Will India’s shipbuilding industry seize this global moment?

In the early 1960s, Japan held a lead in shipbuilding with production figures that consistently surpassed those of the UK and other nations. South Korea emerged as a competitor, rapidly increasing its shipbuilding output and surpassing Japan in the late 1970s and early 1980s. By the 2000s, China had entered the mix, using its vast resources and manufacturing capabilities to become the leading force in shipbuilding by the 2010s. This trend indicates an increasingly Asia-centric shipbuilding industry, with South Korea and China leading the charge. 

Chinese shipbuilders’ market share was relatively low from 2000 to 2005, hovering at about 7%-10%, according to S&P Global Commodity Insights data. However, a gradual upward trend, particularly in the dry bulk and container ship sectors, resulted from growing capacity and competitiveness in the global shipbuilding market. The evolution of Chinese shipbuilders’ market share over time illustrates a trajectory of growth, stabilization and eventual dominance in various shipping sectors, supported by strategic investments and a responsive approach to global shipping demands.

The Indian shipbuilding industry accounts for less than 1% of the global shipping market, according to S&P Global Commodity Insights. This figure contrasts with that of China, which holds a 61% market share in the order book of major commercial shipping sectors. South Korea and Japan also have significant global influence, with advanced technological capabilities and robust export pipelines. India’s commercial fleet is also much smaller than China’s massive merchant marine, underscoring the growth potential for Indian shipyards. India has pledged to secure 1,000 commercial vessels over the next decade as part of a national push to grow its shipbuilding industry and maritime sector.

The potential for mutually beneficial outcomes lies in collaborative bids for overseas shipbuilding contracts. These would leverage the combined technical expertise of South Korea and Japan alongside India’s cost-efficient manufacturing capabilities and extensive port infrastructure. Significant growth opportunities are anticipated, given India’s competitive labor costs, accelerating industrialization and substantial development in port facilities that support an expanding maritime trade sector.

India’s niche market focus

One of India’s core strategies is to build on its established expertise in small to medium-sized and specialized vessels. Indian shipyards have become adept at building offshore support vessels, coastal vessels, general cargo ships and other niche craft that require a blend of technical skill and customization. This specialization differentiates shipbuilding in India from the high-volume, standardized production of East Asian giants and opens up the country to win international orders in growing market segments, especially as much of the global fleet ages and requires replacement.

Several key factors position the Indian shipbuilding industry favorably in the global market:

• Cost advantage: Relatively low labor costs allow the shipbuilding industry in India to offer competitive pricing. While China is also cost-effective, India holds the potential to match or undercut prices, especially as its industry scales up and becomes more efficient.
• Geographic advantage: Situated on key global shipping routes, India is positioned to serve both east-west and north-south maritime trade. As congestion and capacity constraints mount at East Asian shipyards, shipbuilding companies in India can offer global buyers a viable alternative with efficient turnaround times and competitive costs.
• Green and high-tech vessels: With the maritime sector worldwide moving toward sustainable technologies, the Indian shipbuilding industry is channeling investment into research and development for next-generation ships. These include LNG-powered, electric and hybrid vessels. By building eco-friendly ships from the ground up, India hopes to carve out a niche in an evolving, environmentally conscious shipping industry.
• Naval modernization: India’s commitment to self-reliance in national defense is visible in its rising naval budgets and ongoing projects to build aircraft carriers, submarines and advanced warships locally. This provides a strong pipeline for public sector shipyards and drives technological progress and skilled workforce development, which can spill over into the commercial sector.

Challenges facing Indian shipyards

Despite these advantages, several obstacles remain:

• High capital costs: Indian shipyards still struggle with expensive financing options, making large investments risky and limiting shipyards’ ability to scale rapidly.
• Import dependence: Many core components and advanced materials must be sourced from abroad, which increases costs and exposes the shipbuilding industry in India to global supply chain disruptions.
• Lower productivity: Compared with China, South Korea and Japan, Indian shipyards are less productive, often due to outdated technology, longer build times and less streamlined processes.
• Supply chain limitations: The domestic supply chain for shipbuilding materials, machinery and specialized marine equipment remains a work in progress, making it difficult to achieve world-class standards and timelines.

Tackling these challenges will require sustained policy support, massive investments in modern technology and infrastructure, and a coordinated effort to develop a strong domestic supply chain.

India’s competitive landscape: China and beyond

China’s leading position in the global shipbuilding industry is supported by state subsidies, scale, technological prowess and a vertically integrated maritime ecosystem. While South Korea and Japan remain formidable, China’s expansion — particularly in Africa, as discussed below — presents specific strategic challenges for the Indian shipbuilding industry.

• China’s investments in Africa: Through its Belt and Road Initiative, China has invested significant resources into developing African ports and maritime infrastructure. In many cases, Chinese companies build, operate and control these facilities, securing a captive market for Chinese shipbuilding and repair services. With Chinese-backed enterprises now involved in over a third of all major African port developments, they are well placed to influence Africa’s growing shipbuilding sector.
• Implications for India: The deep entrenchment of Chinese interests in Africa risks crowding out competitors, including shipbuilding companies in India. Arrangements between African governments and Chinese companies make it increasingly difficult for Indian shipyards to gain a foothold on the continent, a key market for future growth.

A road map to global competitiveness

For India to join the ranks of the world’s shipbuilding industry leaders, it must build on its strengths while addressing its weaknesses. S&P Global Commodity Insights has identified some key priorities:

• Accelerating the implementation of policy reforms and financial support mechanisms, ensuring that capital is available at competitive rates and administrative barriers are minimized
• Building integrated shipbuilding clusters that bring together shipyards, component manufacturers, research institutions and training centers to foster innovation and productivity
• Investing in technological upgrades, automation and digitalization to boost productivity and reduce build times
• Enhancing the domestic supply chain for critical marine equipment and materials to reduce import dependence and improve reliability
• Expanding international marketing, partnerships and collaborations to tap into new markets and secure export orders, especially in niche and green vessel segments

S&P Global Commodity Insights estimates that about 60 million metric tons of shipyard capacity will be needed to fulfill new order demand, given fleet replacement and an increase in global trade. While competition from China and other East Asian giants will persist, India’s blend of cost, location and developmental vision will help it carve out a place in this evolving global maritime economy. The journey will be challenging, but with continued strategic focus and innovation, India is on track to become a formidable maritime power in the coming decades.