Automobiles: Assembly Without Ownership?
In Maharashtra’s Aurangabad district, a 630-acre automotive facility is being developed to produce up to 400,000 vehicles annually. The project reflects the ambition of Indian conglomerates entering the car manufacturing space.
However, many of these vehicles rely on platforms and electric vehicle technologies licensed from established foreign manufacturers. While Indian firms provide capital, land and labour, the underlying intellectual property often remains with overseas partners.
This model is not inherently flawed. Global automotive history shows that licensing arrangements can evolve into independent innovation. The key question is whether India’s partnerships are designed to enable technology absorption or to remain long-term licensing structures.
Electronics: Scaling Up, But Value Addition Low
India now assembles over 300 million smartphones annually, with production value exceeding $60 billion in FY25.
Yet domestic value addition remains limited. Imported components account for a large share of a smartphone’s bill of materials. To address this, Indian electronics manufacturers have entered joint ventures with foreign technology partners to localise component manufacturing.
While these partnerships help bring production onshore, experts note that manufacturing know-how and process optimisation often depend on foreign technical specialists. Without sustained investment in domestic R&D and engineering depth, India risks remaining concentrated in lower-value assembly roles.
Batteries: Gigafactories and the IP Question
India’s energy transition hinges on lithium-ion battery production. Major Indian battery manufacturers are investing thousands of crores in gigafactories, with initial production lines already undergoing validation.
However, much of the cell technology is licensed from global battery leaders. Licensing ensures operational certainty but does not automatically transfer the ability to independently improve chemistries or develop next-generation alternatives.
The Advanced Chemistry Cell (ACC) PLI scheme aims to catalyse 50 GWh of capacity.
The “Smile Curve” Challenge
Economists often describe global value chains using the “smile curve.” High-value activities such as research, design and intellectual property sit at one end, while branding and distribution occupy the other. Assembly and manufacturing fall in the lower-value middle.
Across automobiles, electronics and batteries, Indian firms have successfully strengthened the manufacturing segment. The challenge is moving toward the high-value R&D peak.
Countries such as China transitioned from technology licensing to indigenous innovation over decades through sustained R&D investments and policy coordination. India’s gross expenditure on R&D, currently below 1 per cent of GDP, is significantly lower than that of leading industrial economies.
Policy Gaps and Strategic Coordination
Press Note 3, introduced in 2020, tightened scrutiny on investments from neighbouring countries sharing land borders with India. While it regulates equity flows, it does not mandate technology transfer or indigenisation targets in licensing arrangements.
Similarly, PLI schemes incentivise production volumes but do not always embed explicit long-term technology absorption benchmarks. Analysts argue that a more coordinated framework linking industrial subsidies to measurable R&D commitments could strengthen domestic capability.
The Road Ahead
India’s manufacturing resurgence is real and significant. Industrial corridors are expanding, supply chains are diversifying away from single-country dependence, and domestic firms are entering sectors once considered out of reach.
Yet long-term competitiveness will depend not just on factory output but on ownership of core technologies. Building laboratories alongside assembly lines, nurturing patent ecosystems, and investing in sustained R&D will determine whether India climbs the value chain.
The factories rising across the country symbolise ambition. The next phase of industrial growth may depend on whether that ambition extends beyond production capacity to technological leadership.
