India’s annual budget, announced on 1 February, included a significant boost to domestic manufacturing expenditure. Finance Minister Nirmala Sitharaman, in her budget speech, emphasised higher investments in infrastructure and local industry while maintaining fiscal prudence. The announcement appears to be a routine economic measure aimed at promoting growth and employment; however, the timing and emphasis suggest something broader than jobs alone.
Across the world, governments, including the United States, the European Union, Japan, South Korea and China, are rediscovering the strategic value of domestic manufacturing and tightening supply chains in key sectors such as semiconductors, advanced technologies, and critical minerals. Manufacturing is seen as national insurance against uncertainty. India’s focus on domestic production reflects this changing mindset.
A Global Turn Toward Industrial Security
This pattern is not unique to India. In the United States, policymakers and industry groups are strengthening domestic semiconductor capacity through large-scale investments and international supply-chain partnerships. Taiwan Semiconductor Manufacturing Company’s roughly $165 billion expansion in Arizona shows how government incentives translate to advanced chip production on U.S. soil, while broader initiatives such as Pax Silica seek to coordinate allied countries to secure semiconductor and AI technology supply chains beyond national borders. The emphasis ensures both economic competitiveness and that critical technologies, from semiconductors to artificial-intelligence hardware, remain available during geopolitical or trade disruptions. A bipartisan group of U.S. lawmakers introduced legislation in January 2026 to establish a $2.5 billion stockpile of critical minerals, aimed at stabilising prices, supporting domestic mining and refining, as policymakers view foreign dependence as a national vulnerability rather than merely an economic issue. European Union leaders, including key representatives from Italy, France and Germany, are focused on reducing dependence on foreign raw materials and reviving manufacturing, even as a recent European Court of Auditors report warned that the bloc remains ‘dangerously dependent’ on external suppliers for critical materials required in strategic sectors. Large subsidy programs and regulatory incentives in the EU are being directed toward green technology, battery production, and advanced chips. In 2025, the European Commission approved €920 million in state aid for a new semiconductor plant in Germany under its Chips Act framework, reflecting concerns regarding overreliance on external suppliers.
In East Asia, Japan is expanding its domestic semiconductor industry. Taiwan Semiconductor Manufacturing Company (TSMC) plans to produce 3-nanometre chips in Kumamoto, southern Japan, with an investment of approximately $17 billion amid rising demand for AI chips. Japan and the United States are discussing joint projects to secure critical materials, such as synthetic diamonds used in advanced manufacturing, as part of broader efforts to reduce dependence on China. South Korea’s semiconductor exports have also surged in early 2026, with shipments expected to grow by roughly 70 per cent year-on-year, highlighting the strength of its manufacturing base as the government promotes long-term plans focused on domestic production. China, meanwhile, has intensified its push for technological self-reliance as it enters its 2026-2030 Five-Year planning cycle. China has emphasised tightening export controls and safeguarding supply-chain resilience to reduce dependence on foreign technology, with the Ministry of Commerce naming enhanced export control rules and risk prevention among its top priorities for 2026. This aligns with the 15th Five-Year Plan’s broader focus on capability building and self-reliance in key industries, such as semiconductors.
Can Self-Reliance Be Sustained?
A renewed push for domestic manufacturing, along with tariffs, subsidies, and the relocation of supply chains closer to home, has downsides. Producing goods locally leads to higher costs as labour, electricity, and raw materials are typically more expensive than imported inputs. According to a report on global supply chains, tariffs increase the prices of critical components and materials, particularly in industries such as metals and electronics. Consequently, many companies are rethinking where they source their supplies and are prioritising long-term stability over short-term cost savings. A 2025 McKinsey & Company survey of global supply-chain leaders found that about 82 per cent of respondents said tariff changes have affected their supply chains, while 39 per cent reported higher supplier and material costs as a direct result. Companies, therefore, have to rethink where they source parts and pursue longer-term stability through dual sourcing or deeper supplier mapping.
Consumers may also feel the effects. A report from the Chartered Institute of Procurement and Supply (CIPS) warns that rising shipping and logistics costs, driven by transport delays and ongoing supply-chain instability, could increase prices for goods such as computers, electrical equipment, and transport machinery in 2026. According to procurement managers, these rising costs are already influencing business plans and expected price increases. In the United States, the Institute for Supply Management (ISM) manufacturing survey reported that tariff uncertainty and higher input costs have weakened manufacturing conditions and complicated production planning.
India’s push to strengthen manufacturing is part of a wider global shift. Countries are not closing their markets. They are rethinking their spending on foreign suppliers in an uncertain global environment. Expanding domestic industries is seen as reducing risk and enhancing stability in addition to creating jobs. However, complete self-sufficiency is neither realistic nor always affordable. The main challenge for governments is to strike a practical balance by supporting key domestic industries while remaining connected to global trade networks that continue to drive growth and innovation.
Akshit Tyagi is an intern at Australian Outlook at the Australian Institute of International Affairs. He is a postgraduate student in International Relations at the Australian National University, Canberra, and holds a Bachelor’s degree in Business Administration as well as a Postgraduate Diploma in Journalism. He previously worked as a business reporter in New Delhi and has written for The Canberra Times, Woroni (ANU student media), The Hill, and other publications.
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