India’s import dependence leaves key sectors vulnerable to global shocks: Crisil

The conflict in West Asia has highlighted a key vulnerability in India’s economy: high dependence on imports for critical commodities and industrial inputs, according to a report by Crisil. The risks extend beyond a widening trade deficit. Disruptions to global supply chains can threaten the continuity of economic activity, while sudden increases in commodity prices can raise production costs and fuel inflation.

With geopolitical tensions continuing, the concentration of India’s import dependence has become an important policy concern. An assessment based on the National Statistics Office’s Supply Use Tables for 2023-24 shows that industry is the most import-dependent major sector, with significant exposure concentrated in mining and manufacturing.

Import dependence is particularly pronounced in the energy sector. Crude oil is India’s most import-dependent product, with roughly 85-90% of domestic requirements met through imports. Copper ore and natural gas are also highly dependent on overseas supplies, with imports accounting for 68.8% and 66.1% of domestic supply, respectively. Such exposure leaves India vulnerable to geopolitical disruptions, commodity price shocks and restrictions on international trade.

Manufacturing faces a different set of vulnerabilities. Import dependence is concentrated largely in industrial inputs and capital goods rather than finished consumer products. Electrical cables and wires have an import dependence of 36.9%, followed by organic chemicals at 36.5%, batteries at 29.7% and plastic products at 23.9%.

By comparison, dependence is considerably lower for iron and steel, at 6%, construction inputs at 9% and rubber products at 12.3%. The distinction is important because imported inputs are embedded in domestic production. Industries such as electronics and pharmaceuticals can therefore remain exposed to external disruptions even when imports of finished products are relatively limited. Clothing, automobiles and processed food, meanwhile, have comparatively lower import dependence.

Government policy has increasingly focused on addressing these vulnerabilities by expanding domestic production. The production-linked incentive scheme has helped strengthen manufacturing capabilities, particularly in electronics, and contributed to a sharp rise in domestic mobile phone production and exports. However, the sector remains heavily reliant on imported components. A 2025 Crisil study estimated domestic value addition in mobile phones at around 20%, indicating that much of the industry continues to be driven by assembly rather than deeper component manufacturing.

To address this gap, the government launched the Electronic Component Manufacturing Scheme in 2025, alongside initiatives such as the India Semiconductor Mission and the Rare Earth Permanent Magnet Scheme. These programmes aim to build domestic capabilities in strategically important components and materials. However, developing resilient supply chains and reducing dependence on imported inputs will require sustained investment and time.

The issue has become more pressing as global commodity prices and trade restrictions remain elevated. International prices for energy, food, fertilisers and metals have remained higher since 2021, increasing the exposure of import-dependent economies to external price shocks. At the same time, data from Global Trade Alert indicate that restrictive trade measures have expanded faster than trade-liberalising measures since 2021. Export restrictions on critical inputs could therefore disrupt Indian production even when adequate supplies exist elsewhere in the global market.

For India, import dependence is consequently more than a trade issue. Heavy reliance on strategically important imports can create supply shocks that simultaneously constrain economic growth and increase inflationary pressures.

The policy response, however, should not focus on reducing imports across the board. Imports remain economically beneficial when they provide competitively priced inputs and products. The priority should instead be to reduce vulnerabilities in strategically critical goods. This means diversifying import sources, maintaining adequate strategic reserves, particularly for energy, and expanding domestic production where it is economically viable.