
2017, they petitioned the DGTR, which recommended a provisional 70% safeguard duty in January 2018.
However, legal challenges and uncertainty around the duty's implementation and cost pass-through
delayed its notification, leading to weak developer participation in solar tenders during early 2018.
To address these concerns, the MNRE clarified in April 2018 that safeguard duties could be treated as a
"change in law" under solar PPAs, enabling cost recovery where contract provisions allowed. This reduced
uncertainty and improved market activity. On July 16, 2018, the DGTR issued its final recommendation for
a two-year safeguard duty on imported solar cells and modules. Unlike the preliminary findings, the final
ruling excluded SEZ-based manufacturers from the definition of domestic industry.
Although the safeguard duty faced further legal challenges in the Odisha High Court, the Ministry of Finance
notified the duty on July 30, 2018. After the government appealed, the Supreme Court lifted the stay on its
implementation, allowing the collection of safeguard duties and completing the process of introducing import
protection for India's domestic solar manufacturing industry.
Table 33:Directorate general of trade remedies' recommendations on safeguard duties
Period Safeguard Duty
30
th
July 2018 – 29
th
July, 2019 25%
30
th
July 2019 – 29
th
January, 2020 20%
30
th
January 2020 – 29
th
July, 2020 15%
30
th
July 2020 to 29
th
January 2021 14.9%
30
th
January 2021 to 29
th
July 2021. 14.5%
Source: CEEW
Therefore, Safeguard duty imposed on solar cells and modules to protect the domestic manufacturing
industry. While applicable on all countries, the measure impacted majorly imports from China, Malaysia and
Taiwan. A safeguard duty of 25% was imposed with progressive reduction to 20% by Jan and 15% by July
2020. While the imposition favourably enhanced the manufacturers’ cost competitiveness, the move largely
failed to address the challenge of lack of low-cost debt and R&D that plagued the industry. It also resulted
in a surge in imports from Vietnam and Thailand who were exempt from the application of duty due to virtue
of being developing countries that accounted less than 3% of imports of the product to India.
Further, extended the safeguard duty to 15% by July 2021 on imports from specific countries namely, China,
Vietnam, Thailand and other developed countries. The move helped bring parity in the cost, however, it
increased the cost of projects.
Basic custom duty
Notification on Change-in-Law: Imposition of Basic Customs Duty and GST Rate Hike on Solar PV
Cells and Modules
The imposition of Basic Customs Duty (BCD) on imported solar cells and modules, along with the increase
in the Goods and Services Tax (GST) rate on renewable energy equipment, represented a key policy
measure to support domestic solar manufacturing and reduce dependence on imports. Effective 1 April
2022, the Government of India imposed a 25% BCD on solar PV cells and a 40% BCD on solar PV modules,
while the GST rate applicable to specified renewable energy devices and components was increased from
5% to 12% with effect from 1 October 2021. These measures increased project costs for renewable energy
developers, leading to industry requests for their recognition as a Change-in-Law event under existing
power procurement frameworks.
231
Table 34:Application of basic customs duty due to change in law
Particular Basic Custom Duty
Solar PV cells 25%
Solar PV modules 40%
Source: CEEW
Subsequently, the Ministry of New and Renewable Energy (MNRE) directed Renewable Energy
Implementing Agencies (REIAs) to treat the imposition of BCD as a Change-in-Law event for solar PV and
solar-wind hybrid projects where the bid submission deadline was on or before 9 March 2021 and the
Scheduled Commissioning Date (SCD) was on or after 1 April 2022. Similarly, the increase in the GST rate
was recognized as a Change-in-Law event for renewable energy projects with bid submission dates on or
before 30 September 2021 and SCDs on or after 1 October 2021, unless explicitly excluded under the
relevant tender or contractual provisions. These provisions enabled affected developers to seek
compensation for the additional costs arising from the policy changes.
The introduction of BCD significantly reduced the pricing advantage of imported solar equipment and
contributed to improving the competitiveness of domestic manufacturers. The differential between domestic
and imported module prices declined considerably, supporting the growth of indigenous manufacturing
capacity. In conjunction with other policy measures, including the Approved List of Models and
Manufacturers (ALMM) and the Production Linked Incentive (PLI) Scheme, the BCD framework
strengthened the domestic solar manufacturing ecosystem by improving the balance between domestic
demand and supply. The customs duty structure was subsequently rationalized under the Union Budget
2025-26, with duties on solar modules restructured to 20% BCD and 20% Agriculture Infrastructure and
Development Cess (AIDC), and duties on solar cells revised to 20% BCD and 7.5% AIDC.
Budget 2025-2026: Changes in Tariff Rates for Solar Cells and Modules
The Budget 2025-2026, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, brought
significant changes to the tariff rates for solar cells and modules. These changes aim to promote the growth
of the solar industry in India, while also generating revenue for the government. The new tariff rates came
into effect on February 2, 2025, and are expected to have a significant impact on industry.
Figure 86: Custom duties for solar cells and modules
Source: Crisil Intelligence
232
Cells: The tariff rate for solar cells, covered under tariff heading 8541, has decreased from 25% to 20%.
However, this decrease is accompanied by an increase in the Agriculture Infrastructure and Development
Cess from 2.5% (Social Welfare Surcharge) to 7.5%. As a result, the effective tariff rate for solar cells
remains unchanged. This shift in the cess structure is notable, as it indicates a change in the way the
government is choosing to tax solar cells. The reduction in the basic tariff rate may make solar cells more
competitive in the market, but the increase in the cess may offset some of these gains. The impact of this
change on the solar industry will depend on various factors, including the response of manufacturers and
the demand for solar cells.
Modules: Similar to the change in the tariff rate for solar cells, this decrease is accompanied by an increase
in the Agriculture Infrastructure and Development Cess from 4% (Social Welfare Surcharge) to 20%. As a
result, the effective tariff rate for solar modules remains unchanged. This change in the tariff rate and cess
structure may have a significant impact on the solar module industry, as it could affect the competitiveness
of Indian manufacturers in the global market. The reduction in the basic tariff rate may make solar modules
more attractive to buyers, but the increase in the cess may increase the cost of production for
manufacturers. The industry will need to adapt to these changes and find ways to remain competitive in the
market.
GST Reduction on Renewable Energy Components
The 56th GST Council’s decision to reduce GST on renewable energy devices and their manufacturing
parts from 12% to 5% represents a strategic fiscal intervention aimed at strengthening India’s clean energy
industrial ecosystem. By lowering the tax burden on components such as photovoltaic cells, modules, solar
generators, and solar based devices, the reform directly improves manufacturing cost structures, project
affordability, and long-term sectoral competitiveness.
Anti-dumping investigation in India
Case 1
Anti-dumping duty on imports of “Ethylene Vinyl Acetate (EVA) Sheet for Solar Module” from China PR.
121
The Designated Authority has initiated a sunset review investigation into the anti-dumping duty imposed on
imports of Ethylene Vinyl Acetate (EVA) Sheet for Solar Module from China PR. This investigation was
prompted by an application from M/s RenewSys India Pvt. Ltd., which alleged that the expiry of the anti-
dumping duty would likely lead to the continuation or recurrence of dumping and injury to the domestic
industry.
The anti-dumping duty was initially imposed on imports of EVA Sheet for Solar Module from China,
Malaysia, Thailand, and Saudi Arabia in 2019, following an investigation that found dumping and injury to
the domestic industry. The duty was imposed for a period of five years, and the current investigation aims
to determine whether the expiry of the duty would lead to a resurgence of dumping and injury. The
domestic industry has requested that the duty be continued, but only with respect to imports from China
PR, as imports from the other countries subject to the duty have significantly declined.
EVA
Ethylene Vinyl Acetate (EVA) Sheet for Solar Module" is a crucial polymer-based component utilized in the
production of solar photovoltaic (PV) modules. Its primary function is to encapsulate solar PV cells,
providing adhesion and cushioning properties. As a vital element, the EVA sheet plays a key role in
121
DGTR (Dec 2023)
233
integrating and supporting the module's components, including the glass, cells, and backsheet, ensuring
their mechanical stability and durability throughout the module's lifespan.
The Authority has concluded its investigation into the continuation of anti-dumping duties on imports of
Ethylene Vinyl Acetate (EVA) sheets from China, Malaysia, Thailand, and Saudi Arabia. The investigation
was initiated to determine whether the cessation of existing duties would lead to a continuation or
recurrence of dumping and injury to the domestic industry.
The Authority has recommended the continuation of anti-dumping duties on imports of EVA sheets from
China, citing evidence of dumping and injury to the domestic industry. The investigation found that the
domestic industry has improved significantly since the imposition of duties, but that the cessation of duties
would likely lead to a surge in dumped imports from China. The Authority also noted that there are significant
unutilized capacities available with Chinese exporters, and that the revocation of duties would lead to further
aggravated dumping and injury to the domestic industry. The duties will be continued for an additional period
of five years to provide a level playing field to domestic producers. The Authority has recommended the
following duties:
• China PR: The existing quantum of anti-dumping duty will be continued.
• Non-cooperating producers/exporters: The duty will be imposed at the same rate as the "any
others" rate in the original investigation.
The Authority's decision is based on its findings that the domestic industry constitutes a domestic industry
under the Rules, and that the application filed by the domestic producer satisfies the criteria of standing.
The investigation also found that the product under consideration continues to be exported to India at prices
below the normal value, resulting in dumping of the subject goods. The Authority has concluded that the
continuation of duties is necessary to prevent further injury to the domestic industry.
The Indian government has imposed an antidumping duty on EVA sheets for solar modules imported from
China to protect the domestic industry from cheap imports. The duty is applicable on EVA sheets with
specific tariff items, including 3920 1011, 3920 1019, and 3920 1099, among others. The duty amount
varies depending on the producer, with a specific duty of $590 per metric ton for Changzhou Sveck
Photovoltaic New Material Co., Ltd. and a general duty of $897 per metric ton for all other producers. The
duty is intended to prevent dumping of EVA sheets from China and to promote the domestic production of
these sheets.
The imposition of the antidumping duty is expected to have a significant impact on the Indian solar industry,
as EVA sheets are a critical component of solar modules. The duty may lead to an increase in the cost of
solar modules, which could affect the competitiveness of Indian solar manufacturers in the global market.
However, it may also promote the domestic production of EVA sheets and other solar module components,
which could lead to the growth of the Indian solar industry in the long term.
Case 2
Anti-dumping investigation concerning imports of “anodized aluminium frames for solar panels/modules”
originating in or exported from China PR.
122
The Indian government has initiated an anti-dumping investigation into imports of anodized aluminum
frames for solar panels/modules from China. The investigation was initiated after Vishakha Metals Pvt. Ltd.,
a domestic manufacturer of anodized aluminum frames for solar panels/modules, filed a complaint with the
122
DGTR (June 24)
234
Designated Authority, alleging that imports from China were being dumped in India, causing injury to the
domestic industry.
The investigation will examine whether the imports from China are being sold in India at a price lower than
their normal value in China, and whether this is causing harm to the domestic industry. The investigation
will also consider factors such as the volume of imports, the price of the imports, and the impact of the
imports on the domestic industry. The investigation is being conducted under the Customs Tariff Act, 1975,
and the Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles
and for Determination of Injury) Rules, 1995. These rules provide the framework for conducting anti-
dumping investigations in India.
