India’s Role in Global Supply Chains Shifting from Participation to Leadership

India’s export landscape shows broad-based growth, diversification of markets, and resilience, positioning the country as an emerging global trade leader. India’s exports with China and Hong Kong grows faster than USA in 2025-26

The global trade and production ecosystem is undergoing a critical transition. The disruptions caused by the pandemic, followed by geopolitical tensions, commodity market volatility, and rising tariff-based trade frictions, have forced countries and corporations to rethink traditional supply chain models. The long-dominant global manufacturing structure cantered around East Asia is increasingly giving way to a more diversified framework where stability, resilience, and geopolitical neutrality determine sourcing and production decisions.

In this evolving landscape, India has emerged as a key contender, leveraging its economic scale, young workforce, growing policy reforms, and strengthening industrial capacity. Simultaneously, India’s export profile is undergoing a distinct shift, expanding beyond heavy reliance on the United States and diversifying into West Asia, Europe, East Asia, Africa, and Latin America. This is not merely a trade adjustment; it is a structural transformation that reflects India’s rising stature in global value chains and its strategic positioning in the world economy.

India reconfiguring global supply chains

The pandemic exposed vulnerabilities associated with over-concentrated supply clusters. Logistics shutdowns, labor shortages, shipping delays, and extended delivery timelines became global challenges, prompting firms to reconsider the cost-versus-reliability equation. Moreover, geopolitical tensions between major economies have introduced regulatory uncertainty and strategic concerns regarding dependence on single-country sourcing. In this changing context, India’s emergence is both timely and strategically relevant. India offers a large domestic consumption market, a youthful and growing workforce, improving infrastructure connectivity, and rapidly strengthening industrial policy frameworks. National-level initiatives such as “Make in India,” the Production Linked Incentive (PLI) Schemes, and infrastructure-focused programs like PM Gati Shakti and the National Logistics Policy have begun to reshape India’s manufacturing and export profile.

The Shifting narratives of global supply chains

The past few years have demonstrated that efficiency cannot come at the cost of fragility. The new global supply chain philosophy emphasizes resilience, diversification, and redundancy. Corporations are now actively balancing cost advantages with risk mitigation measures such as multi-country sourcing, diversified supplier networks, and increased inventory buffers. India’s ongoing industrial transformation aligns closely with this global shift. The country is not simply positioning itself as a lower-cost alternative to China; it is establishing itself as a resilient, politically stable, reliability-focused hub for long-term production partnerships. Multinational firms are increasingly designing global operational strategies that place India as either a co-equal or complementary manufacturing and distribution hub alongside existing Asian production centers. The growth of India’s digital infrastructure and logistics data networks further enhances real-time planning, inventory management, and supply chain visibility, critical factors in a resilience-driven trade environment.

India’s strategic export diversification beyond the United States

The United States has long been one of India’s largest export markets, particularly for engineering goods, textiles, pharmaceuticals, electronics, and gems and jewelry. However, the recent imposition of higher tariffs by the US administration, especially the raised 50% duty on a wide basket of Indian products, accelerated India’s need to diversify its export destinations. This diversification effort has been both proactive and strategic, supported by government export promotion agencies, trade bodies, and diplomatic outreach programs.

Indian exporters have expanded significantly into the United Arab Emirates, Saudi Arabia, Qatar, Oman, and other West Asian economies, taking advantage of growing demand in food supplies, consumer goods, electronics, chemicals, and jewellery. Europe has also become a major centre of export expansion, particularly through the Netherlands and Germany, which serve as critical re-distribution hubs into the European Union. Meanwhile, India’s trade with East Asia has diversified both in product composition and value, with increased shipments of processed foods, marine products, iron ore, electronics, and industrial raw materials to China, Vietnam, Hong Kong, Japan, and South Korea. In Africa and Latin America, increased diplomatic engagement, trade fairs, and bilateral agreements have helped Indian exporters tap emerging consumer and infrastructure markets.

Growth of India’s exports during trade tensions (Apr-Aug 25)

Source: Compiled form GOI

India’s merchandise export profile reflects its expanding role in global trade, supported by diversified markets and rising competitiveness across high-value sectors. Exports to Hong Kong stood at around USD 6.07 billion in 2024–25 and also recorded a strong 26% growth recorded during April–August 2025, driven primarily by gems and jewellery, engineering, and electronic goods. India’s exports to China also rose notably, reaching USD 14.25 billion in FY 2024–25, with growth of 19.6% in the April–August 2025 period. The export basket to China highlights India’s importance as a supplier of raw materials and intermediate industrial inputs such as petroleum products, chemicals, iron ore, and marine products.

