India is transitioning from low-cost manufacturing to developing globally competitive capabilities, with factors like currency depreciation, increased trade access, and high public expenditure driving a potential shift in the sector, as per a recent report by Carnelian Asset Management and Advisors. The report highlights the success of India’s first manufacturing-focused fund, which has shown a remarkable 32% Compound Annual Growth Rate (CAGR) since its establishment in 2020.
The report emphasizes the ongoing evolution of Manufacturing 2.0, indicating that the sector’s future growth will be fueled by various factors working in tandem. Significant opportunities are identified in electronics manufacturing services, defense exports, pharmaceutical and CDMO exports, auto ancillaries, as well as textiles and apparel.
Key drivers propelling growth in the manufacturing segment, such as the real depreciation of the Indian rupee and enhanced trade opportunities, are underscored in the report. It notes that with each substantial depreciation in the Real Effective Exchange Rate (REER) over the past thirty years, exports from India have shown a positive response. Notably, the REER declined by approximately 16% from December 2024 to April 2026, marking the most significant sustained drop since the early 1990s.
India’s trade landscape has significantly broadened, providing preferential access to around $9 trillion worth of global imports. Moreover, the recent Union Budget for 2026–27 saw a substantial increase in public capital expenditure to Rs 12.2 lakh crore, a four-fold rise from a decade ago.
The report concludes that significant wealth creation opportunities arise when market underestimates structural shifts. India’s mobile phone production has exceeded $56 billion, with iPhone exports surpassing nearly $17 billion, and Apple now manufacturing over 20% of its global iPhone volumes within the country. Favorable government policies, global supply chain diversification, growing domestic demand, infrastructure investments, and enhanced competitiveness collectively contribute to a robust manufacturing upcycle.
Despite existing execution risks, the report suggests that India is on the brink of a multi-year phase of industrial expansion, offering substantial investment prospects.