The Authority has investigated the dumping of solar cells and modules from China and has found that the
product has been exported to India at a price below the normal value, resulting in dumping. The Authority
has also found that the dumping has caused material injury to the domestic industry, including retarding the
establishment of the industry, underutilization of capacity, and preventing the industry from achieving a
reasonable price. The Authority has concluded that the imposition of anti-dumping duty is necessary to
offset the dumping and consequent injury, and that it will not be against the public interest.
The Authority recommends imposing an anti-dumping duty on imports of the subject goods from the
specified country to prevent harm to the domestic industry. The duty will be set at the lower of the two
calculated margins: the margin of dumping or the margin of injury. The recommended duty will be in effect
for a period of five years from the date of notification by the Central Government, with the specific duty
amounts listed in the appended table.
Table 35:Anti-dumping duty on solar panel frames from China
S.
No.
Heading/
subheading*
Description of
goods
Country
of origin
Country of
Export
Producer/ exporter
Amount
$USD/MT
1
7610 9010,
7610 9030,
7616 9990
Anodized
Aluminium
Frames for
Solar
Panels/Modules
China PR
Any Country
including
China PR
Jiangyin Tinze New
Energy Technology
Co., Ltd
433
2 China PR
Any Country
including
China PR
Jiangyin Yuanshuo
Metal Technology
Co., Ltd
505
3 China PR
Any Country
including
China PR
Jiangsu Yuejia
Metallic Technology
Co., Ltd
403
4 China PR
Any Country
including
China PR
Jiangyin Haihong
New Energy
Technology Co.,
Ltd, and Jiangyin
Haihong Solid-FSW
Co., Ltd.
418
5 China PR
Any Country
including
China PR
Zhejiang Jiaxing
Taihe New Energy
Technology Co.,
Ltd, And Jiaxing
Youjia Metal
products Co, Ltd
511
6 China PR
Any Country
including
China PR
Any other than S.
No 1-5 above
577
7
Any
Country
other than
China PR
China PR
Any other than S.
No 1-5 above
577
235
Case 3
Anti-dumping investigation concerning imports of ‘Solar Cells whether or not assembled in Modules or made
up into Panels’ originating in or exported from China PR.
123
The Indian government has launched an anti-dumping investigation into imports of solar cells and modules
from China, following a complaint from several Indian manufacturers, including FS India Solar Ventures
Private Ltd., Jupiter International Ltd., Tata Power Solar System Ltd., and TP Solar Ltd. The investigation
will examine whether the imports from China are being sold at a price lower than their normal value, causing
injury to the domestic industry. The investigation is being conducted in accordance with the Customs Tariff
Act, 1975, and the Customs Tariff (Identification, Assessment, and Collection of Anti-Dumping Duty on
Dumped Articles and for Determination of Injury) Rules, 1995.
The conclusion of the investigation is that the domestic solar photovoltaic industry has been injured by the
dumping of solar cells and modules from other countries. The investigation has found that the subject goods
have been exported to India at a price below the normal value, resulting in dumping, and that the volume
of subject imports has increased significantly over the injury period. The domestic industry has been forced
to sell at losses, and its profitability has deteriorated over the injury period. The investigation has also found
that the subject imports are threatening to cause further injury to the domestic industry, and that the
imposition of anti-dumping duty is in the larger public interest.
The Authority recommends the imposition of anti-dumping duties on imports of solar cells and modules from
certain countries to protect the domestic industry from injury caused by dumping. The duties will be imposed
for a period of 3 years and will be calculated as a percentage of the CIF value of the goods. The Authority
has followed the lesser duty rule, which means that the duty will be imposed at a level that is sufficient to
remove the injury to the domestic industry, but not higher than the margin of dumping.
Table 36:Anti-dumping duty recommended on solar cells and modules
S.
No.
Heading/
subheading*
Description
of goods
Country
of origin
Country of
Export
Producer/ exporter
Duty as
% of CIF
1
85414200
and
85414300
Solar cells or
photovoltaic
cells whether
or not
assembled in
modules or
made up into
panels,
produced
using c-Si or
thin film
technology,
including
solar
modules or
panels made
up of solar
cells
China
PR
Any country,
including China
PR
Jinko Group Nil
2
China
PR
Any country,
including China
PR
Aiko Group 23%
3
China
PR
Any country,
including China
PR
Trina Group Nil
4
China
PR
Any country,
including China
PR
Non-sampled
cooperative producers,
as per list below
23%
5
China
PR
Any country,
including China
PR
Any producer other than
1 to 4 above
30%
6
Any
country
other
than
China
PR
China PR Any 30%
123
DGTR (Sep 2025)
236
Case: 4
Multi-Country Anti-Dumping Probe: Solar Encapsulants from South Korea, Thailand, and Vietnam
124
The Directorate General of Trade Remedies has initiated an anti-dumping investigation concerning imports
of Solar Encapsulants originating in or exported from South Korea, Thailand, and Vietnam. The investigation
has been initiated based on an application filed by M/s RenewSys India Pvt. Limited, who have claimed
that the subject goods are being dumped into India, causing injury to the domestic industry. The applicant
has provided prima facie evidence that the normal value of the subject goods in the subject countries is
higher than the export price, resulting in a significant dumping margin.
The Authority has considered the applicant as the domestic industry within the meaning of Rule 2(b) of the
Rules and has satisfied the criteria of standing in terms of Rule 5(b) of the Rules. The investigation will
cover the period from 1st April 2024 to 31st March 2025, and all interested parties have been advised to
intimate their interest and file their questionnaire responses within 30 days from the date of receipt of the
notice. The subject countries for the present investigation are South Korea, Thailand, and Vietnam.
The applicant has claimed that the imports have caused material injury to the domestic industry, as the
imports are undercutting the prices of the domestic industry, depressing the prices, and preventing price
increases. This has adversely impacted on the profitability of the domestic industry, which has deteriorated
in the injury period. The capacity utilization of the domestic industry has declined, and it has underutilized
capacities. The inventories of the domestic industry have increased, and there is sufficient prima facie
evidence to justify the initiation of the anti-dumping investigation.
Case: 5
Initiation of Anti-Dumping Investigation: Solar Encapsulants from China PR
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The Directorate General of Trade Remedies has initiated an anti-dumping investigation concerning imports
of Solar Encapsulants, excluding EVA Encapsulants, originating in or exported from China PR. The
investigation has been initiated based on an application filed by M/s RenewSys India Pvt. Limited, who
have claimed that the subject goods are being dumped into India, causing injury to the domestic industry.
The applicant has provided prima facie evidence that the normal value of the subject goods in China PR is
higher than the export price, resulting in a significant dumping margin.
The Authority has considered the applicant as the domestic industry within the meaning of Rule 2(b) of the
Rules and has satisfied the criteria of standing in terms of Rule 5(b) of the Rules. The investigation will
cover the period from 1st April 2024 to 31st March 2025, and all interested parties have been advised to
intimate their interest and file their questionnaire responses within 30 days from the date of receipt of the
notice. The applicant has claimed that the subject goods, which are being dumped into India, are identical
to the goods produced by the domestic industry, with no differences in technical specifications, functions,
or end-uses.
The Authority has noted that the applicant alone holds a major proportion in the total domestic production
in the country and has imported the subject goods from the subject countries nor is it related to any exporter
or importer of the subject goods from the subject countries. The investigation aims to determine the
existence, degree, and effect of alleged dumping and to recommend the amount of dumping duty, which if
levied would be adequate to remove the injury to the Domestic Industry.
The applicant alleges that the imported goods have harmed the domestic industry by undercutting their
prices, leading to decreased profitability and preventing price increases. As a result, the domestic industry's
capacity utilization has decreased, leaving them with underutilized capacities and increased inventories,
providing sufficient evidence to warrant an anti-dumping investigation.
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DGTR (Sep 2025)
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DGTR (Sep 2025)
237
Production Linked Incentive (PLI) Scheme:
National Programme on High Efficiency Solar PV Modules
126
The Ministry of New and Renewable Energy, Government of India, has launched the Production Linked
Incentive (PLI) Scheme as part of the National Programme on High Efficiency Solar PV Modules. This
initiative aims to establish a significant manufacturing capacity of high-efficiency solar photovoltaic (PV)
modules in the country, with a total outlay of Rs. 24,000 crore ($2.7 billion
127
). To achieve this goal, solar
PV manufacturers are selected through a transparent and competitive process. Once selected, these
manufacturers will be eligible for a Production Linked Incentive (PLI) for a period of five years after
commissioning, provided they manufacture and sell high-efficiency solar PV modules. This scheme is
designed to promote the domestic production of high-quality solar modules, reduce dependence on imports,
and contribute to the growth of the renewable energy sector in India.
The primary objective of the scheme is to establish a robust ecosystem for the manufacture of high-
efficiency solar photovoltaic (PV) modules in India, thereby reducing the country's dependence on imports
in the renewable energy sector. The key goals of the initiative include developing a substantial solar PV
manufacturing capacity for high-efficiency modules, introducing cutting-edge technology to India to produce
these modules, and promoting the establishment of integrated plants to ensure better quality control and
competitiveness. Additionally, the scheme aims to foster an ecosystem that supports the local sourcing of
materials for solar manufacturing, generate employment opportunities, and ultimately achieve technological
self-sufficiency in the solar energy domain.
Production Linked Incentive Scheme (Tranche I)
128
The Cabinet had approved the introduction of the Production Linked Incentive (PLI) Scheme for 10 key
sectors on November 11, 2020, to enhance India's manufacturing capabilities and exports under the
Atmanirbhar Bharat initiative. One of the 10 sectors for which the introduction of the PLI had been approved
was 'High Efficiency Solar PV Modules', with the Ministry of New & Renewable Energy (MNRE) designated
as the implementing ministry. The financial outlay for the PLI for 'High Efficiency Solar PV Modules', as
approved by the Cabinet and communicated via NITI Aayog's Order No. 13(176)/2020-I&M (I) dated
November 20, 2020, over a five-year period, was Rs 4,500 crore ($510 million
129
).
India had set an ambitious target of setting up 1,75,000 MW capacity of renewable energy by 2022 and
4,50,000 MW by 2030. Based on a techno-economic analysis, the Central Electricity Authority (CEA) had
indicated in its Optimum Energy Mix report that 2,80,000 MW capacity from solar energy would be needed
by 2029-30. To achieve the target, around 25,000 MW of solar energy capacity needed to be installed every
year until 2030. Solar capacity addition had largely depended on imported solar PV cells and modules, as
the domestic manufacturing industry had limited operational annual capacities of around 2,500 MW for solar
PV cells and 9,000-10,000 MW for solar PV modules.
Implementation
The PLI scheme was implemented by the Ministry of New and Renewable Energy (MNRE) through the
Indian Renewable Energy Development Agency (IREDA) as the Project Management Unit. IREDA was
responsible for providing secretarial, managerial, and implementation support, and carried out other
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PLI Scheme MNRE
127
USD is arrived using an exchange rate of 88.3 (average of fiscal 2026)
128
PLI Scheme T1 MNRE
129
USD is arrived at using an exchange rate of 88.3 (average of fiscal 2026).
