India Announces Factories While the World Builds Something Else
There is a moment when the competitive map of an economy changes without its policymakers noticing in time. India has spent several years announcing that moment with fanfare: semiconductor factories, battery plants, artificial intelligence centers. The cabinet signs, the headlines celebrate, the foreign investment funds attend the event. And yet, something does not add up. The deep architecture that transforms a factory into long-term power — the universities that generate patents, the patient capital that finances laboratories for a decade, the technical standards that dictate who controls the industry tomorrow — continues to be built without the same urgency.
The recent episode involving Sunil Bharti Mittal and his intention to deepen his stake in British Telecom illustrates this mismatch with uncomfortable clarity. The UK government activated its national security radar at the prospect of an Indian conglomerate acquiring greater control over critical telecommunications infrastructure. This is not an isolated case: Beijing blocked Meta's acquisition of the Chinese artificial intelligence startup Manus; the Netherlands vetoed the takeover by a US firm of a provider linked to its digital identity infrastructure. Japan, Europe, and the United States have spent years adjusting their investment filters in sectors that were previously traded freely.
What the press usually presents as "routine regulatory reviews" is, in reality, part of a deeper reorganisation: governments have decided that control over certain technological capabilities is not negotiable at market price. For India, the question is not why these blockages occur. It is whether the country is preparing the assets that would justify the same level of defence.
A Factory Alone Does Not Generate Strategic Power
For decades, the measure of economic success for a developing nation was simple: attract foreign investment, build manufacturing capacity, integrate into global supply chains. India internalised that manual forcefully from the 1990s onwards, with trade liberalisation and the boom in technology services outsourcing. Then, in the 2010s, came the manufacturing chapter: "Make in India", the production-linked incentive schemes, the negotiations to attract Apple, Samsung, and their supplier chains.
The problem is not that this strategy was wrong. The problem is that it is no longer sufficient.
A chip manufacturer is not worth the same as a semiconductor materials research centre surrounded by talent, specialised venture capital funds, precision input suppliers, and regulation that facilitates technology transfer between the laboratory and the production line. The first asset can be relocated if the fiscal or geopolitical climate changes; the second takes twenty years to build and is practically impossible to replicate elsewhere once critical mass consolidates.
China did not become a power in electric vehicle batteries simply because it manufactured more cells than anyone else. CATL and BYD dominate large segments of the global battery supply chain today not because the Chinese state paid them subsidies, but because over two decades a system was articulated in which technical universities generated applied research, local government facilitated land, financing and public procurement, and private capital found long-term signals clear enough to invest. That model — which some academics call the triple helix, although the name matters less than the mechanism — converted factories into industrial standards. And standards are power.
India produces engineers in formidable quantities. Its public digital infrastructure — Aadhaar and UPI, above all — demonstrates that when government, technology and public policy align around a precise objective, the results can be world-class. The iDEX defence programme has begun to produce similar signals in military technology. But these are cases of high institutional coordination in bounded sectors. What India has not yet built is the connective tissue that converts those cases into the rule, not the exception.
The Data Point That Should Most Trouble an Indian CEO
India spends approximately 0.6% of its GDP on research and development. China invests around 2.4% to 2.6%. The United States, Germany, South Korea, and Japan oscillate between 2% and 4%. That gap is not just a number: it is the distance between building factories and building the capacity to design what the factories produce.
The Global Innovation Index of the World Intellectual Property Organization places India at position 52 in innovation inputs. The country performs better in outputs — it converts its limited resources into some innovative results — but the ceiling is low because the inputs are insufficient. And where the data becomes most uncomfortable is at the intersection of symbolic capital and intellectual property: India has more than one hundred companies valued above one billion dollars. Of them, according to data cited in the reference analysis, at least 101 hold no patents whatsoever.
That data point describes with precision the type of innovation India has privileged: digital business models that arbitrage consumer behaviour, intermediation platforms, financial applications built on public infrastructure. All of that creates value and employment. But it does not create the assets that European and Anglo-Saxon governments protect with national security laws. No one activates the equivalent of the UK's National Security and Investment Act over a payments app. They do activate it over a telecommunications network, over a digital identity provider, over a company with IP in battery materials or in foundational artificial intelligence models.
For investors and executives who read the map with cold clarity, the operational conclusion is this: the strategic value of an asset is no longer determined solely by its projected cash flow, but by whether the country where it operates considers it part of its power infrastructure. That revaluation is happening right now in semiconductors, telecommunications, energy, artificial intelligence, and biotechnology. Companies that are positioned within those perimeters — with IP, with long-term government contracts, with a presence in international technical standards — will be valued differently in the next decade. Those outside that perimeter, even if profitable, will be more easily displaced.
What India Needs to Build Before the Map Sets
The concrete risk for India is not running out of factories. It is being left with factories that others control. A semiconductor plant announced with fanfare but without a local research chain, without its own equipment suppliers, without engineering faculties that generate the process engineers that plant will need in ten years, is an asset that can be packed up and moved. Or one that may become dependent on foreign licences to update its technology. Or one that, in the best case, assembles other people's designs without ever generating its own.
The difference between both scenarios is institutional before it is economic. It requires universities with a genuine capacity to produce patents and commercial spin-offs, not merely to publish academic papers. It requires venture capital willing to fund an advanced materials company for eight years before it sees revenue, something the current Indian market does not provide with sufficient depth for hardware-intensive sectors. It requires technology transfer mechanisms between public laboratories and industry that actually function, not merely ones that exist on paper. And it requires long-term industrial policy coordination that survives electoral cycles, something no democratic country resolves easily but which some — South Korea, Taiwan, Germany — have achieved with varying degrees of sustained success.
India's research and development spending would need to rise from 0.6% to at least 1.5% of GDP to begin approaching the economies already competing in the categories where the technological power of the coming decades is being defined. That leap implies tens of billions of additional dollars per year, and a discussion about where to allocate them that goes far beyond announcing more factories.
The BT episode is not an anecdote of foreign policy, nor a problem belonging to one Indian businessman with ambitions in Europe. It is the clearest signal India has received in recent years that Indian capital wishing to operate in sectors considered strategic by advanced economies needs to arrive with technological credentials, not just financial capital. And building those credentials — in IP, in standards, in its own research capacity — is precisely what India has been postponing while celebrating the next plant inauguration.
The friction that no Indian government has addressed with sufficient seriousness is neither bureaucratic nor fiscal. It is the cognitive friction between the language of manufacturing, which dominates the discourse of economic policy, and the language of strategic assets, which is already the operational language of Washington, Brussels, Tokyo, and Beijing. Until that gap is closed in budget decisions, in university reform, and in the architecture of domestic venture capital, factories will continue to be the most expensive and most replaceable asset in the Indian economy.
