India’s economic transformation is creating new opportunities for investors. Gabriel Sacks, Lead Manager of Aberdeen Asia Focus plc, explores how the country’s push to strengthen manufacturing and capital goods industries is helping shape the next phase of growth.
For many consumers, rightly or wrongly, “Made in China” was long associated with… well, rubbish. Purchases bearing this tag were frequently mass-produced, cheaply made and less than durable.
Times have changed. China might still be seen as the “workshop of the world”, but its focus is now much more on high-end processes and goods rather than the bargain-basement offerings of years past.
A similar transition can be associated with another, less well-known term from the sphere of emerging markets (EMs).
Originally introduced in 2014, “Make in India” now fully merits investors’ attention.
Before exploring why, it is imperative to understand the designation itself. It may sound clunky – if not downright incorrect – but this is because it was intended to serve not as a descriptor but as an exhortation.
Prime Minister Narendra Modi launched Make in India as a nation-building initiative. The fundamental aim was to reinvigorate the country at a time when EMs as a whole were struggling to deliver economic growth.
To quote the official spiel, this was “a rallying cry… a galvanising call to action to India’s citizens and business leaders” – not to mention “an invitation to potential partners and investors”[1].
The stated core objectives were to boost manufacturing, encourage innovation, create jobs and attract investment. Modi’s government reasoned that accomplishing these goals would require new procedures, new infrastructure, new sectors and a new mindset.
The last of these pillars demands further explanation. In essence, it involved a shift in policymaking. Instead of acting as a strict rule-maker, the government would become a facilitator. Deregulation would mark the way ahead.
The impacts were never going to become apparent overnight, and it is fair to say there have been a few stumbles over the past dozen years or so. But Modi’s dream of India establishing itself as a genuine economic powerhouse is now being realised on multiple fronts.
It is not just a matter of India being tipped to become the world’s third-largest economy by the end of the decade or shortly thereafter. This trajectory has been relatively clear for some years[2].
In our opinion, what is really notable at present is a substantial move towards capital goods – that is, products that companies use to make other goods. India has not only followed China in this respect but is now increasingly taking business from it.
Leapfrogging, supply chains and smaller companies
As its government is only too delighted to proclaim, India is well on its way to becoming a leading player in fields such as electrical equipment, machinery and construction. In the words of the Ministry of Commerce and Industry, a “capital goods revolution” is taking place[3].
Numerous dynamics can help explain this transformation, but we believe two in particular are significant from an investment perspective. One is domestic, the other global.
First, like many EMs, India missed out on some of the most influential technological breakthroughs of the 20th century. This once rendered the country a laggard, but now it instead provides a blank canvas on which to keep pace with tech’s present-day march.
This ties in with all of Modi’s pillars – most obviously the need for new infrastructure and new innovation. It is hard to think of an economy better placed to embrace positive disruption without having to rid itself of outmoded systems and underpinnings. India has become arguably the most effective “leapfrogger” on Earth.
Second, India is cementing its position at the heart of international supply chains. Aerospace and defence are among the industries currently relocating various aspects of production, and there is some hope that semiconductor manufacturing could follow.
India has plenty in its favour in this regard. Its labour force is enormous. It boasts a multi-million-strong graduate demographic. Unlike China, it does not come with patent geopolitical sensitivities.
Of course, a vital question remains for investors: where might the best prospects be found amid this “capital goods revolution”? The short answer is that we continue to prefer smaller companies.
India has recently accounted for around a fifth of our fund’s holdings. By comparison, China has accounted for around a sixth.
In our experience, smaller companies are often among the most potent engines of long-term growth. Whether in India, China or elsewhere, they can be powerful yet widely unrecognised drivers of transformation – the businesses that quietly enable the sweeping change taking place both in EMs and in their developed counterparts.
It is highly unlikely that you will ever buy a product that is branded “Make in India”. But there could be much to be said for investing in high-quality, well-managed, forward-looking smaller companies that adhere to the spirit of Modi’s ambitious rallying cry.
1. See, for example, Make in India: “About us”, accessed October 2026 – https://www.makeinindia.com/about.
2. See, for example, S&P Global: “India is set to become the third-largest economy by 2030-31 with projected annual growth of 6.7%, according to S&P Global”, September 19 2024 – https://www.spglobal.com/en/press/press-release/india-is-set-to-become-the-third-largest-economy-by-2030-31.
3. See, for example, Ministry of Commerce and Industry: “Make in India and the capital goods revolution”, accessed October 2026 – https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2117968®=3&lang=2.
Main image: Indian flag, India, naveed-ahmed-9Dt4WutvwDs-unsplash
