Rethinking India as an innovator and manufacturing partner

For much of its history, India had been an economic superpower with a stellar reputation for intellectual exports. While its edge in the services sector still extends that tradition, tariff wars being waged in the world are now shining a new light on the country’s hidden potential in manufacturing.

An expert panel at the HSBC Global Investment Summit 2025 remembered how up until the 19th century, India had been a nation of wealth and riches – the reason the Portuguese, French and British sought to establish trading relationships with the country starting in the 15th century. Local businesses built strong global trading ties by sea that date back to the Roman empire, and their enterprising spirit is the reason Indian trading communities were established in Africa and Southeast Asia centuries ago, according to author and historian William Dalrymple.

There are many parallels between India then and now.

“India’s most notable exports in ancient times were products of intellectual innovation, such as mathematics, language, and religion”, said Pranjul Bhandari, Chief Economist, India and Indonesia, HSBC. Even today, some of India’s most significant exports are the result of skill and innovative thought processes – software, medical, legal and design services.

Openness in protectionist times

Responsiveness to geopolitical changes is another common characteristic between then and now. The country, which maintained its economic vibrancy by quickly pivoting to Southeast Asia amid the Roman empire’s decline, is today positioning itself to benefit from the impact on global supply chains from US tariffs and protectionist policies.

Ms. Bhandari said India is cutting import duties, signing trade deals, signalling its openness to regional foreign direct investment, particularly from China, and allowing the rupee to be more flexible.

“Instead of becoming protectionist itself, India is actually open for business,” she said.

But the country, now the world’s most populous with over 1.4 billion people, must do better to create the number of jobs needed, including for the millions of young people entering the workforce every year. And to be able to do that, it needs a lot more factories and investments in manufacturing from local and global companies.

While India has been in the news for bringing Apple to make the iPhone in the country, it also needs a larger presence in labour-intensive sectors such as toys, textiles and furniture.

Hidden potential

Manufacturing is seen an area where India, better known globally for its services exports, has a lot to offer, and New Delhi is keen to address the opportunities with a pro-business stance. Prime Minister Narendra Modi’s “Make in India” campaign inviting multinationals and sweeteners such as productivity-linked incentives for manufacturers, are among efforts to enable more factories in the country.

India’s pro-business stance and reliability as a partner augur well in the current global economic climate, industrialist Kumar Mangalam Birla said in a separate conversation at HSBC’s Global Investment Summit.

Mr. Birla is Chairman of the Aditya Birla Group – an Indian conglomerate with interests in metals, cement, textiles and financial services, among others, with a market capitalisation of more than USD100 billion as of 3 April 2025.

Mr. Birla said the South Asian country’s strong track record in manufacturing – with many large and high-quality companies in its private sector – must be seen against the current international backdrop. Global companies have also successfully operated in the country for decades, reflecting India’s reliability as a partner in manufacturing.

“I think that India is a partner to be discovered in terms of manufacturing, over and above services,” he said.

Marketing skills

An inability to promote itself well is a factor that may have held India back, and needs to be addressed.

India has a “terrible” record of marketing its strengths to the world, according to historian Dalrymple. He cited the lack of global awareness that India had been the main centre of East-West trade for centuries, or that the modern numeral system originates from the country.

Poor marketing skills are manifest even today, and while risks in India are well-known, the opportunities are often hidden, according to Kunal Shroff, Managing Partner at ChrysCapital. He gave the example of investors seeking a high risk-premium to invest in the nation, although data shows that India’s growth over the past three decades has been accompanied by profits for those who have invested in the country.

“I believe that we need to do a better job of marketing India, and ensuring that the risk-premium comes down,” Shroff said.