Also, said the report, there appears to be a lack of alternative suppliers in many cases at the same scale or costs. While consumer durables are dependent on China for components, pharma is dependent for active pharma ingredient (API) sourcing.
Telecom is dependent on China from a network standpoint as well as for 4G smartphone handsets as China caters to more than 75 per cent of the Indian handset demand.
Various sectors have material inter-linkages with China and form a critical part of the supply-chain for many firms in India.
"Any potential escalation between the two nations could increase operational and supply-chain risks in the current economic backdrop even as economies look to recover from the pandemic," said the report.
"Overall, it will be difficult and expensive for Indian firms to immediately find alternative suppliers. Structural reforms are crucial for manufacturing competitiveness and reducing long-term dependence on China."
In the short-to-medium term, deep inter-linkages of several sectors preclude any meaningful retaliation on the trade front, said the report.
However, as the world looks to de-risk its supply-chain from China given the backdrop of the Covid-19 pandemic from a long-term perspective, the need for emphasis on Indian manufacturing gets reinforced now.
Further, the Indian government has also announced several measures to drive self-dependence in various aspects (Atmanirbhar Bharat).
For a sustained change, however, structural reforms encouraging manufacturing (ease of doing business, ease of compliance burden, etc) and market reforms (land, labour and capital) will augur well to augment India's manufacturing competitiveness.