India’s manufacturing sector is charting a strategic course towards sustainable growth by embracing the China Plus One strategy. This approach, which involves diversifying supply chains away from sole reliance on China, has emerged as a key driver in India’s quest to establish itself as a formidable manufacturing hub on the world stage.
For decades, China has been the undisputed leader in global manufacturing, offering competitive advantages such as low labour costs, scale, and infrastructure. However, recent geopolitical tensions, trade disputes, and the COVID-19 pandemic have exposed vulnerabilities inherent in over-reliance on a single manufacturing powerhouse. As a result, businesses worldwide are reevaluating their supply chain strategies, seeking greater resilience and agility.
India, with its vast workforce, burgeoning consumer market, and improving business environment, is increasingly being viewed as an attractive alternative to China. The government’s initiatives such as “Make in India,” aimed at promoting domestic manufacturing and attracting foreign investment, have further bolstered India’s appeal as a manufacturing destination.
The China Plus One strategy involves companies diversifying their manufacturing operations by establishing or expanding production facilities in countries beyond China, with India emerging as a favoured choice. This approach not only mitigates risks associated with over-dependence on a single market but also offers access to India’s skilled labour pool, expanding consumer base, and favourable business incentives.
Several industries, including electronics, automotive, textiles, and pharmaceuticals, are witnessing a surge in manufacturing activities in India as companies seek to leverage the advantages offered by the China Plus One strategy. Major multinational corporations are either setting up new facilities or expanding existing ones in India, signalling a shift in the global manufacturing landscape.
Moreover, India’s strategic location, with access to key global markets and proximity to Southeast Asia, positions it as a strategic node in the evolving supply chain networks. By integrating with regional trade blocs and fostering closer economic ties with neighbouring countries, India aims to capitalise on its geographical advantage and become a pivotal player in the global manufacturing ecosystem.
However, realising India’s full potential as a manufacturing powerhouse requires addressing various challenges, including infrastructure bottlenecks, regulatory complexities, and skill shortages. The government, in collaboration with industry stakeholders, is undertaking concerted efforts to streamline processes, improve infrastructure, and enhance the ease of doing business to create a conducive environment for manufacturing growth.
As India’s manufacturing journey unfolds, embracing the China Plus One strategy presents a unique opportunity to accelerate its ascent on the global manufacturing stage. By capitalising on its inherent strengths, addressing existing challenges, and fostering collaboration between government, industry, and other stakeholders, India can emerge as a competitive and resilient manufacturing destination, shaping the future of global supply chains.
References:
- A new growth formula for manufacturing in India | McKinsey & Company | Oct 2020
- A deep dive into India’s manufacturing landscape | The Economic Times | Jan 2024
- India’s quest to become a global manufacturing hub | Times of India | Oct 2023
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