238
responsibilities assigned by MNRE. IREDA also examined claims for disbursement of PLI, verified and
reconciled disbursement claims, and submitted progress reports to MNRE on a quarterly basis.
The selection of beneficiaries was done through a transparent bidding process, with applications shortlisted
based on parameters such as extent of integration, manufacturing capacity, and minimum module
performance. Preference was given to manufacturers who proposed to set up fully integrated solar PV
manufacturing plants, and those who set up higher capacity plants. To qualify for the bid, applicant
manufacturers had to promise minimum integration across solar cells and modules and undertake to set
up a manufacturing plant of minimum 1,000 MW capacity.
The minimum performance parameters for manufacturers included a minimum module efficiency of 19.50%
with a temperature coefficient of Pmax better than -0.30% per degree Celsius, or a minimum module
efficiency of 20% with a temperature coefficient of Pmax equal to or better than -0.40% per degree Celsius.
IREDA was eligible to receive 1% of the PLI amount disbursed as administrative charges on an annual
basis.
Calculation of Production Linked Incentive (PLI)
64
The Production Linked Incentive (PLI) was calculated using a formula that considered the sales volume,
base PLI rate, tapering factor, and local value addition. The formula was: PLI (₹) = Sales Volume (Wp) ×
Base PLI Rate (₹/Wp) × Tapering Factor × Local Value Addition. The tapering factor varied from 1.4 to 0.6
over the five-year period, and the local value addition was expressed as a fraction of one.
The actual PLI paid to a manufacturer depended on their actual sales or maximum capacity awarded,
whichever was less, as well as their position in the Performance Matrix and actual local value addition.
However, manufacturers were not eligible for any PLI beyond what they had quoted for a particular year. If
a selected manufacturer failed to meet the promised extent of integration or manufacturing capacity, they
did not receive any PLI until they overcame these deficiencies. If they achieved the promised levels later,
they became eligible for PLI from the next month, but they could not receive PLI for the full five years.
Manufacturers who failed to meet the minimum performance parameters for their modules did not receive
any PLI for those modules. The PLI requirement for each year was calculated based on estimated values
of the parameters in the formula, and manufacturers had to submit their total PLI requirement for the five-
year period post-commissioning of the manufacturing unit at the time of bidding.
Impact of PLI Scheme (Tranche I)
64
As part of the Production-Linked Incentive (PLI) Scheme's first tranche, the Indian Renewable Energy
Development Agency Limited (IREDA) released bid documents on behalf of the Ministry of New and
Renewable Energy (MNRE) to select manufacturers for setting up high-efficiency solar photovoltaic (PV)
module production facilities. Following a competitive bidding process, IREDA issued Letters of Award in
November and December 2021 to three successful bidders, who will establish fully integrated solar PV
module manufacturing units with a combined capacity of 8,737 megawatts (MW) under the PLI scheme,
which has an outlay of ₹4,500 crore ($510 million).
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Production Linked Incentive Scheme (Tranche II)
130
To further expand the manufacturing base for solar PV modules, an additional allocation of Rs 19,500
crore/$ 2.2 billion
131
(Tranche II) was announced in the Budget 2022-23 on February 1, 2022, with priority
given to fully integrated manufacturing units from polysilicon to solar PV modules.
Implementation
65
The PLI Scheme (Tranche-II) was implemented by the Ministry of New and Renewable Energy (MNRE)
with the Solar Energy Corporation of India Limited (SECI) as the Project Management Unit. SECI was
responsible for providing secretarial, managerial, and implementation support, and carried out other
responsibilities assigned by MNRE. The agency received applications, examined and appraised them,
issued acknowledgments and letters of award, examined claims for disbursement of PLI, verified and
reconciled disbursement claims, and compiled data on the scheme's progress and performance.
SECI had the right to conduct physical inspections of applicants manufacturing units and offices and could
seek help from the National Institute of Solar Energy (NISE) to verify the efficiency and temperature
coefficient of modules. If required, MNRE could also designate National Accreditation Board for Testing and
Calibration Laboratories (NABL) accredited labs for such verification. A Project Management Unit (PMU)
was established in MNRE to assist MNRE and SECI in implementing the scheme, with its expenditure met
from the administrative charges.
SECI was eligible to receive 0.50% of the PLI amount disbursed as administrative charges on an annual
basis. The agency submitted progress reports to MNRE on a quarterly basis, including details of
disbursement claims received, amounts disbursed, and reasons for any delays in disbursement.
Impact of PLI Scheme (Tranche II)
65
The Solar Energy Corporation of India (SECI), acting on behalf of the Ministry of New and Renewable
Energy (MNRE), has issued a tender for the selection of solar PV manufacturers under the second tranche
of the Production-Linked Incentive (PLI) Scheme. This initiative aims to promote the development of high-
efficiency solar PV modules. Following a competitive bidding process, SECI issued Letters of Award (LoAs)
to 11 successful bidders in April 2023, authorizing them to establish a combined 39,600 megawatts of fully
or partially integrated solar PV module manufacturing capacity.
Approved List of Models and Manufacturers (ALMM)
The Approved List of Models and Manufacturers (ALMM) is a comprehensive list compiled by the Ministry
of New and Renewable Energy (MNRE) that features approved models and manufacturers of solar
photovoltaic (PV) modules. This list plays a crucial role in regulating the solar industry in India, as it
stipulates that only the listed solar PV models and module manufacturers can be utilized for various solar
projects across the country. These projects encompass a wide range, including government-initiated
projects, government-assisted projects, and those undertaken under government schemes and programs,
as well as open access and net-metering projects. In essence, the ALMM list applies to a broad spectrum
of solar projects, including utility-scale solar projects tendered by the government, rooftop solar installations
with net metering, corporate power purchase agreements (PPA) market, and government-backed schemes
such as KUSUM, thereby ensuring that only approved and reliable solar PV modules are used in these
projects.
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PLI Scheme T2 MNRE
131
USD is arrived at using an exchange rate of 88.3 (average of fiscal 2026)
240
The Approved List of Models and Manufacturers (ALMM) is a registry that allows both domestic and foreign
solar module manufacturers to have their products listed, with the primary goal of ensuring the quality and
reliability of solar panels. By introducing this list, the aim is to provide a benchmark for the industry,
guaranteeing that only high-standard products are used. Notably, as of now, the list exclusively features
domestic manufacturers, with no foreign entities included, highlighting an opportunity for international
manufacturers to explore and comply with the necessary standards to be enlisted.
To be included on the Approved List of Models and Manufacturers (ALMM), manufacturers must obtain a
product and performance certificate from the Bureau of Indian Standards (BIS). This certification is valid for
a period of two years. The BIS is responsible for ensuring the quality of the product, while the ALMM
provides certification for the manufacturing process, the manufacturer itself, and the manufacturing facility,
offering a comprehensive evaluation of the manufacturer's capabilities and adherence to standards.
ALMM consists of two lists:
• List-I (Solar PV models and manufacturers)
• List-II (Solar PV cells and manufacturers)
• List-III (Solar PV wafers and manufacturers) (proposed)
The Ministry of New and Renewable Energy (MNRE) has been regularly updating List I under the Approved
List of Models and Manufacturers (ALMM) order, with the latest update being on October 13
th
, 2025. As per
this update, a total of 93 domestic module manufacturers, collectively having a capacity of 1,16,500 MW,
have been included in the list.
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The Ministry of New and Renewable Energy (MNRE) has recently updated the Approved List of Models
and Manufacturers (ALMM) order, with the latest revision taking place on September 23rd, 2025. This
update of 11 domestic cell manufacturers to List II, bringing the total capacity of these manufacturers to
17,880 MW. This move is expected to promote the growth of the domestic solar industry and encourage
the use of locally manufactured cells in solar projects.
133
Backward Integration Push
134
The government had accelerated its push for creating domestic manufacturing capacities across the solar
value chain by proposing to mandate the use of India-made wafers under the Approved List of Models and
Manufacturers (ALMM) starting June 1, 2028. The Ministry of New and Renewable Energy (MNRE) had
issued a draft amendment to the ALMM order, which proposed creating an ALMM List-III for wafers, similar
to solar modules and cells. Stakeholders were invited to submit their comments and suggestions by October
11, 2025. The amendment had proposed that all projects falling under ALMM's purview must mandatorily
source their modules from ALMM List-I, which in turn had to use solar cells from the ALMM List-II for solar
cells, and these cells had to use wafers from ALMM List-III. As part of its backward integration drive for the
manufacture of all components of the solar component ecosystem, MNRE had announced in December
that the ALMM List-II for cells would be effective from June 1, 2026. The ALMM for solar wafers was not
issued unless it contained at least three wafer manufacturing units, which had to operate independently
and not be under common ownership or control, with an aggregate wafer manufacturing capacity of 15 GW
a year. The ALMM mandate for modules had succeeded in putting in place a robust manufacturing capacity
in a little over four years, with India's module manufacturing capacity crossing 100 GW. In August, the
MNRE had released the first ALMM List-II, which included a solar cell manufacturing capacity of 13 GW.
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ALMM I MNRE
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ALMM II MNRE
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ALMM III MNRE
241
India previously lacked significant wafer manufacturing capacity. The enlistment in the Approved List of
Models and Manufacturers (ALMM) List-III required wafer manufacturers to also possess ingot
manufacturing capacity equivalent to their intended wafer manufacturing capacity. This meant that the
authorized wafer manufacturing capacity under ALMM List-III reflected the manufacturing capacity of both
wafers and ingots. Thin film technology-based modules listed in ALMM List-I, which were manufactured in
integrated solar module manufacturing units, were deemed compliant with the requirement of using wafers
from ALMM List-III and cells from ALMM List-II.
Projects that had submitted bids on or before the designated "cut-off date" were exempt from using ALMM-
listed wafers. The cut-off date was set as one month after the first ALMM List-III for wafers was issued, and
this exemption applied regardless of the project's commissioning date. Additionally, projects that were
exempt from using ALMM-enlisted solar cells were also automatically exempt from using ALMM-enlisted
wafers. The exemption for using ALMM-III wafers extended to projects where bids were submitted or power
purchase agreements were signed before the cut-off date, and subsequent tenders for engineering,
procurement, and construction, solar module supply, or solar cell supply were issued.
Projects covered under ALMM, with bid submission dates falling after the cut-off date, were required to
include a clause in their tender stating that the solar modules, cells, and wafers used must align with the
requirements of ALMM-I, II, and III. Only solar modules that used cells from ALMM List-II, which in turn used
wafers from ALMM List-III, were allowed to remain in ALMM List-I. Module manufacturers that failed to
comply with this condition were removed from the ALMM List-I.
From June 1, 2028, three additional lists will be maintained: ALMM List-I
(a) for solar modules using solar cells and wafers not enlisted in ALMM, ALMM List-I
(b) for solar modules using solar cells enlisted in ALMM but wafers not enlisted in ALMM, and ALMM
List-II
(c) for solar PV cells using wafers not enlisted in ALMM.
These lists contained modules and cells catering to different project categories that were exempted
from using ALMM enlisted wafers but were mandated to use either ALMM enlisted modules or cells.
