Read Time: 3 min

India’s $189 Billion Import-Substitution Opportunity

Which Industrial Products Could Attract Foreign Manufacturers?

Every year, India pays foreign suppliers for goods it has the demand, talent and land to make at home. In FY 2025-26, merchandise imports reached about $776 billion, a record. Inside that figure sits a shortlist overseas factory owners should read closely: 1,272 products worth nearly $189 billion in annual imports that India now wants to manufacture domestically. For anyone studying India import substitution, this is no longer a slogan. It is a buying list with product names attached.

What The $189 billion Actually Covers

The Centre-state strategy picks products that each record more than $50 million in yearly imports and are either not made in India or made in inadequate quantities. It also draws a sober line: only about 26% of the import basket can realistically be replaced. Crude oil, gold and coal will stay imported. Another 28% are already competitive at home, so those purchases reflect price or quality choices rather than missing factories.

Only a quarter of India’s import bill can realistically be replaced 

Source: Centre’s assessment of the FY 2025-26 import basket, as set out in the Centre-state import-substitution strategy.

That leaves the 26% slice as the real prize. It is specific, it is large, and it is where foreign manufacturers in India can fill gaps instead of fighting established local players.

Where The Import Money Goes?

Department of Commerce data for FY 2025-26 shows how concentrated the opportunity is. Electronic goods alone cost $116.1 billion, and machinery another $61.7 billion. Add transport equipment, non-ferrous metals, chemicals, plastics and steel, and these seven industrial groups pass $300 billion. They pair heavy demand with thin domestic supply, which is the combination that creates India manufacturing opportunities.

Seven industrial import groups, FY 2025-26 (US$ billion)

Industrial Products are Most likely to Attract Foreign Manufacturers

The strategy names chemicals, electronics, machinery and specialty steel as focus areas. Here is how each looks to an investor.

Electronics

Components and sub-assemblies

Imports rose 17.6% in FY 2025-26. Component, display and sensor specialists can serve assemblers who still import most sub-assemblies.

Machinery

Machine tools and automation

Machine tool imports reached $6.5 billion, up 14.4%. Precision and tooling expertise is scarce locally, so technology-led entrants hold an edge.

Chemicals

Specialty chemicals and resins

Chemicals and plastic materials together cost $50.7 billion in imports. Process know-how is the gating factor, and foreign partners bring it.

Metals

Specialty steel and alloys

Non-ferrous metal imports grew 17.1% to $28.9 billion, with iron and steel at $21.5 billion. Alloy producers can serve auto, defence and capital goods buyers.

Industry Example: Electronic Components

ILLUSTRATIVE SCENARIO

Picture a mid-sized European maker of printed circuit boards and connectors. Its Indian customers assemble phones, appliances and industrial controls, yet import the boards. A plant near an existing electronics cluster cuts lead times and import exposure. The government’s Production Linked Incentive schemes, announced for 14 sectors with an outlay of ₹1.97 lakh crore, improve the economics further. For the chip side of this story, read UJA’s note on India’s semiconductor revolution. 

Why The Timing Favours Investors

India recorded a historic $94.53 billion in FDI during 2025-26, with over 90% of equity inflows through the automatic route, according to DPIIT. The Centre has also asked states to create sector-specific clusters, single-window clearances and fiscal support, since states control land and approvals. Together, these make India investment opportunities easier to act on than a policy announcement alone.

Supply chains matter too. Many listed products need a full supporting chain of inputs, tooling, testing and logistics. Each missing link is a niche, and India supply chain opportunities favour suppliers who follow their anchor customers into the country.

What to Watch Before You Commit

Domestic production only works when cost and quality come close to global levels. Support schemes should help a plant cross its early cost barrier, not cover weak productivity forever. Manufacturers that plan to export from day one, and not only sell locally, are better placed.

How to Size Your Opportunity

Start with manufacturing market research India teams can trust:

  1. Match your products to the import data by commodity group and trade code.
  2. Compare landed import cost with local production cost, including incentives.
  3. Shortlist states offering clusters, power, ports and skilled labour.
  4. Choose an entry route: wholly owned plant, joint venture or contract manufacturing.

Doing this before committing capital turns a headline number into a plan. Industrial manufacturing in India rewards firms that localise sourcing early.

Planning to Manufacture in India?

UJA’s market-entry team helps foreign manufactures test demand, structure the entity and set up operations. Book a free 15-minute consultation & find out where your products fir.

Book a Free Consultation -> www.uja.in/contact-us