India’s push to strengthen domestic manufacturing and achieve greater self-reliance continues to face a major challenge: heavy dependence on imports for critical energy resources, electronics components and industrial inputs.
A recent analysis by Crisil highlighted the vulnerability created by India’s reliance on imported critical commodities and industrial inputs, particularly amid geopolitical tensions and disruptions to global supply chains. Import dependence can expose Indian industries to sudden increases in commodity prices, freight costs and supply disruptions.
Energy remains a major vulnerability
India remains highly dependent on overseas supplies for its energy requirements. The country imports more than 90% of its crude oil needs, leaving domestic fuel costs and industrial production exposed to international prices and geopolitical disruptions. In July 2026, Russia accounted for a record 50.83% of India’s crude oil imports, highlighting the scale and strategic importance of overseas energy supplies.
The vulnerability extends beyond crude oil. India is also a major importer of liquefied petroleum gas (LPG). Indian Oil Corporation is now looking to diversify its LPG sourcing by increasing supplies from Algeria and the United States amid continuing uncertainty around Middle Eastern energy flows.
Electronics supply chain still relies on imports
India has made considerable progress in electronics manufacturing, particularly in mobile phones. However, the domestic ecosystem remains dependent on imported semiconductors and electronic components.
According to NITI Aayog, India imports roughly 90–95% of its semiconductor and electronic component requirements, with China, Taiwan, South Korea and Singapore among the major sources. This dependence remains a significant challenge as electronics become increasingly important to automobiles, consumer devices, telecommunications, healthcare and defence.
The government is attempting to address the gap through initiatives such as the Electronics Components Manufacturing Scheme and India Semiconductor Mission 2.0. The latest government measures aim to build a deeper domestic component ecosystem rather than relying primarily on final-product assembly.
Industrial and strategic inputs remain exposed
Import dependence also extends to critical minerals, specialised materials and components required for sectors such as electric vehicles, renewable energy and advanced manufacturing.
India is therefore accelerating efforts to establish domestic rare-earth magnet production and secure overseas sources of critical minerals. These materials are increasingly important for electric vehicles, electronics, renewable-energy equipment and other high-technology industries.
The electric-vehicle industry illustrates the challenge. Although India has made significant progress in localising EV production, imported semiconductors, rare-earth magnets and specialised materials remain important gaps in the domestic supply chain.
Import bill adds pressure
The continuing dependence on imported energy and industrial inputs also has implications for India’s trade balance. Merchandise imports rose sharply in July 2026, reaching $76.22 billion, while exports stood at a record $44.24 billion. The resulting merchandise trade deficit widened to $31.98 billion, a six-month high. Electronics imports jumped 44% year on year during the month.
At the same time, India is attempting to move up the value chain by expanding domestic manufacturing and exports. NITI Aayog has identified sectors such as telecom equipment, chemicals, textiles and solar photovoltaics as areas with potential to become globally competitive manufacturing hubs, while stressing the need to reduce import dependence.
Self-reliance remains a long-term objective
The government’s strategy is increasingly focused on developing complete domestic ecosystems rather than simply replacing imports of finished goods. Incentives for electronics components, semiconductor manufacturing, critical minerals, defence equipment and other strategic industries are intended to strengthen local supply chains.
For India, reducing import dependence is not only about lowering the trade deficit. Greater domestic capacity could also improve supply-chain resilience, protect industries from global disruptions and strengthen national economic and strategic security.
However, achieving meaningful self-reliance will require substantial investment in technology, raw materials, research and development, skilled manpower and supporting infrastructure. Until these domestic capabilities mature, energy, electronics and several critical industrial inputs will continue to leave India exposed to global supply-chain and geopolitical risks.