Guidelines for open access projects
The Indian government has introduced new guidelines for open access projects and net-metering,
particularly with regards to the use of modules, cells, and wafers from the Approved List of Models and
Manufacturers (ALMM). For projects commissioned before June 1, 2028, there is an exemption from using
wafers from ALMM List-III, but these projects must still utilize cells and modules that are enlisted in the
ALMM. However, for projects commissioned after June 1, 2028, the rules become stricter, requiring the use
of modules, cells, and wafers from all three ALMM lists. This implies that any new net-metering or open
access projects initiated after the specified date must adhere to the more stringent criteria, promoting the
use of domestically manufactured components.
Furthermore, the amendment also addresses behind-the-meter and captive projects owned by government
entities. For these projects, if they are commissioned after June 1, 2028, they will be subject to the
requirements of ALMM List-III. This means that government-owned projects will also need to comply with
the domestic content requirements, ensuring that they use approved and locally sourced components.
Notably, there are no exemptions from the Domestic Content Requirement provisions for certain programs
initiated by the Ministry of New and Renewable Energy (MNRE), such as Components B and C of the
Pradhan Mantri-Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) scheme, the PM Surya
Ghar: Muft Bijli Yojana, and the CPSU Program Phase-II. This underscores the government's commitment
to promoting domestic manufacturing and reducing reliance on imported components for renewable energy
projects.
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The International Solar Alliance (ISA)
135
The International Solar Alliance (ISA) is a collaborative intergovernmental organization that was
inaugurated in 2015 by the Prime Minister of India and the President of France at the United Nations Climate
Change Conference in Paris. As an action-oriented and member-driven platform, the ISA aims to accelerate
the global deployment of solar energy technologies. The organization's strategic framework, known as the
'Towards 1000' strategy, outlines ambitious objectives, including mobilizing $1 trillion in investments in solar
energy solutions by 2030, providing clean energy access to 1 billion people, installing 1,000 gigawatts of
solar energy capacity, and reducing global carbon emissions by 1 billion tonnes annually. Guided by its
vision of making the sun's energy brighter for all and its mission of illuminating every home, the ISA operates
from its headquarters at the National Institute of Solar Energy (NISE) in Gurugram, India, driving global
efforts to harness the power of solar energy for a sustainable future.
The goals and key focus areas of ISA
The International Solar Alliance (ISA) has set forth several key objectives aimed at promoting the
widespread adoption of solar energy globally. By 2030, the ISA seeks to facilitate the deployment of 1000
gigawatts of solar energy capacity worldwide and mobilize over $1 trillion in investments for solar energy
projects in its member countries. To achieve these goals, the ISA aims to develop innovative financial
mechanisms that can help reduce the costs associated with solar energy deployment, as well as encourage
research and development in solar energy technologies. Ultimately, the ISA's mission is to establish solar
energy as a primary source of energy for all, making it a mainstream and accessible option globally. To
drive progress in these areas, the ISA's programs focus on four priority areas: analytics and advocacy,
capacity building, programmatic support, and readiness and enabling activities, which collectively provide
a comprehensive framework for advancing the solar energy agenda.
The governance framework of the ISA
The International Solar Alliance (ISA) has a well-defined governance structure, with the ISA Assembly
serving as the supreme decision-making body. Comprising representatives from each member country, the
Assembly is responsible for making key decisions, such as selecting the Director General, overseeing the
functioning of the ISA, and approving the operating budget. The first ISA Assembly was held in October
2018 in Greater Noida, India. The Steering Committee provides strategic guidance to the ISA and monitors
its operations, meeting regularly to review progress and make recommendations to the Assembly. The
Secretariat, headed by the Director General, is the administrative arm of the ISA, responsible for
implementing the decisions of the Assembly and the Steering Committee. The Director General leads the
ISA's operations, carries out the functions of the Secretariat, and is accountable to the ISA Assembly, with
a tenure of four years and eligibility for re-election, ensuring continuity and stability in the organization's
leadership.
How did the ISA originate and evolve over time
The International Solar Alliance (ISA) was born out of a collaborative initiative between India and France to
combat climate change by promoting the adoption of solar energy solutions. The concept of the ISA was
first introduced on the sidelines of the 2015 United Nations Climate Change Conference (COP21) in Paris,
marking a significant step towards global cooperation on renewable energy. Following the amendment of
its Framework Agreement in 2020, the ISA has become a truly global entity, with all member states of the
United Nations now eligible to join. As of now, over 110 countries have signed the ISA Framework
Agreement, with 90 countries having ratified the agreement to become full-fledged members of the alliance.
This widespread participation underscores the growing recognition of the importance of solar energy in
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ISA
243
addressing the global climate crisis and the ISA's role in facilitating international cooperation to achieve a
sustainable energy future.
The significance of ISA
India's involvement in the International Solar Alliance (ISA) presents a unique opportunity for the country to
demonstrate its leadership in the renewable energy sector. With an ambitious target of achieving 450
gigawatts of renewable energy capacity by 2030, India can leverage the ISA platform to promote solar
energy deployment not only domestically but also among its member countries, thereby accelerating its
progress towards this goal. Furthermore, by taking a leading role in the ISA, India can enhance its global
reputation as a responsible and committed player in the pursuit of sustainable development, exercising its
soft power in the international arena. Additionally, as a developing country highly vulnerable to the impacts
of climate change, India's participation in the ISA can facilitate its efforts to mitigate and adapt to the
challenges posed by climate change, ultimately contributing to a more sustainable and resilient future for
the nation.
The International Solar Alliance (ISA) plays a vital role in promoting clean energy globally, with a primary
objective of advancing the use of solar energy as a clean, renewable, and sustainable source of energy.
This endeavor is crucial for achieving climate change goals and mitigating the impacts of global warming.
Furthermore, the ISA aims to mobilize over $1 trillion in investments in solar energy by 2030, which can
create new business opportunities, stimulate economic growth, and generate employment. Additionally, the
ISA's focus on solar energy can help increase access to energy, particularly in rural and remote areas,
thereby contributing to poverty reduction and overall human development. By promoting solar energy, the
ISA can help bridge the energy gap and ensure that everyone has access to reliable, affordable, and
sustainable energy, ultimately contributing to a more equitable and sustainable future for all.
Various projects and initiatives of ISA
Solar Technology Application Resource Centre (STAR C)
The Solar Technology Application Resource Centre (STAR C) initiative is a key capacity-building and
institutional strengthening program launched by the International Solar Alliance (ISA) to support its
developing member countries. The primary objective of the STAR C initiative is to foster the development
of human capacity and skills within member countries, enabling them to undertake significant energy
transition activities, create new job opportunities, and contribute to their overall economic growth. These
centers serve as hubs of technology, knowledge, and expertise on solar energy, providing a go-to platform
for member countries at both regional and national levels. By establishing these centers, the ISA aims to
empower its member countries with the necessary resources and expertise to accelerate their transition to
solar energy, driving sustainable development and economic prosperity.
Indian Technical and Economic Cooperation (ITEC) Scheme.
The Government of India has been actively supporting the International Solar Alliance (ISA) through the
Indian Technical and Economic Cooperation (ITEC) Scheme, which provides training to master trainers in
the field of solar energy. Under this initiative, the Government of India bears all costs for a 21-day training
program, aimed at enhancing the skills and knowledge of participants in solar energy technologies. In the
2018-2019 period, the ITEC program facilitated the training of 133 candidates from 25 countries at the
National Institute of Solar Energy in Gurugram, India. This capacity-building effort not only contributes to
the global dissemination of solar energy expertise but also underscores India's commitment to supporting
the ISA's mission of promoting solar energy deployment worldwide.
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ISA solar fellowship for mid-career professionals
The International Solar Alliance (ISA) offers a fellowship program designed for mid-career professionals,
aiming to enhance the long-term development capabilities of its member countries by creating a pool of
skilled and qualified professionals who can effectively manage solar energy projects, programs, and
policies. The fellowship is awarded to mid-career professionals from ISA member countries, with the
expectation that they will contribute to policy development in their home countries upon completion of the
program, thereby supporting the ISA's objectives. The inaugural batch of the fellowship program, which
commenced on July 22, 2019, comprises 21 candidates from 18 ISA member countries, who are pursuing
master's degrees in Renewable Energy Management and Economics. This initiative not only fosters
capacity building and knowledge sharing among member countries but also plays a crucial role in achieving
the ISA's mission of promoting solar energy globally.
One Sun, One World, One Grid (OSOWOG) initiative.
The concept of One Sun, One World, One Grid (OSOWOG) was first proposed by India in 2018, with the
ambitious goal of creating a global network that connects energy supplies across international borders. The
underlying vision of OSOWOG is rooted in the idea that "the sun never sets," symbolizing the constant
availability of solar energy somewhere in the world. By establishing a common grid that interlinks regional
grids, the OSOWOG initiative aims to facilitate the transfer of renewable energy, particularly solar power,
across the globe. This innovative approach seeks to harness the full potential of renewable energy sources,
promoting a more sustainable and interconnected energy landscape worldwide.
The International Solar Alliance (ISA) is working to increase access to affordable and sustainable energy
solutions through various initiatives. One key area of focus is on providing affordable finance on a scale,
leveraging innovative financing mechanisms such as the Green Climate Fund and the World Bank's
International Finance Corporation to make solar power more accessible and affordable for all. Additionally,
the ISA is promoting the development of mini-grids powered by solar energy, which can provide electricity
to communities that are off-grid or have limited access to electricity, thereby enhancing energy access and
promoting economic development. The ISA is also involved in a range of other projects, including the
promotion of solar-powered agriculture pumps, solar rooftop installations, solar water heaters, and solar
street lighting, among others, aiming to harness the potential of solar energy to transform lives and
communities worldwide.
The challenges and limitations of the ISA
Despite the significant strides made by the International Solar Alliance (ISA) since its establishment, the
organization faces several challenges that hinder its progress and effectiveness. One of the primary
concerns is funding, as the ISA requires substantial financial resources to achieve its ambitious objectives
of promoting solar energy in developing countries, and while it has received support from countries like
France and India, more funding is needed. Another challenge is the limited participation of countries, with
only over 100 nations having signed the ISA Framework Agreement, which restricts the organization's ability
to achieve its goals and expand its impact globally. Furthermore, the diverse energy policies and regulations
among countries create a hurdle in harmonizing them and establishing a level playing field for solar energy,
making policy coordination a significant challenge. Lastly, the implementation of solar energy projects is
often hindered by factors such as inadequate infrastructure, political instability, and insufficient financing,
leading to a lack of successful project implementation and undermining the ISA's overall impact.
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How can ISA effectively guide its future direction
To chart a successful future course, the International Solar Alliance (ISA) can consider several strategic
approaches. Firstly, enhancing collaboration with international organizations, governments, and private
sector entities can help the ISA leverage a broader range of resources and expertise in the solar energy
sector, thereby amplifying its impact. Secondly, expanding its membership by engaging with more countries,
particularly those with significant potential for solar energy adoption, can increase the organization's reach
and influence. Implementing policy reforms in member countries is also crucial, as this can involve providing
incentives for solar energy adoption and reducing subsidies for fossil fuels, thereby creating a more
favorable environment for solar energy growth. Furthermore, the ISA can play a pivotal role in facilitating
financing for solar energy projects in member countries, potentially by establishing a dedicated fund or
collaborating with international financial institutions. Lastly, fostering innovation in the solar energy sector
is essential, and the ISA can achieve this by supporting research and development activities, as well as
providing a platform for the sharing of best practices and knowledge, which can help drive the development
of more efficient and affordable solar energy technologies.
