Geopolitical Shocks as Industrial Opportunity: Firm-Level and Sectoral Evidence from India, 2018–2024

Abstract

In 2018, an escalation in trade tensions between the United States and China, compounded by global supply chain disruptions from the COVID-19 pandemic, exerted new structural pressures on multinational firms, necessitating a reassessment of global production geographies. Given its large working-age population, competitive wage levels, and accelerated policy reforms over the past decade (Dutta and Ghosh, 2021; Lall, 2021), India emerged as a potential beneficiary of the "China + 1" diversification paradigm. This paper analyzes the extent to which India has absorbed this industrial opportunity using a secondary data-based analytic framework drawing on official data from the ASI, CMIE, DGCI&S, and RBI. Focusing on the 2018–2024 period, we evaluate five priority sectors: electronics, pharmaceuticals, textiles, chemicals, and automotive components. Employing descriptive trend analysis, comparative sectoral benchmarking against Vietnam and Bangladesh, and firm-level evidence, the findings reveal a heterogeneous pattern of industrial absorption. Electronics manufacturing and pharmaceuticals demonstrated strong export growth and capacity expansion, whereas labour-intensive sectors (textiles and auto components) faced persistent structural competitiveness constraints. By grounding the analysis in "weaponised interdependence" and "developmental state" theories, this paper asserts that India's industrial response has been uneven, shaped by existing capacities, labour market rigidities, and the demand-side focus of its industrial policy. Geopolitical opportunity is a necessary, but not sufficient, condition for late industrial transformation.