The continued churn of the Trump tariffs and the unraveling of long-established global supply chains mark a definitive rupture in the post-Cold War economic consensus. For India, this is not merely a challenge—it is an inflection point. The once-dominant paradigm of lowest-cost wins is rapidly giving way to a renewed appreciation for strategic autonomy. What once seemed unthinkable—the decoupling of the U.S. and Chinese economies—is now materializing with disquieting certainty. While one must remain cautious of the potential for renewed trade détente, the underlying shift in global sentiment is undeniable: systemic uncertainty has become the new normal.
And uncertainty is the archenemy of long-term investments and supply chain resilience.
The Rare Earth Enigma: An Urgent Wake-Up Call
As of April 2025, China commands a staggering 99% share of global refining capacity for critical rare earth elements—materials indispensable to the functioning of electric vehicles, energy storage systems, and next-generation defense platforms, including the U.S. F-35, Tomahawk missiles, and Predator UAVs. Despite its technological prowess, the United States lacks domestic refining capabilities and has only recently initiated efforts to build a self-reliant supply chain. The 2024 National Defense Industrial Strategy articulates a vision to establish a full-spectrum, mine-to-magnet rare earth supply chain by 2027—yet this may prove both too little and too late.
Beijing’s imposition of export restrictions and licensing requirements on rare earth minerals serves as a strategic lever—encouraging compliance from dependent economies. For India, the message is unequivocal: we must urgently diversify sourcing strategies, explore untapped reserves domestically and in friendly geographies, and, crucially, invest in the downstream capabilities to process these elements.
Manufacturing Efficiency: The Illusion of Low-Cost Labor
India’s longstanding assumption—that rising wages in China would naturally redirect global manufacturing to our shores—has been overly simplistic. In reality, the redistribution of supply chains has seen countries such as Vietnam outperform India by capturing a disproportionately large share of manufacturing shifts. For instance, by 2023, Vietnam was responsible for nearly half of Nike’s global output.
Moreover, with the rise of automation, the labor component of total production cost is steadily diminishing. Competitive manufacturing today is defined not by wage arbitrage, but by lean operations, high levels of automation, integrated logistics, and scale economies. While India has made commendable progress in infrastructure development over the past decade, sustained and focused investment remains imperative.
Deep-Tech and Innovation: The Next Frontier
The recent commentary by Hon’ble Commerce Minister Piyush Goyal at the Startup Maha Kumbh sparked considerable debate. However, his core message warrants amplification: India must decisively commit to deep-tech research and high-end innovation. At present, India’s gross expenditure on R&D languishes at 0.6–0.7% of GDP, compared to over 2.6% in China—a gap further magnified when adjusted for GDP size.
China’s audacious strides in frontier technologies—epitomized by the launch of DeepSeek and the ensuing pricing war among global LLM developers—signal its readiness to challenge U.S. hegemony not just in trade, but in innovation. India must rise to this moment. Encouragingly, the Government’s announcement to allocate a majority of the ₹10,000 crore ‘Fund of Funds’ towards sectors such as AI, advanced manufacturing, and machine intelligence reflects a calibrated policy pivot. It is now incumbent upon India’s emerging deep-tech start-ups to scale with confidence and ambition.
The Era of Counter-Globalization: Reverse Brain Drain as an Opportunity
Amidst the broader retreat from globalization, one paradox becomes evident: while barriers rise, global interconnectedness deepens. A growing number of Indian start-ups are relocating their headquarters back to India, and highly skilled members of the Indian diaspora are returning, drawn by both opportunity and rising protectionism abroad. This reverse brain drain presents India with a once-in-a-generation opportunity to harness its global intellectual capital.
In a world increasingly defined by geopolitical fragmentation and institutional gridlock, India’s strategic posture must be rooted in self-reliance. As Prime Minister Modi candidly observed in his conversation with Lex Fridman, institutions such as the United Nations are at risk of fading into irrelevance. The responsibility now lies with India to leverage its intrinsic strengths—its demographic dividend, diaspora networks, technological ambition, and democratic resilience—to forge an independent and forward-looking development pathway.
[Photo by the White House, via Wikimedia Commons]
Dr. Rajeev Sijariya is a Professor and Former Dean at the Atal Bihari Vajpayee School of Management and Entrepreneurship, Jawaharlal Nehru University. With over 25 years of experience, he specializes in Marketing, Entrepreneurship, and Strategic Management. He has authored multiple books, holds several international patents, and has led transcontinental collaborations across institutions. The views and opinions expressed in this article are those of the author.