R&D incentives:
SERIIUS (2012)
136
Was a collaborative effort between India and the
US aimed at foresting high impact research on
development of next-generation solar
photovoltaics, specially focusing on advanced
materials and novel device architectures. The
partnership includes several leading research
institutes and universities such as Indian Institute
of Science, National Renewable Energy
Laboratory and others.
Indo-German Partnership
137
Established to foster cooperation between India
and Germany in the field of solar energy, including
PV manufacturing. It included focus on developing
advanced PV technologies, improving efficiencies
and reducing cost.
Industrial incentives:
Domestic content requirement (2010-2016 and
2024 onwards)
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Introduced as a part of JNNSM to protect
domestic Solar PV manufacturing by mandating
use of domestically manufactured solar cells and
modules. The move, however, faced several
challenges as it led to increased costs in the
absence of a large manufacturing base. A 2016
WTO ruling resulted in progressive phase out of
the measure. However, the announced PM Surya
Ghar Yojana mandates use of DCR modules to
solarise 1 crore
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households in India
Modified – Special Incentive Package scheme
(2012)
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Notified with the objective of incentivizing
investments in the electronic systems design and
manufacturing (ESDM) industries. Solar PV
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US-India Partnership to Advance Clean Energy
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Bundesverband Solarwirtschaft e.V.
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MNRE
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PM Surya Ghar MNRE (June 2024)
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Special incentive Package MEITY (Feb 2016)
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manufacturing constituted one of the eligible
verticals. The scheme provided 25% capex
subsidy for solar PV plants (polysilicon, ingot,
wafer, or cells) set up outside SEZs, and a 20%
subsidy in the case of plants with SEZs. It also
reimbursed excise or countervailing duty on
imports of capital equipment for non-SEZ plants. A
10% subsidy was also provided on production
turnover for both SEZ and non-SEZ facilities. The
scheme had an approved incentive outlay of Rs
10,000 crore, applications till 31st Dec 2018.
However, only Rs 1,781 crore ($202 million
141
)
was till Dec 2022. Though the M-SIPs received
applications from Solar PV developers, it was not
effective in providing significant support as it was
not particularly targeted towards solar PV and
applicants had to compete with applicants from
the broader ESDM sector for incentives.
Approved List of Models and Manufacturers
(FY20 to present)
142
Introduced by MNRE to mandate usage of only
listed models and manufacturers for the
government utility-scale, net metering and open
access projects from April 2022. The measure,
while in abeyance for years, was aimed to provide
a demand boost to domestic manufacturing
industry which was at the cusp of witnessing an
exponential demand of 38-42 GW per annum by
the end of the decade. The measure was
reimposed from April 2024 onward. Over the
years. MNRE has frequently aimed at updating
the list by improving the minimum efficiency of
listed modules and increasing enlisted capacity.
The capacity doubled by April 2024 to 44 GW
from 22 GW in September 2022, providing
comfort for the developers. Despite 4 years of
announcement, the list has only restricted to
domestic players thereby limiting foreign
competition and has touched 100 GW
4
in August
2025. The ministry also rolled out ALMM II in July
2025 with 13 GW
143
enlistment to develop cell
manufacturing capacity
Production linked incentive scheme (2021 –
Present)
144
Introduced in an effort to improve localisation in
the manufacturing industry, the MNRE allocated
Rs 24,000 crore ($2.7 billion) performance-based
incentive to install high efficiency solar capacities
of 48.3 GW in two tranches. The scheme targets
expansion across various levels of P-M (24.1
GW), W-M (40.9 GW) and C-M (48.3 GW). The
move is expected to reduce import reliance on
downstream components and act as a kickstarter
to the capex intensive upstream value chain of
polysilicon and wafers.
141
USD arrived using an exchange rate of 88.3 (average of fiscal 2026)
142
ALMM MNRE (Mar 2021)
143
ALMM II MNRE (July 2025)
144
PLI Scheme MNRE (Apr 2021)
247
Skilling incentives:
Skill development initiative under NSM (2009)
145
The National Institute of Solar Energy under
MNRE launched various training programs for
solar PV technicians and engineers that helped
train a significant workforce in solar PV
installations, maintenance, and manufacturing
process, supporting the growing solar energy
Skill council for green jobs (2015)
146
The skill council for green jobs (SCGJ)
collaborated with the industry stakeholders to
develop national occupational standards and
certifications programs for solar PV installers and
technicians.
Green skill development program (2017)
147
It collaborated with training institutes to develop
courses on environmental sustainability and green
technologies, including solar.
International cooperation and platforms
India also co-founded and hosts the International Solar Alliance (ISA) a 107-member
148
, treaty-based body
driving global solar deployment - which gives India both convening power and practical toolkits that Indian
PV firms can already use. ISA has moved from dialogue to execution through PV-centric programs like
Scaling Solar Rooftops and Scaling Solar Mini-grids, plus the Global Solar Facility (GSF)- a blended-finance
platform. ISA is operationalising with the World Bank’s Multilateral Investment Agency (MIGA). On the
finance side- India tied ISA cooperation to concessional Lines of Credit - $1.4 billion announced at the
founding conference for 27 solar projects in 15 countries
149
, and a further USD 2 billion set aside for solar
in Africa- implemented via EXIM Bank
150
in coordination with ISA member countries. In December 2024,
India signed an agreement with ISA to implement solar energy project in Fiji. This initiative was valued at
$2 million and was funded by India as part of its commitments under the Quad Climate Working Group
145
Ministry of Skill Development and Entrepreneurship
146
Skill India
147
Ministry of Environment, Forest & Climate Change
148
ISA
149
PIB (Feb 2019)
150
ISA MNRE (Oct 19)
248
Challenges and Recommendations
Overall Landscape
India's solar manufacturing sector has witnessed significant growth, driven by comprehensive government
initiatives and policies. The solar module manufacturing capacity has increased to 100 GW by August 2025,
up from less than 3 GW in 2014. To boost local manufacturing, the government has implemented several
monetary and non-monetary benefits across capital expenditures (capex) and operating expenses (opex)
for the entire value chain. However, much of this growth has occurred over the past four fiscal years,
following the introduction of the Production Linked Incentive scheme and the Approved List of Models and
Manufacturers. Furthermore, capacity expansion has been largely concentrated on the downstream value
chain, with the upstream chain still heavily reliant on imports. Furthermore, as per CEA’s NEP Transmission
Plan 2024, the country's solar installations are expected to reach 365 GW by fiscal 2032, resulting in
demand of 283 GW between fiscals 2025 and 2032. Thus, increasing upstream capacity will be crucial to
reducing import dependence. In addition to expanding upstream capacities, the value chain will require
timely protection to maintain a level playing field, as more than 80% of the value, along with the necessary
capital goods, is currently concentrated in China.
While the growth in domestic solar manufacturing capacity represents a significant milestone, the sector is
now entering a phase where the focus extends beyond capacity creation alone. The development of a
competitive and resilient solar PV manufacturing ecosystem will depend on several interconnected factors
across the value chain. These include access to specialised manufacturing equipment, continued
investment in research and development, availability of skilled manpower, a supportive industrial and
regulatory environment, and access to diversified export markets. The following sections examine these
areas and outline opportunities to strengthen domestic value addition, support upstream manufacturing,
and enhance the long-term competitiveness of India's solar PV sector.
Figure 87: Need to focus on ancillary parameters after incentivising the production
Source: Crisil Intelligence Land and utility identification
Desi gn and construction
Setting up of
capital go ods
for production
Labou r
and sta ff
Production of
domestic cells and
module s
Do mestic
demand
Exports
Finance
Power
and
utilities
Ra w
materials
Re search and
development
Land and utility procurement
Low exposure of central and
state entities in outst andin g
loan book
Sta te driven in centives.
Central single window
clearance syste m can be
considered.
Sh ortage of skilledlabour
High import of critical capital
goods for wafers and
polysilicon
Minimal research and
development
PLI for expansion of
polysilicon to modules.
Imports of cells to module
protected by BCD of 25%
and 40%. BCD is also
applicable on glass
Domestic dema nd protected
by ALMM and ALCM
Exports concentrated to the
US
Ce ntralisedsupport can be
considered
Ne eds focus
Strong su pport protects d eman d
Ce ntral suppo rt exists; imports
continue
249
1. Access to machinery and equipment:
Access to capital goods for the manufacturing of polysilicon, wafers, and solar cells is crucial for the long-
term growth and competitiveness of India's solar manufacturing sector. Without these critical inputs,
domestic manufacturers remain heavily reliant on imports, leaving them vulnerable to supply chain
disruptions, price fluctuations, and geopolitical risks. To mitigate this challenge, the Indian government has
introduced the Production Linked Incentive (PLI) scheme for High-Efficiency Solar PV Modules, with a total
outlay of Rs 24,000 crore ($2.7 billion). The scheme aims to establish a comprehensive, end-to-end solar
manufacturing ecosystem in India. However, while the PLI scheme provides essential financial support, its
ultimate success depends on manufacturers' ability to access the necessary capital goods to produce
polysilicon, wafers, and cells on a large scale.
As the industry seeks to deepen domestic value addition and expand into upstream segments such as
polysilicon, ingots, and wafers, the availability of specialised manufacturing equipment assumes increasing
importance. Unlike module assembly, upstream manufacturing requires highly sophisticated production
lines, specialised engineering expertise, and access to advanced process technologies. Consequently, the
pace at which India can expand its upstream manufacturing base will depend not only on policy support
and investment appetite, but also on the industry's ability to procure, install, and operationalise the
necessary capital goods in a timely manner.
Challenges:
Majority of the capital goods market for the solar value chain is concentrated in China, which has resulted
in restricted access to these essential goods for Indian manufacturers. Prominent industry players have
expressed concerns about the access to the supply of W-C-M equipment by Chinese companies. Further,
industry leaders have also voiced similar concerns in the stakeholder consultation round. Limited access
to capital goods could lead to a shortfall in capacity expansion in the upstream segments, creating
bottlenecks for self-reliance and potentially delaying the nation's renewable energy targets. Furthermore,
this could perpetuate the dependence of manufacturers on imports. The consequences of continuing this
could further impact the commissioning timelines under the PLI scheme, potentially hindering the growth of
India's solar manufacturing sector. It should be noted that developments in global supply chains, evolving
trade relationships, and ongoing investments by industry participants may have improved the availability of
certain categories of equipment since this challenge was first identified. In parallel, policy measures aimed
at strengthening domestic manufacturing capabilities continue to evolve. Nevertheless, procurement of
specialised capital goods for upstream solar manufacturing remains an important consideration for the long-
term development of a fully integrated domestic solar PV value chain.
