Thread by @zerodhamarkets

The global political economy has been shaped by various ideas over the last century, with globalization being a key player. When a financial crisis hit India in the early 1990s, the government introduced the New Economic Policy of 1991, which leaned heavily on these growing global trends. 🧵👇

Since then, globalization has only gained momentum. One way to see this is by looking at exports as a share of the world’s GDP. In the 1990s, exports made up about 15% of global GDP. Today, that number is closer to 25%. Many countries have benefited from this shift, but it seems like things might have gone a bit too far.

Between the 1990s and 2008, the world entered what the World Economic Forum calls a phase of “hyperglobalization.” But then came a series of shocks—the 2008 financial crisis, trade wars, frustrated middle classes in developed countries, and growing concerns about relying too much on single trade partners. Together, these factors slowed globalization down to a trickle, a phase often called “slowbalization.”

Now, we’re seeing a shift toward “deglobalization.” The COVID-19 pandemic, the war in Ukraine, widening ideological divides, and the global push for greener economies have made governments and companies rethink their reliance on overseas suppliers. Many are now focusing on “building at home” or working only with trusted partners to ensure stability.

This shift towards self-reliance is happening everywhere, from 'America First' in the US to 'Strategic Autonomy' in the European Union. India's approach is called 'Atmanirbhar Bharat', and its effects are substantial. Today, let's take a closer look at India’s approach to this transformation.

India has many reasons to work towards self-reliance, with energy being one of the most important. We are one of the world’s biggest markets for crude oil and solar panels, yet we still depend heavily on imports. Another key area is electronics and semiconductors, where the government's efforts are making a real impact.

Thanks to programs like the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), the India Semiconductor Mission, and partnerships with global companies, we’ve made great progress. We’re now producing enough electronics to meet most of our own needs. On top of that, our exports of electronic products have nearly tripled between FY22 and FY24.

A big part of this growth comes from smartphones. Just last year, headlines proudly announced that India was assembling 1 out of every 7 iPhones—a milestone we covered in The Daily Brief.

With the launch of the iPhone 16, Indian-made iPhones hit global shelves on the same day as those made in China. For the first time, India also produced the advanced Pro and Pro Max models. This shows that Foxconn, Apple’s contract manufacturer, is gaining confidence in India as a manufacturing hub and even sees it as a potential alternative to China.

As India rises as a potential manufacturing hub, China seems uncomfortable with this shift. Allegedly, Chinese staff face visa issues to work at Indian plants, while others are being recalled. Rumors of delayed equipment shipments also swirl, which if true, could stall India's mobile manufacturing progress. However, these claims remain unconfirmed.

The bigger issue here is the importance of knowledge and technology transfer for any growing industry. India hasn’t been making iPhones for very long, while Foxconn’s teams in China have had years of experience perfecting the process. For India to succeed, Foxconn will need to share that expertise with its Indian teams.

That’s exactly how China became the “factory of the world.” They welcomed foreign companies to set up operations there, offering cheap labor, but only on the condition that technology transfer took place locally. If India wants to achieve true Atmanirbharta (self-reliance), it will need to follow a similar strategy.

If these reports about China blocking technology transfer are true, it’s a challenge India will have to tackle head-on. Overcoming it will be crucial for building a strong and competitive manufacturing industry.

We’ve seen a similar story play out in the U.S. as well. Determined to reduce its dependence on foreign semiconductors, America—ironically, the birthplace of semiconductors—watched its share of global manufacturing capacity shrink from 37% in 1990 to just 10% by 2022. This happened largely because other countries invested heavily in chip manufacturing incentives, while the U.S. government didn’t.

To turn things around, Washington passed the CHIPS Act, convinced TSMC to invest $65 billion, and secured a commitment from them to build three semiconductor factories (fabs) in the U.S. by the end of the decade. But progress has been slow.

It’s only recently that the first fab has finally gone live after facing several delays—mostly due to a shortage of skilled workers. The U.S. had to rely on Taiwanese experts to set up the processes, but it seems the worst of those challenges is now behind them.

While many countries want to move toward deglobalization, foreign partnerships remain vital. The deep interconnection of our economies means going solo isn't simple. If India wants to follow in China’s footsteps and become largely self-reliant, it will need to adopt similar strategies, notably advocating for technology transfers.

Without that, the dream of true self-reliance could slip away. Technology and expertise are essential to building industries that can stand on their own. To make this vision a reality, we must learn from others and incorporate their knowledge.