China has been the undisputed mogul in manufacturing products for decades. Its massive scale of production, affordable labor, and excellent infrastructure have rightly earned China the title of the “world’s factory.” However, recent geopolitical shifts and trade tensions, along with China’s critical vulnerabilities exposed by the COVID-19 pandemic, have prompted world organisations to consider a “China+1” strategy, which favors diversification of the global supply chain. In this world trade realignment, India has come up as the most credible contender. But does India have it all that it takes to be a genuine alternative to China? Well, there’s a lot to uncover to get the final answer!
India as a supply chain powerhouse
India boasts of powerful advantages that have helped position it as a viable sourcing and manufacturing alternative to China. Let us learn about it in detail!
- Demographic advantage – India’s favorable demographics are a beacon of hope for its potential in the global supply chain. With the world’s largest working-age population and an average age of under 30, India has a massive labor force for both industrial and high-skill manufacturing roles.
- Infrastructure push – Government projects such as PM Gati Shakti and National Infrastructure Pipeline have significantly improved port connectivity, logistics, and supply chain efficiency. The prevalence of better roads, dedicated freight lines, and industrial corridors is a key catalyst in transforming India into a reliable production base.
- Policy reforms – Major government initiatives such as Make In India, Production Linked Incentive (PLI) schemes and Ease of Doing Business reforms have greatly helped in boosting domestic manufacturing. These programs have been great foreign investment magnets and made India independent in critical industries, including renewable energy, automotive, and electronics.
- Digital transformation – India has massively enhanced its digital infrastructure with promising initiatives like e-governance, Unified Payments Interface (UPI), and Open Network for Digital Commerce (ONDC). These programs have improved business transparency and reduced operational friction.
How are global businesses responding?
We have already seen global giants expanding their manufacturing operations to India. Some of the popular companies include:
- Apple – Apple, along with its suppliers like Pegatron and Foxconn, have set up assembling units of iPhones in India. It is planning to export made-in-India devices globally.
- Samsung – Samsung has set up two of the world’s largest mobile manufacturing plants in Noida and Chennai.
- Tata Group – Tata and global semiconductor companies are active investors in India’s electronics and chip manufacturing sector.
- VinFast – The Vietnamese EV maker has invested more than $2 billion to set up manufacturing units in Tamil Nadu, with plans for further expansion in Andhra Pradesh.
Such moves by global companies portray increasing confidence in India’s capabilities and long-term potential as a global production hub.
Bottomline
Despite massive progress, India must overcome a few challenges before fully rivalling China. The workforce must focus on technical skill development to match advanced manufacturing demands. Also, there remains a significant infrastructure gap between India and China. Logistics costs in India account for over 14% of GDP as compared to China’s 9%. With a proactive stance on fixing such issues, India can demonstrate an unmatchable potential in becoming China’s alternative as a global supplier. However, reaching that position will require India to commit to economic reforms, huge investment in infrastructure, and a huge focus on improving the ease of doing business.