Recommendations
1. Industry players may look to expand their global presence to identify alternative sources for procuring
capital goods and reduce dependence on a limited supplier base.
To bridge gaps in the domestic supply chain, Indian companies may adopt a collaborative approach by
forming joint ventures and strategic partnerships for upstream manufacturing, particularly in polysilicon,
ingots, and wafers.
This is especially important given India’s currently limited upstream manufacturing capacity and constrained
access to specialised capital goods, both of which hinder the development of a self-reliant solar PV
ecosystem. Given that upstream production is highly capital-intensive and requires specialised technical
expertise, joint ventures can help mitigate financial risk, accelerate technology transfer, and support the
creation of a sustainable indigenous manufacturing base.
250
Such partnerships would not only help address critical supply bottlenecks but also enhance the
competitiveness of India’s domestic solar PV industry by fostering innovation, resilience, and scale. Over
time, this could position India as a more significant player in the global renewable energy manufacturing
landscape.
The countries listed below present promising opportunities for diversifying capital goods procurement and
strengthening supply-chain resilience:
Table 37: India shares positive relations with most countries that possess capital goods
Source: Crisil Intelligence
Figure 88: Players can increase their presence through multiple strategies below
Source: Company filings
251
2. Indian companies may also selectively explore partnerships with established Chinese firms, particularly
where such collaborations can provide access to advanced technology, process know-how, equipment
integration capabilities, and operational expertise. While supply-chain diversification remains a strategic
priority, carefully structured partnerships could help shorten the learning curve and build domestic
capabilities more efficiently, subject to regulatory, geopolitical, and commercial considerations.
The industry has already witnessed the emergence of joint ventures and acquisitions as a means to expand
strategic presence. However, to further accelerate growth, this strategy needs to be scaled up and
replicated in alternative geographies, enabling access to critical capital goods and research and
development (R&D) capabilities.
While access to machinery and equipment forms the foundation for manufacturing capacity creation, long-
term competitiveness increasingly depends on technological capabilities and continuous innovation. As
global solar manufacturers continue to improve cell efficiencies, optimise production processes, and reduce
manufacturing costs, technology development has become an increasingly important differentiator.
Consequently, alongside investments in physical infrastructure, sustained focus on research and
development will be critical to strengthening India's position across the solar PV value chain and supporting
the transition towards higher-value manufacturing activities.
2. R&D spending:
R&D has been pivotal in advancing solar cell technology, leading to significant improvements in efficiency,
cost-effectiveness, and environmental impact. Initially, solar cells were primarily composed of silicon,
offering limited efficiency. Through dedicated R&D, alternative materials such as perovskite have been
explored, resulting in higher efficiency rates. For instance, Qcells (South Korea) achieved a world record
by developing a large-area silicon solar cell with a perovskite top layer that reached 28.6% efficiency. These
advancements not only enhance energy output but also reduce the space required for installation, making
solar power more accessible and practical. The Chinese players have applied this principle over the value
chain by reinvesting the cost savings from government grants into R&D. This has resulted in a significant
fall in module prices over the years.
As India seeks to strengthen its position across the solar PV value chain, technological leadership is
becoming an increasingly important source of competitive advantage. Improvements in manufacturing
processes, cell efficiencies, material utilisation, and product reliability have enabled leading manufacturers
globally to reduce costs while improving performance. Consequently, sustained investment in research and
development is emerging as a key factor in determining long-term competitiveness across the solar PV
value chain, particularly as manufacturers’ transition towards more advanced technologies.
Challenges:
The R&D spend as a share of revenue by Indian players was negligible compared to their Chinese
counterparts, which, on average, has been 3% of revenue and extends to 6% for some players. High in-
house R&D spending has enabled significant evolution in technology and a reduction in costs over the
period. Over the past six years, the prices of solar modules have fallen by 61% to $0.11/Wp in 2024,
compared to 2018. Consequently, the number of patents filed by Indian players is minimal compared to
their Chinese counterparts.
252
Figure 89: R&D investments critical to reduce cost of production
Note: Players considered for global analysis are LONGi Solar, Jinko Solar, and Canadian Solar. The above information is on CY
basis while that for Indian players is on fiscal year basis
The government has attempted to foster academia-industry partnerships. However, the spending on R&D
has been low. Between FY2021-22 and FY2026-27, MNRE’s dedicated Research and Development budget
remained a very small component of the Ministry’s overall expenditure, averaging approximately 0.28% of
its revenue budget over the period. The total funds disbursed for R&D by the MNRE till March 2026 were
$14 million, as opposed to the $2.7 billion in total grants disbursed by the Chinese government.
It is important to note that efforts to strengthen domestic innovation capabilities have evolved over recent
years. Both government and industry stakeholders have increasingly recognised the importance of
research, technology development, and academia-industry collaboration in supporting the growth of the
solar manufacturing sector. While some of the challenges identified in this section may be gradually
addressed through ongoing initiatives and future policy interventions, continued focus on R&D will remain
important as solar technologies, manufacturing processes, and industry requirements continue to evolve.
Figure 90: Government subsidies enable more R&D investments
253
Notes: Players considered for global analysis are LONGi Solar and Jinko Solar. The above information is on a CY basis.
Exchange rate of INR 84/USD used for MNRE R&D funds released.
The grant subsidies received by Chinese players is total grants. India’s grants released are for R&D. Beyond R&D, India has also
announced $2.9 billion incentive under the production linked incentive scheme. Incentives are yet to be disbursed as of March 2026.
Source: MNRE, Annual filings
Recommendations
1. A performance-based R&D incentive may be considered to encourage R&D among domestic players.
The MNRE can expand financial support under the Renewable Energy Research and Technology
Development (RE-RTD) Programme, which received a cumulative allocation of only $17 million over
FY2021-22 to FY2026-27—equivalent to just 0.28% of the Ministry’s total budgetary allocation for the
entire six-year period.
A mechanism suggested below could be followed:
• Increase budgetary allocation for solar R&D:
MNRE could consider increasing its budgetary allocation for solar R&D in line with global best
practices. The focus could be on developing advanced cell technologies such as TOPCon, HJT,
and Perovskite, as well as promoting innovation to reduce the production cost of existing
technologies such as mono-crystalline and thin-film solar PV.
• Leverage ANRF funding for solar technology commercialisation:
MNRE could facilitate access for domestic solar manufacturers and technology developers to the
₹1 lakh crore Research, Development and Innovation Fund under ANRF. Eligible projects—
particularly those involving next-generation solar cells, indigenous materials and equipment,
higher-efficiency technologies, and process innovations at Technology Readiness Level 4 or
above—could receive long-term, concessional financing through approved fund managers, helping
bridge the gap between laboratory research, pilot-scale validation and commercial deployment.
• Introduce a production-linked R&D mandate:
While the PLI scheme aims to incentivize higher-efficiency solar PV manufacturing, the R&D-linked
component could be enhanced to reward manufacturers that actively invest in research and
innovation. In addition, a milestone-based incentive programme could be introduced to encourage
manufacturers to invest in R&D and capacity building. Under this model, manufacturers could
receive incentives upon achieving pre-defined outcomes such as setting up pilot production lines,
developing indigenous process technologies, filing patents, improving module efficiency, localising
capital equipment, or collaborating with academic and research institutions. This would encourage
private-sector investment, support the creation of domestic intellectual property, and help India
move beyond assembly-led manufacturing towards technology-led competitiveness.
• Facilitate public-private partnerships in R&D:
Collaboration between government laboratories, academic institutions, and private manufacturers
could be strengthened by incentivizing a larger number of R&D projects annually, beyond the recent
list of five projects announced up to December 2024.
• Establish a dedicated solar R&D fund:
A dedicated fund could be considered to finance cutting-edge solar research, with a focus on
scaling up indigenous capabilities in polysilicon, wafer, and cell production.
254
• Fast-track intellectual property protection:
Intellectual property protection could be fast-tracked to encourage innovation, reduce uncertainty
for investors, and promote greater private-sector participation in solar R&D.
• Establish an industry-led Solar PV Manufacturing R&D Consortium:
MNRE may facilitate a consortium of domestic solar manufacturers, equipment and material
suppliers, NISE, NCPRE, IITs and other relevant research institutions to undertake mission-
oriented R&D aimed at commercial manufacturing outcomes. The consortium may focus on
production-line challenges such as improving cell efficiency and yield, reducing critical-material
consumption, developing indigenous equipment and process technologies, improving module
reliability under Indian climatic conditions, and advancing TOPCon, HJT and tandem technologies
to pilot-manufacturing readiness. Projects would require participation and co-funding from at least
one domestic manufacturer, access to a production line for validation, and clearly defined
commercialisation milestones. Government may provide support against measurable outcomes—
laboratory validation, pilot-line demonstration, reliability certification and commercial-line
deployment—rather than research expenditure alone.
2. While the government strengthens mechanisms to incentivize R&D, players may consider
increasing their R&D spend as a percentage of revenue to keep up with their Chinese counterparts.
This will ensure innovation and safeguard the industry from any potential patent wars in the future.
To do so, the players can exercise:
• Strategic ties with global players to bring in in-house R&D programs.
• Increase R&D spending to an average of 3% of revenue, as seen in the global market.
While investments in research and development are critical to advancing technology and improving
manufacturing competitiveness, the successful adoption of these innovations ultimately depends on the
availability of a suitably skilled workforce. As solar manufacturing technologies continue to evolve from
conventional cell architectures towards advanced technologies such as TOPCon, HJT, and future tandem
configurations, the demand for specialised technical capabilities is expected to increase. Accordingly,
workforce development becomes an important complement to technology development and will play a key
role in supporting the long-term growth of India's solar PV manufacturing sector.
3. Availability of skilled labour:
India’s solar photovoltaic industry employs approximately 3.2 lakh people, across grid-connected and off-
grid applications. As per IRENA (International Renewable Energy Agency), 1 GW of solar module
generation creates anywhere between 1,085 to 2,020 jobs. With India set to expand its cell-to-module
capacity base by 48.3 GW under the PLI, the next few years will result in at least 1 lakh direct and indirect
jobs. Thus, the availability of skilled labour will be crucial. This is because manufacturers are expected to
focus on evolving technologies, such as Mono PERC, TOPCon, and HJT, to maximise efficiencies. As
technology evolves, the manufacturing process becomes complex. This is because the fabrication of solar
cells relies on a multitude of high-purity, semiconductor-grade gases and chemicals, which are critical inputs
at each stage of the manufacturing process. To ensure safe, efficient, and high-yielding solar cell production,
the effective management of utilities is paramount.
As manufacturing facilities become larger and technologies become more sophisticated, workforce
capabilities assume increasing importance across production, quality control, equipment maintenance,
process optimisation, and research functions. The transition towards advanced cell technologies is
255
expected to increase demand for specialised technical expertise, making skill development an important
enabler of both manufacturing scale-up and operational efficiency across the solar PV value chain.
Table 38: PV technologies - Complexities and efficiency
Technology Mono PERC TOPCon HJT Tandem
Manufacturing
complexity
Least complex.
