Summary:
The past decade has been marked by high geopolitical uncertainty, disrupting not only the global political order but also dismantling long-standing global economic systems. The US-China trade and tech war, the COVID-19 pandemic, and the Russian invasion of Ukraine exposed the vulnerability of global supply chains—delays, shortages, and rising costs became the norm. In response, governments worldwide began seeking greater control over production, especially in strategic sectors. Terms like reshoring and friend-shoring entered the global vocabulary, reflecting how trade and investment decisions were increasingly shaped by geopolitics rather than just economic efficiency. Industrial policy, once sidelined, came back in vogue.
India responded with its own strategic push to the manufacturing sector. Under the framework of Aatmanirbhar Bharat (Self-Reliant India), the government launched one of its largest incentive schemes, the Production-linked Incentive Scheme (PLI), allocating USD 26 billion in subsidies to scale domestic manufacturing. This push aimed to achieve self-sufficiency in critical industries, integrate India more deeply into reconfiguring global value chains, and revive the manufacturing sector as a new pillar of sustained economic growth and job creation.
Against this backdrop, exports are on the rise in India. Merchandise exports and imports both increased in 2024-25, with imports expanding more sharply, contributing to a larger current account deficit. Meanwhile, growth in services exports is expected to help narrow the trade deficit.
In light of these developments, thematic research for this year’s edition introduces a novel measure of trade competitiveness across manufacturing sectors for India’s subnational economies. Tamil Nadu, Telangana, and Gujarat emerge as the most trade-competitive states, while Odisha, Chhattisgarh, Jharkhand, and Kerala rank lowest. Maharashtra, Karnataka, Uttar Pradesh, and West Bengal show notable improvements in trade competitiveness.
At the national level, India holds a comparative advantage in pharmaceuticals, textiles, leather, rubber and plastic products, and motor vehicles. Within these key sectors, in 2022, states like Gujarat and Maharashtra appear among the top three in three out of five industries, while Tamil Nadu ranks in the top three in four. In addition to these major industrial hubs, several states show sector-specific strengths—for instance, West Bengal in textiles and Haryana in leather goods. Lastly, the chapter features a case study exploring why two coastal states, Odisha and Kerala, lag behind despite the general advantage coastal states enjoy in trade competitiveness.
This volume also presents the latest results of the ACI India Annual Competitiveness Analysis of the 36 sub-national economies and five regions of India.
– Maharashtra has retained its spot as the most competitive sub-national economy, followed by Karnataka, Gujarat, Tamil Nadu, and Delhi. Jharkhand is the least competitive sub-national economy.
– At the environment level, the Top five economies’ overall competitiveness is driven by strong performances in Macroeconomic Stability, Government and Institutional Setting, and Financial, Business, and Manpower Conditions, but trails behind in Quality of Life and Infrastructure Development.
– The Western region remained the most competitive. The Southern region overtook the Northern region, while the North-eastern region moved ahead of the Eastern, which ranks last.
– Western and Southern regions outperform others in most indicators. They are wealthier, accounting for greater capital formation and FDI inflows. They are also home to a sizeable urban population and a productive labor force.
– The North-eastern economies rank significantly higher than others in health infrastructure and education spending.
ACI Perspectives 