China Plus One: Is India Actually Capturing the Supply Chain Shift?

The China Plus One strategy — adding one alternative manufacturing location to reduce China dependence — accelerated dramatically following COVID-19 exposure of concentrated supply chain vulnerabilities. The question is whether India is actually benefiting at scale.

Where India is winning: Mobile phone manufacturing is the most cited success — Apple through Foxconn and Tata Electronics has significantly expanded India production with iPhone exports reaching approximately USD 14 billion in FY2024. Pharmaceuticals have attracted contract manufacturing as EU and US companies diversify away from Chinese APIs. Electronics PLI has attracted USD 9 billion in manufacturing investments.

Where India is losing: Vietnam captured far more of the China Plus One shift in electronics, textiles, and footwear — benefiting from existing infrastructure, lower wages, streamlined investment approvals, RCEP membership, and EVFTA with EU. Mexico captured North American supply chain manufacturing due to USMCA proximity. Bangladesh continues to dominate EU garment market despite India advantages in cotton and yarn.

The structural gaps India must close: (1) Logistics cost — approximately 13-14% of GDP versus 8% in China and 10% in Vietnam; (2) Labour flexibility — India labour laws remain complex versus more flexible frameworks in Vietnam and Indonesia; (3) Land acquisition timelines; (4) Investment approval speed; (5) FTA network gaps — RCEP non-member, no USA FTA, India-EU FTA not yet concluded.