Leverages mature
technology with
minimal additional
process like
passivation layers
and rear side
contact
More complex than
PERC, requires
precise deposition
of ultra-thin tunnel
oxide and
polysilicon layers
High complexity due
to the integration of
both crystalline
silicon and
amorphous silicon
layers, requiring
advanced
deposition and
curing equipment
Most complex,
involving stacked
cells, e.g.
perovskite-silicon,
with precise
material engineering
to optimise
efficiency and
bandgap alignment.
Losses and
damages
p-type MONO
PERC cells are
prone to LID and
PID losses. Such
losses are high
compared to peers
PID and LID losses
in TOPCon are
lower compared to
MONO PERC
Not prone to PID
and LID losses,
since general cell
construction is n-
type
Affected by LID and
PIC moderately
Temperature Co-
efficient of Power
-0.35% / °C
PERC cells
experience a more
noticeable power
decline at elevated
temperatures
-0.29% / °C
Offers a significant
power improvement
over PERC cells at
elevated
temperatures
-0.24% to -0.26% /
°C
Lowest temperature
coefficient – HJT
cells experience
minimal power loss
even at high
temperatures
Limited data
Efficiency 23-24% 24.5-25% 25-25.5% 26-28%
Note: LID – Light-induced degradation. PID – Potential-induced degradation
Source: ITRPV, Industry
Challenges:
• The challenge of complexity could be further exacerbated by low productivity. The average productivity
of an employee per MW in India is lower than that of major global players. The productivity of an
employee per MW (measured by dividing total capacity by the number of employees) for major global
players has increased between 2020 to 2023 by ~3 times owing to increase in scale where the PV
capacity (P-W-C-M) of three major global players (LONGi solar, Jinko Solar and Canadian Solar has
increased ~5 times between 2020 to 2023 to 803 GW. While India’s cumulative PV capacity (W-C-M)
has too grown at a sharp pace, estimated over 100 GW by August 2025 productivity levels are only a
about a third presently compared to global peers mainly due to scale effect and integrated processes.
• The industry witnesses a continuous evolution in technology, where cells have evolved from
Polycrystalline to HJT. The availability of skilled labour thus becomes a critical parameter to drive
innovation in R&D. Hence, availability of labour will be crucial to scale manufacturing technologies in
the future.
256
While the government offers a grant-in-aid of up to Rs 50 lakh ($56,625
151
) to educational institutions for
upgrading laboratory facilities, the same is limited to 2 institutes per annum.
It should be noted that workforce development has received increasing attention from both industry
participants and government agencies in recent years. Various training, skilling, and vocational initiatives
have been introduced or expanded to support emerging manufacturing sectors. In parallel, several
manufacturers have strengthened internal training programmes to support evolving operational
requirements. While skill availability continues to be an important consideration as the industry scales, these
ongoing efforts may help address some of the capability gaps identified in this section over time.
Recommendations:
1. An increase in the budgetary allocation to training and increase the limit on the recipients for grants
in aid beyond 2 institutes per annum could be considered.
a. The government could consider establishing a dedicated fund, with the allocation determined
based on sectoral needs, alongside a routine oversight mechanism to monitor implementation.
Participating institutes may be required to submit quarterly financial and performance reports
to ensure alignment with grant objectives. Accountability could be further strengthened through
third-party independent audits, similar to practices adopted by the National Skills Development
Corporation. An outcome-based funding model may also be adopted, similar to the PM-
KUSUM scheme, where fund disbursement is linked to clearly defined milestones such as
training targets achieved, industry collaborations established, publications, patents filed,
prototypes developed, and technology commercialisation outcomes.
b. Training may be provided to institute personnel in project management, curriculum design,
and industry engagement. Curricula should be developed in collaboration with industry to
ensure practical relevance, with higher weightage assigned to hands-on training, internships,
apprenticeships, and industry-based projects.
c. A combination of data-backed decision-making, milestone-linked incentives, and strong
accountability mechanisms can help MNRE bridge skill gaps, promote domestic innovation,
encourage manufacturers to invest in capability development, and ensure the judicious use of
grant-in-aid funding.
2. The industry stakeholders could consider setting up an industry-led solar skills development council.
The following framework can be used:
a. Setting up of dedicated council under Skill India Mission and MNRE, led by key industry
players to ensure collaboration with ITIs, polytechnic institutes and engineering colleges to
create industry-relevant curricula with frequent revision as per evolution in the industry.
b. Introducing structured training programs for key manufacturing roles such as polysilicon and
wafer processing, solar cell and module assembly and quality control and automation in solar
factories with government backed certifications
c. The proposed council could collaborate with MSDE, NSDC and MNRE to deliver solar-
manufacturing courses under PMKVY 4.0, using “Short-Term Training and Special Projects”
for new entrants and “Recognition of Prior Learning” to upskill and certify the existing
workforce. These interventions could be complemented by on -the-job training and
apprenticeships under the National Apprenticeship Promotion Scheme.
151
USD arrived at using an exchange rate of 88.3 (average of fiscal 2026)
257
d. Partner with global solar leaders (Germany, USA, South Korea) to train Indian workers in
cutting-edge manufacturing techniques. A precedent is seen in automobiles sector with Japan
and Germany for EV skilling. Partnerships could also be explored with China to access solar-
manufacturing know-how and accelerate technology transfer for workforce training.
e. Develop e-learning platforms and certifications.
Access to capital goods, investment in innovation, and the availability of skilled manpower collectively form
the foundational building blocks of a competitive manufacturing ecosystem. However, the pace at which
manufacturing capacity is established and expanded also depends on the broader business environment.
Factors such as land availability, infrastructure readiness, regulatory approvals, power access, and policy
clarity can influence investment decisions and project execution timelines. Consequently, ease of doing
business remains an important consideration in supporting the continued growth of India's solar PV
manufacturing sector.
4. Ease of doing business:
While the ease of doing business varies across states, the thrust from government initiatives such as PLI,
BCD, and ALMM I and II has created a conducive policy landscape for Indian manufacturers to scale up
their operations rapidly. In addition to the above, the regulators could consider taking two additional steps
to support Indian manufacturers in setting and scaling up their factories.
As the industry moves towards larger and more integrated manufacturing facilities, the importance of
supporting industrial infrastructure and efficient regulatory processes is expected to increase. In addition to
policy incentives, factors such as land availability, utility access, connectivity, approval timelines, and
infrastructure readiness can influence the speed and scale of manufacturing investments. Strengthening
these enablers can help improve project execution, support capacity expansion, and enhance the overall
competitiveness of India's solar PV manufacturing ecosystem.
i. Identifying manufacturing clusters
Need: Manufacturing hubs concentrate manufacturers and suppliers in the same location, driving cost
reduction, subsidy utilities, improve supplier options and innovation.
Recommendation:
A precedent has been established in the China for the same. Infrastructure on these lines was set up in
China (Pearl River Delta) and Malaysia (Kulim and Penang) for solar. In India, the cluster-based
manufacturing model has already delivered significant benefits across sectors such as automobiles,
electronics and chemicals, providing a strong domestic precedent for establishing a similar integrated
manufacturing ecosystem for the solar industry.
State governments could consider attracting investments from solar manufacturers and their suppliers by
developing manufacturing hubs. Given the scale of anticipated investment, multiple states have an
opportunity to attract manufacturers and create multi-gigawatt scale hubs.
a. Deemed approval of open-access renewable energy and removal of net metering limits:
States could consider providing deemed approval for open-access renewable energy projects and
reviewing net metering limits. This may help manufacturers access affordable and reliable clean
power, potentially supporting operational efficiency and sustainability goals.
b. Identification of suitably sized land parcels: By identifying and aggregating land parcels with
competitive leasing rates and ensuring connectivity to road, port, and air infrastructure, states might
lower entry barriers for investors. Such steps could enhance the attractiveness of the state for
potential manufacturers.
258
c. Including solar manufacturing as a thrust/priority sector: States could explore designating
solar manufacturing as a thrust or priority sector in their industrial policies. This could unlock
targeted incentives and signal policy intent, potentially encouraging both anchor investments and
the development of supporting supply chains.
d. Support for labour requirements: Labour availability may be enhanced through skill-training
initiatives tailored to the solar manufacturing sector, and by developing residential facilities for
workers, particularly in underdeveloped regions. Such measures might help ensure a steady supply
of skilled labour and support wider community development.
e. Long-term tie-ups and anchoring hubs to solar parks: As state-owned utilities account for a
significant share of power procurement and distribution, they could evaluate the possibility of long-
term tie-ups with developers and manufacturers in the state to secure solar module supplies,
possibly at favourable costs. States might also consider anchoring manufacturing hub development
to large-scale upcoming solar parks, which could provide integrated infrastructure and shared
benefits.
f. Co-located common R&D facility: Establish co-located common R&D and testing facilities within
each manufacturing hub, anchored by India’s National Institute of Solar Energy (NISE) – which
already operates solar PV module test laboratories, reliability and performance test rigs, and
certification, standardization and skill development capabilities at its 200-acre Gurugram campus.
Replicating these shared facilities at hub level would compress certification turnaround times, lower
per unit testing costs for small and mid-sized manufacturers, and provide a platform for
collaborative innovation in cells, modules and capital BoS components as Indian manufacturers
deepen their presence in the upstream value chain.
While infrastructure and industrial ecosystem development can support the establishment of manufacturing
facilities, long-term investments across the solar value chain are also influenced by policy visibility and
market certainty. Given the capital-intensive nature of solar manufacturing, particularly in upstream
segments such as polysilicon and wafers, investors typically require clarity on the regulatory and trade
environment over an extended period. Accordingly, the predictability of measures relating to import
protection and domestic manufacturing support can play an important role in facilitating investment
decisions, particularly in capital-intensive upstream segments of the value chain.
Transitioning from market protection to long-term competitiveness
ii. Balancing industry support with competitive market development
Recommendation:
The implementation of ALMM I has facilitated the scaling of downstream components and is likely to yield
benefits for upstream segments. However, its effects should be monitored closely to guard against potential
oversupply and to sustain market competitiveness. Accordingly, it is recommended that policymakers
consider including a sunset clause or a conditional phase-down mechanism for ALMM I once pre-defined
market indicators are met. Such an approach would allow the policy to be relaxed when appropriate—
thereby incentivizing competition and preventing market complacency—while retaining the ability to extend
or reintroduce support if market conditions warrant.
Supporting Grid and Storage Infrastructure
Focus on grid storage and infrastructure development is also critical. India’s installed solar capacity, and
the additional capacity planned through 2030 and beyond, will generate power that is concentrated in
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daylight hours and subject to seasonal and weather-related variation. The ability to utilise this power reliably
across demand cycles depends on the availability of adequate transmission infrastructure to evacuate
power from generation-rich states to load centres, and storage infrastructure to shift surplus generation to
periods of peak demand. Without continued and scaled focus on both, additions to generation capacity
alone will not translate into grid reliability or energy security.
The consequences of an infrastructure deficit with India’s renewable energy growth outpacing its
transmission infrastructure, the impact may be witnessed in form of curtailments and underutilised capacity,
especially in renewable-rich states. The lack of evacuation infrastructure may also delay the commissioning
of new projects as they await grid connection. Continued and scaled focus on grid storage and transmission
is therefore not a downstream policy concern — it is a prerequisite for the effective utilisation of every
megawatt of solar capacity that is or will be installed.