India’s exports with select countries before and after trump tariffs

Source: Compiled from GOI

Although United States remains a major export destinationA, with merchandise exports amounting to USD 6.87 billion in August 2025, driven by electronics, pharmaceuticals, textiles, and gems and jewellery, however, exports registered a dip from July to August 2025, whereas exports to other key destinations including the UAE, Netherlands, Australia, Nepal, South Africa and Hong Kong witnessed an uptick during the same period. India also continues to strengthen trade ties with Germany and South Korea, with exports to both increasing by 11.73% and 9.69% respectively in April–August 2025, reflecting deeper market integration supported by technology linkages and trade agreements.

Sectoral strengths reinforcing India’s export momentum

India’s rising global trade role is driven by distinctive sectoral performance. The electronics sector, particularly mobile phone production, has seen exponential growth. Supported by PLI incentives, India has transformed from a net importer to a net exporter of smartphones, with major global technology firms establishing supply chain bases in India. The pharmaceutical sector continues to be a global leader, with India supplying affordable high-quality generics, vaccines, and complex drug formulations to advanced and emerging economies. The “Pharmacy of the World” position strengthened further during the pandemic, which showcased India’s manufacturing scale, scientific capabilities, and humanitarian diplomacy.

Engineering goods exports, including auto components, heavy machinery, industrial equipment, and transportation systems, have expanded steadily. The growth of new mobility sectors, such as electric vehicles and battery storage systems are expected to further accelerate this segment. Agricultural and processed food exports have gained momentum with rising international demand for healthy cereals, spices, rice, marine products, and value-added food categories. India’s agricultural diversity provides a natural advantage in capturing emerging markets where food security and dietary preferences are shifting.

Emerging export corridors and destination markets

The United Arab Emirates has become one of India’s most important trade corridors, supported by the Comprehensive Economic Partnership Agreement (CEPA), which has simplified tariff structures and enhanced market access. The UAE also acts as a gateway to the Gulf Cooperation Council region and African markets, amplifying India’s export reach. The Netherlands and Germany have emerged as central European gateways, especially due to their highly developed logistics and port infrastructure. These countries are enabling deeper penetration of Indian pharmaceuticals, machinery, chemicals, and food products into European markets.

India’s engagement with East Asian economies is particularly significant. Hong Kong and China have become major destinations for petroleum products, electronic components, chemicals, and industrial inputs. Trade with Vietnam, Thailand, and Japan is steadily increasing, particularly in marine products, processed foods, and textiles, reflecting shifting consumption trends and supply chain diversification initiatives. Growing export ties with Africa and Latin America signify long-term market development rather than short-duration transactional shifts. As infrastructure development accelerates in African nations, Indian engineering, pharmaceutical, and construction-related exports are likely to gain further traction.

Policy support strengthening export competitiveness

India’s export growth and supply chain integration are strongly shaped by policy reforms that improve production efficiency, reduce logistics bottlenecks, and expand market access. The Production Linked Incentive Schemes across fourteen sectors have incentivized large-scale domestic manufacturing and attracted foreign direct investment into high-growth industries. The National Logistics Policy and PM Gati Shakti Master Plan are directly addressing the high logistics cost barrier by modernizing ports, improving multi-modal connectivity, integrating freight corridors, and digitizing cargo movement systems. The Foreign Trade Policy 2023 introduced flexible and dynamic policy adjustments to enhance export ecosystem efficiency, digital trade enablement, and e-commerce export capacity.

Trade agreements have assumed renewed strategic importance, with India concluding partnerships with the UAE and Australia and advancing negotiations with the European Union, Oman, Peru, and Netherlands. These agreements aim to secure long-term tariff stability, investment facilitation, technology cooperation, and regulatory alignment, thereby enhancing India’s global value chain competitiveness.

In conclusions, India’s expanding position in global supply chains represents a historic inflection point. The transition from a service-dominated export identity to a diversified manufacturing and global trade hub signals a new phase in India’s economic rise. The strategic shift of exports beyond reliance on the United States demonstrates both resilience and adaptability. India’s dual advantage lies in its robust domestic economy and its strengthening role in the global trade system. As global markets move toward diversified, secure, and resilient supply networks, India is emerging not only as an alternative manufacturing base but as a central pillar in the restructured global economic architecture.

Going ahead, the coming decade will likely witness India’s strengthened position in global supply chains and shaping them, as production-linked incentives, modern ports, dedicated freight corridors, and renewable energy reduce costs; world-class startups, advanced manufacturing, and skilled talent deepen capabilities; digital public infrastructure, logistics reforms, and trade agreements enable scale; and resilient, sustainable practices attract partners seeking China-plus-one diversification, thereby positioning India as a rule-setter in the trajectory of global supply chains.