We are talking about 2004. Like as you said China was taking off in manufacturing. The Indian government at that time NDA wanted to focus on manufacturing if they happen to win in 2004 elections which unfortunately they lost. Until now the period between 1999-2004 remains the best any Indian government has gotten in terms of economic reforms and job creation. That 6 year period created 65 million jobs, that's 10 million each year. They undertook massive highway construction. They opened up the economy for more foreign investment. They made many public sector units profitable and even sold off some to private players.
All these were brilliant, but the problem is: Chinese did far more and much earlier.
According to a report if they would have won in 2004, they would have diverted some manufacturing which would have gone to China to India instead. Back then there wasn't much difference between India and China in economic terms. So it was highly feasible it would have happened.
Then you are missing the facts: there were huge difference between India and China in economic terms around 2004:
From the table in the above, you can see that in those key areas for manufacturing, Chinese had 2 or 3 times advantage over India in 2005.
And if we check those raw materials critical for manufacturing, you can see that Chinese were far ahead of India in 2004. For example, Chinese produced 128.5 mt steel in 2000 when India produced 26.9mt. In 2007, Chinese production was 494.9 and India was 53.5. This means Chinese factories can get much cheaper materials comparing to Indian competitors.
And most importantly, you miss a key point: TIMING! The world manufacturing companies started their massive investment in China from 1995-1996. Generally, it took 3-4 years to build the factories, so these factories started to produce in 2000. Considering the time of sorting out the issues like quality, management, logistic, these factories wouldn't see any profit in first 2-3 years. So, in 2004, the majority of these factories just started to produce profits. But as an investment project, the total profit was still not enough to cover the whole investment. In other words, these manufacturing companies had no money to create another factories in India at the time.
My point is: no matter who was in the power, India wouldn't be able to get much manufacturing from China in 2004 because:
1. The infrastructure wasn't ready at the time (it took 10 years for India to get into that position);
2. The economic circle wasn't finish ( Chinese started to receive these manufacturing from South East Aisa when last circle finished in 1990s).