In order for you to climb the manufacturing ladder you need to attract foreign companies with advanced tech to come into your country, invest in a factory and start manufacturing and making money in your country. You can then use the fact that upstream suppliers to these foreign manufacturers provides fertile ground for your own company to grow to help grow your country.
China did this in a lot of fields, Tesla for example. China let Tesla into Shanghai and provided a lot of incentives to make them comfortable, with the condition that Tesla Shanghai have to use Chinese parts suppliers. Those supplies can then turn around and also provide parts for domestic EV makers. Tesla makes a lot of money from the Shanghai factory and killed a lot of crappy Chinese EV makers that was barely hanging on from lack of competent competition as well as government subsidy. With Tesla coming in and clearing the field the surviving Chinese EV makers like BYD, Nio and Xpeng all got whipped into shape and became world leading.
This process is necessarily painful for the industry loser and you will need to let the foreign companies earn the money that they deserve to earn. India's protectionism prevents similar process from taking place and will only serve to create an ecosystem of inefficient domestic companies that can't survive on their own on the international market.
It's important to note that China could let Tesla in the way it did only because its industrial and technological strength by that point in time was great enough to compete with Tesla.
If your country is backward, you need forced-technology transfers and joint ventures to slowly build up your domestic tech strength and, over time, facilitate a competitive domestic industry. Otherwise a company like Tesla is just going to perpetually dominate the market. This is what China did in the 80s, and is what many emerging economies like Vietnam and Indonesia are doing today.
The problem for India is that companies require a tradeoff for giving away their technology and equity. Usually this means a cheap but skilled workforce, efficient infrastructure, a large consumer market, and a business friendly environment to tap into. India has horrible infrastructure, a massive population but small consumer market (how many Indians can afford Teslas?), an absolute fustercluck of a bureaucracy, and Indian workers are thoroughly thrashed by their ASEAN counterparts in terms of education level vs. wages they're willing to receive. All this topped off with unpredictable crackdowns and fines on foreign entities for seemingly no reason other than to feed the Jai Hind hindu master race mentality. It's no wonder FDI is fleeing India and pouring into China, particularly China's hi-tech service and manufacturing industries.
China has played the FDI game beautifully and will eventually evolve to become the tech overlord of the world, starting first with its domination of EVs and renewables. 1.4 billion talented, intelligent, and hardworking Chinese people led by a ruthlessly pragmatic, forward-thinking and ambitious Party will inevitably dominate every single hi-tech industry, from semiconductors to jet engines to AI to biotechnology. It will happen within our lifetimes.
India, at best, will become a massive Brazil. Actually, the way things are going, India becoming a supersized Brazil is a miracle. India in the future will most likely resemble a slightly better version of India today.
