China’s dominance over global exports and critical supply chains presents a significant challenge for India, as noted in the Economic Survey 2024-25 released on Friday. Beijing’s extensive control over manufacturing, particularly in sectors critical to the energy transition, poses several hurdles for India’s ambitions to ramp up renewable energy production and infrastructure development.
Beijing’s role as a “manufacturing colossus” underscores the challenges India faces in producing critical goods at the scale and quality required for its infrastructure needs. As India navigates the complexities of normalising relations with China post the military standoff on the Line of Actual Control (LAC), economic dynamics continue to play a significant role. Bilateral trade between India and China is worth close to $120 billion, heavily skewed in China’s favor. While China is pushing for the revival of trade and investment ties suspended during the face-off, India remains cautious.
Weak domestic demand in China, coupled with a lack of significant policy stimulus to boost consumption, has led to an excess capacity spilling over into external markets. The survey highlights that Chinese exports are thriving, with China’s trade surplus in 2024 nearing one trillion US dollars.
China’s dominance extends to supply chains and services in the renewable energy sector. The survey emphasizes that the single-source concentration risk in several product areas exposes India to potential supply chain disruptions, price fluctuations, and currency risks. China’s significant role in the production or processing of critical minerals and renewable energy components poses challenges for India’s energy transition goals.
In a section titled “The elephant and the dragon in the room,” the survey notes that long-held principles and practices in the global economy are being re-evaluated, with China’s prominent role in global supply chains contributing to this shift. China has leveraged its competitiveness and economic policy to access and control key resources critical for global supply chains.
China’s rise as a manufacturing powerhouse has impacted the production of automobiles, especially electric vehicles (EVs), and the mining and refining capacity for critical minerals like copper, lithium, nickel, cobalt, and graphite. The shift in global solar photovoltaic (PV) manufacturing capacity from Europe, Japan, and the US to China, with over $50 billion invested in new supply capacity, highlights the scale of China‘s dominance. China’s share of solar panels exceeds 80% in all manufacturing stages, posing a significant supply disruption risk.
India sources 75% of its lithium-ion batteries from China and has minimal domestic production capacity for key components like polysilicon, ingots, and wafers. This is particularly concerning given India’s plans to mitigate road transport emissions to achieve Net Zero goals by 2070. The survey notes that manufacturing an EV requires nearly six times more minerals than a conventional car, with most of these minerals used in the battery.
The Ministry of Mines has identified 33 critical minerals vital to India’s economic security, with 24 currently at high risk of supply disruption. China’s significant share of global mineral processing and production reinforces its dominant position in the supply chain.
India’s production-linked incentive (PLI) schemes demonstrate the government’s awareness of the need to build domestic supply chains. Future policies must focus on broadening the scope of these schemes to adapt to the growing needs of the EV industry. Developing a more self-reliant ecosystem powered by increased research and development in advanced battery technologies is crucial.
Moreover, India must establish technology transfer agreements with other countries seeking to diversify supply chains. Partnerships with aspiring nations can help distribute the high costs associated with securing a comparative advantage in the global market.
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