While strengthening domestic manufacturing capabilities and supporting infrastructure remain important
priorities, the long-term sustainability of the sector will also depend on access to sufficiently large and
diversified markets. As manufacturing capacities continue to expand across the value chain, exports can
play an important role in supporting capacity utilisation, diversifying revenue streams, reducing dependence
on individual markets, and improving the resilience of the domestic manufacturing ecosystem.
Consequently, alongside domestic demand growth, the development of diversified export opportunities
assumes increasing importance for India's solar PV manufacturing sector.
5. Export agreements:
Exports are crucial for solar module manufacturers as they support premium revenue growth, improve
capacity utilisation, and expand market reach beyond domestic demand. The increase in India’s module
manufacturing capacity to 173 GW by March 2026 created a stronger platform for export-led growth.
However, India’s solar module exports remain highly concentrated in a single destination market—the US.
Overall, the US accounted for 97% of India’s solar module exports between fiscal 2020 to 2026,
underscoring the sector’s heavy dependence on one geography. In contrast, India’s share in other key
regions such as Europe, Asia, and the rest of the world remains negligible, limiting its ability to diversify
revenue streams and reduce exposure to market-specific risks. This high concentration exposes Indian
manufacturers to demand fluctuations, trade policy changes, tariff actions, and procurement shifts in the
US market.
As India’s manufacturing capacity continues to expand, maintaining access to multiple export destinations
will become increasingly important for sustaining capacity utilisation and reducing market concentration
risks. Diversified export markets can provide greater resilience against changes in trade policies, demand
cycles, and geopolitical developments in any single geography. Consequently, the ability to establish a
broader international presence and diversify export destinations is likely to become an important factor in
supporting the long-term competitiveness and stability of India's solar PV manufacturing sector.
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Figure 91: Trade sanctions by US on China opens door for Indian exports; results in geographic concentration
Note: UFLPA stands for Uyghur Forced Labor Prevention Act. CVD and ADD refer to countervailing duties and anti-dumping duties,
respectively. Green indicates favourable outcomes, while red indicates unfavourable outcomes.
Source: Ministry of Commerce
While exports have supported capacity utilisation and revenue growth, the concentration of exports in a
limited number of markets creates exposure to evolving trade and policy developments.
Challenges:
1. As of the current date, India lacks an export agreement with the US for the supply of solar
technologies, including cells and modules. This is significant as the US remained the largest global
importer of solar cells and modules in CY2025, accounting for nearly 21% of global imports. At the
same time, the US has adopted an increasingly protectionist trade stance, imposing anti-dumping
duties (ADD), countervailing duties (CVD), and reciprocal tariffs on several exporting nations. It has
imposed ADD and CVD in the range of 15% to 3,404% on Cambodia, Vietnam, Thailand, and
Malaysia, while also proposing duties of 103% to 249% on India, Laos, and Indonesia over the
reciprocal tariff. These measures have raised the landed cost of imported solar cells and modules
in the US, contributing to a decline in exports from India and other affected markets.
2. Against this backdrop, India’s rapidly expanding manufacturing base faces heightened market-
access risk. With 90-100 GW of cell-to-module capacity additions announced, the industry could
face oversupply pressures at the module stage of the value chain if export channels remain
constrained. As the domestic capacity base rises, diversification of export markets beyond the US
becomes critical to reduce policy-driven demand shocks, protect capacity utilization, and support
the long-term viability of India’s solar manufacturing ecosystem.
Furthermore, barring the US, India’s supply to top importers such as Netherland, Brazil and Spain remain
negligible.
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Figure 92: India’s share is limited in top importer’s basket
Note: Above trade statistics are for CY 2025
Source: ITC Trademap
It should be noted that trade relationships, market access discussions, and international cooperation
frameworks continue to evolve. In recent years, both the Government of India and industry participants
have increased their engagement with global markets through trade dialogues, commercial partnerships,
and investment initiatives. While some of the market-access challenges identified in this section may be
addressed gradually through ongoing negotiations and evolving trade arrangements, continued efforts
towards export diversification remain important for reducing concentration risks and supporting long-term
growth in the solar PV manufacturing sector.
Recommendations:
1. The government could consider helping trade and market expansion through bilateral and
multilateral trade agreements. Negotiate favourable trade agreements to reduce tariffs and trade
barriers with the key importers.
2. Focus on signing MoUs with key importers. A precedent has been established in the green
hydrogen sector where the government has signed an MoU with Saudi Arabia in electrical
interconnections, green/clean hydrogen and supply chains in October 2024.
3. Diversifying Export destinations: The global solar market is poised for significant growth, with an
expected addition of 5 TW of solar capacity by 2030. Excluding China, India, and some advanced
economies, the rest of the world is anticipated to add approximately 624 GW of solar capacity over
the next six years, starting from 2025. This translates to a substantial annual addition of around
104 GW. India, which already contributes 3% to the US solar PV export basket, can tap into this
growing market. India can potentially extend Lines of Credit to developing countries. This can be
done in line of Export-Import Bank of India (EXIM Bank), entering into agreement with government
of Guyana to provide a Line of Credit worth $2.5 million
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for installation of a solar photo voltaic
powerplant at Cheddi Jagan International Airport.
4. The industry stakeholders could consider the recommendations provided in point 1 of
recommendations (enhancing their presence in the global market through JV and acquisitions) for
the key importing nations. Apart from this, industry stakeholders are also encouraged to expand in
the global market by setting up assembling/manufacturing plants to increase their presence. A
precedent has been established by Premier Energies and Waaree Energies to improve their
presence in the US market.
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India-Guyana
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5. Apart from this, both the government and industry stakeholders could focus on organising trade
missions and expos to form export and strategic alliances with not only the top importers but also
countries with solar power targets. With the capacity expansion planned in India, the country can
be become the second largest PV manufacturer with the required upstream value chain, after
China. India is already the second largest module manufacturer in the world with an enlisted
capacity of 183 GW in ALMM release dated May 1
st
2026.
6. The India-EU free trade agreement, whose negotiations were concluded on January 27, 2026,
against the backdrop of EUR 120 billion
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in bilateral goods trade in 2024, eliminates or reduces
tariffs on over 96% of EU goods exports and reciprocal Indian exports, and contains explicit
commitments on cooperation in renewable energy, low carbon goods, and the easing of trade and
environmental goods and services. Industry stakeholders could therefore consider routing module
and cells exports to UK and EU offtakers under the preferential tariffs once both agreements enter
into force. They could also form joint ventures with European project developers, given that EU’s
required annual solar deployment may continue to outstrip the European solar PV industry.
Conclusion
India's solar PV manufacturing sector has made significant progress over the past decade, supported by
targeted policy interventions, increasing domestic demand, and substantial capacity additions across the
downstream value chain. The rapid expansion in module and cell manufacturing demonstrates the sector's
ability to scale and support the country's renewable energy ambitions.
At the same time, the next phase of growth is likely to depend on the continued development of upstream
manufacturing capabilities, technology leadership, workforce readiness, industrial infrastructure, and
diversified export markets. While considerable progress has been made across several of these areas,
many of the challenges identified in this report remain interconnected and require coordinated action from
policymakers, industry participants, research institutions, and other stakeholders.
It is also important to recognise that policy and market developments continue to evolve. In several areas,
measures introduced by central and state governments, as well as strategic initiatives undertaken by
industry participants, may already be contributing towards addressing some of the challenges highlighted
in this assessment. Nevertheless, continued focus on strengthening domestic value addition, improving
competitiveness, and enhancing ecosystem resilience will remain important as India advances towards its
renewable energy and manufacturing objectives.
Taken together, the challenges and recommendations presented in this report should be viewed not as
isolated interventions, but as complementary elements of a broader effort to establish a competitive,
integrated, and globally competitive solar PV manufacturing ecosystem in India.
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Conclusion
India’s aspiration of becoming a global manufacturing hub by 2047 will require a focused strategy that
combines scale, competitiveness, innovation, and integration into global value chains. The analysis
presented in this volume demonstrates that Chemicals, Textiles, Telecom & Network Equipment, and Solar
PV Manufacturing represent four distinct yet complementary pathways through which India can accelerate
industrial growth, generate employment, enhance technological capabilities, strengthen self-reliance, and
expand its presence in international markets. Together, these sectors capture the breadth of India’s
manufacturing opportunity: from employment-intensive industries and foundational industrial inputs to
advanced technology products and strategic sectors of the future.
A common theme emerging across all four sectors is that India possesses significant inherent advantages,
including a large domestic market, a favourable demographic profile, an improving policy environment,
growing infrastructure investments, and increasing global interest in supply-chain diversification. However,
these strengths alone will not be sufficient to secure global leadership. Across sectors, challenges such as
import dependence on critical inputs, fragmented supply chains, infrastructure and logistics gaps, limited
domestic value addition, technology constraints, and skill shortages continue to constrain competitiveness.
Addressing these bottlenecks will require a coordinated approach involving the Union and State
Governments, industry, academia, financial institutions, and the broader innovation ecosystem.
The sectoral analyses also reinforce the importance of moving beyond assembly-led or low-value
manufacturing towards deeper and more resilient value-chain participation. In chemicals, the priority lies in
strengthening domestic feedstock availability, developing integrated manufacturing clusters, and increasing
downstream value addition. In textiles, enhancing competitiveness in man-made fibres, improving
productivity, modernising MSMEs, and expanding market access will be critical. In telecom equipment, the
focus must shift towards localisation of components, technology development, and export-oriented
manufacturing ecosystems. In solar PV, scaling upstream capabilities, strengthening research and
development, and reducing dependence on imported inputs will be essential to building a globally
competitive industry.
The experiences of global manufacturing leaders examined in this report further highlight that sustained
success is rarely the result of a single policy intervention. Rather, it is achieved through long-term policy
consistency, industrial clustering, infrastructure readiness, targeted incentives, investment in technology
and skills, and strong linkages between domestic firms and global markets. The lessons drawn from
countries such as China, Vietnam, South Korea, Singapore, and others underscore the importance of
execution, institutional coordination, and the creation of complete industrial ecosystems rather than isolated
manufacturing capacities.
As India seeks to increase the contribution of manufacturing to economic growth, exports, and employment,
the recommendations outlined in this volume provide a practical roadmap for action. If implemented in a
coordinated and time-bound manner, they can help strengthen domestic capabilities, attract investments,
enhance productivity, improve export competitiveness, and create quality employment at scale. More
importantly, they can enable India to secure stronger positions in global value chains while building the
resilience and technological depth necessary for long-term industrial leadership.
This volume marks the first step in a broader effort to identify and develop the sectors that can drive India’s
manufacturing transformation. The opportunities presented by Chemicals, Textiles, Telecom & Network
Equipment, and Solar PV Manufacturing are substantial, but equally significant is the broader message that
emerges from the study: India has the potential to become a globally competitive manufacturing
powerhouse, provided it combines ambition with sustained reforms, targeted investments, and disciplined
execution. The subsequent volumes will extend this analysis to the remaining priority sectors, completing
a comprehensive roadmap to support India’s journey towards becoming a leading global manufacturing
hub and realizing the vision of Viksit Bharat@2047.