India is launching a comprehensive import substitution initiative targeting $189 billion worth of imports through domestic manufacturing of 1,272 specific products. According to the latest government assessment, each identified product records annual imports of over $50 million and is either not manufactured domestically or produced in inadequate quantities. The initiative is based on the central government's assessment that only 26% of India's import basket is realistically amenable to import substitution, with India's goods import bill reaching an all-time high of $776 billion in FY26, which included $246 billion of crude oil and gold. The Centre and states plan to replace these imports by boosting domestic production through targeted manufacturing and industrial clusters.
Of the identified products, about $51 billion in imports were viewed as critical inputs for manufacturing across various industries from textiles to solar panels. The government has outlined an action agenda for states to develop manufacturing ecosystems around these identified products, recommending that states designate sector-specific manufacturing clusters and align their industrial policies to promote domestic production. The initiative focuses on 100 items from this set spanning sectors from footwear to textiles, electric vehicle industries and solar panels. In the footwear sector alone, the government found that sole moulds worth about $483 million in imports last year take about two weeks to make in India, compared with three to five days in China. The Centre has also formed working groups under the Department for Promotion of Industry and Internal Trade (DPIIT) to identify more products for import substitution.
India's import substitution agenda has gained urgency amid ongoing geopolitical conflicts and currency pressures. The rupee depreciated for the fourth consecutive day on Thursday to settle at 96.33 against the dollar as tensions intensified again in West Asia. India's foreign exchange reserves have depleted over 7% from a record-high of $728.49 billion before the onset of the US-Iran war on February 28, as imports of metals, oil and fertiliser turned expensive. Out of the total imports, 46% or $332 billion comprised products such as crude oil, gold and coal that cannot be substituted through domestic manufacturing, while another 28% were products where India is already competitive and imports are driven primarily by cost considerations rather than absence of domestic industrial capacity.
The government has outlined specific measures for states to implement the import substitution plan effectively. States are recommended to establish single-window clearance systems on the lines of the National Single Window System to expedite approvals and regulatory clearances. The Centre has recommended fiscal support through measures such as stamp duty waivers and capital expenditure incentives. State governments are positioned as the critical implementation layer, as land acquisition, regulatory clearances and incentive policies fall within their jurisdiction. India's imports have continued their sharp rise in the current financial year, with inward shipment value climbing 20% annually to $216.18 billion in just the first quarter of the year. Experts believe the government's product-level approach is more targeted than broad import substitution programmes, but caution that success would depend on building domestic manufacturing capabilities across the value chain rather than simply shifting final-stage assembly to India.
