Section I: The Impact of the “China+1” Strategy on India’s Manufacturing

The “China+1” strategy encourages companies to diversify their supply chains and seek manufacturing bases outside China. India, with its demographic dividend and geographic advantages, has become a hotspot. In 2024, India’s manufacturing accounted for 17% of GDP (approximately $680 billion). The “China+1” strategy presents both opportunities and challenges, affecting India’s superpower ambitions. The following analyzes its impacts and outlook.

Background and opportunities of “China+1”: Since the 2018 U.S.-China trade war and the 2020 COVID-19 pandemic, global companies (such as Apple and Tesla) have adopted the “China+1” strategy. In 2024, 30% of supply chain investments shifted to India, Vietnam, and Mexico. According to the 2024 KPMG report, India attracted $10 billion in manufacturing FDI, accounting for 20% of global “China+1” investments. Opportunities include: 1) Demographic dividend: In 2024, India’s 550 million workforce (65% under 35) provides low-cost labor, with average wages one-third of China’s ($300/month). 2) Market potential: India’s 1.41 billion population and 400 million middle class support domestic demand; the consumer market reached $200 billion in 2024. 3) Geographical advantage: India is at the heart of the Indo-Pacific; in 2024, maritime logistics accounted for 10% of global shipping, attracting electronics and automotive industries. 4) Policy support: “Make in India” (2014) offers tax incentives; in 2024, Apple increased iPhone assembly by 20% and Samsung exported $5 billion in phones.

Specific impacts: 1) Electronics manufacturing: In 2024, India’s electronics output reached $100 billion; Apple assembled 25% of iPhones in India (up from 5% in 2020), creating 100,000 jobs. 2) Automotive and components: Tesla invested $2 billion in Gujarat in 2024, planning to produce 500,000 electric vehicles by 2030. 3) Textiles and chemicals: Textile exports grew 15% ($50 billion), chemicals (pharma intermediates) up 20% ($30 billion) in 2024. 4) Employment: Manufacturing created 500,000 new jobs in 2024, with rural workforce participation up 10%. However, India accounts for only 3% of global manufacturing (China 30%), lagging behind Vietnam (FDI up 15% in 2024).

Challenges: 1) Infrastructure shortage: In 2024, logistics costs were 14% of GDP (China 8%); port efficiency was low (Mumbai port container turnaround 30 days vs. Shanghai 15 days). 2) Skills gap: Only 30% of manufacturing workers possess modern skills (e.g., robotics operation); 50% of companies reported recruitment difficulties in 2024. 3) Policy instability: 20% of FDI projects in 2024 were delayed due to land acquisition or tax disputes. 4) Competition: Vietnam and Indonesia offer lower tax rates (10% vs. India 15%), capturing 15% of “China+1” investments in 2024.

Outlook: By 2030, manufacturing is targeted to reach 25% of GDP ($1.2 trillion), attracting $50 billion in “China+1” FDI. Investments of $50 billion in infrastructure and skills training are needed. Success would establish India as a manufacturing hub; failure would limit opportunities.

Section II: India’s Potential to Attract Foreign Direct Investment (FDI)

India, as a global FDI hotspot, attracts capital through market size and policy reforms. In 2024, FDI inflows reached $60 billion (UNCTAD), accounting for 4% of global FDI. However, structural challenges limit potential. The following analyzes advantages, challenges, and outlook.

Advantages in attracting FDI: 1) Market size: India’s 1.41 billion population and 400 million middle class support a $200 billion consumer market; retail and e-commerce (Amazon, Flipkart) attracted $10 billion FDI in 2024. 2) Workforce: 550 million laborers (average age 28) provide low-cost labor and English proficiency; IT and manufacturing FDI accounted for 60% ($36 billion) in 2024. 3) Policy reforms: “Make in India” and PLI scheme (2020) offer 10% tax incentives; in 2024, Apple, Tesla, and TSMC invested $5 billion. 4) Digital economy: 1,000 billion UPI transactions in 2024; digital market ($50 billion) attracted $2 billion investment from Google and Meta. 5) Geopolitics: U.S.-China decoupling redirected U.S. companies to India; U.S. FDI accounted for 30% ($18 billion) in 2024.

Specific results: In 2024, FDI mainly flowed into: 1) Manufacturing ($20 billion, 33%), electronics and automotive accounted for 50%. 2) IT & BPO ($15 billion, 25%), AI and cloud computing up 30%. 3) Energy ($10 billion, 17%), solar and green hydrogen 60%. 4) Retail & e-commerce ($8 billion, 13%). Gujarat and Karnataka attracted 50% of FDI, rural areas only 10%. FDI created 1 million jobs in 2024; IT and manufacturing accounted for 80%.

Challenges: 1) Infrastructure: 40% of FDI projects in 2024 affected by power outages (5 hours/month in rural areas) and logistics delays (30-day port delays). 2) Bureaucratic corruption: Transparency International CPI ranked 85; 10% of FDI projects delayed due to bribery costs (5% of project cost) in 2024. 3) Labor laws: 20% of firms reported complex labor regulations (e.g., strike restrictions) affecting investment confidence. 4) Competition: Vietnam attracted $30 billion FDI (up 20%), offering lower taxes and faster approvals. 5) Regional imbalance: Northern states (e.g., Bihar) attracted only 5% of FDI, worsening inequality.

Outlook: By 2030, India targets $120 billion FDI inflows, 8% of global FDI. Investments of $100 billion in infrastructure, labor law simplification, and anti-corruption (CPI top 50) are needed. Success would boost economy and employment; failure would limit potential.

Section III: The Key Role of Infrastructure Improvement in Manufacturing Development

Infrastructure is the cornerstone of India’s manufacturing development. In 2024, $100 billion (3% of GDP) was invested, but transportation, power, and digitalization shortages limit “China+1” opportunities. The following analyzes the role, progress, and challenges of infrastructure.

Key roles: 1) Logistics efficiency: Efficient transport reduces costs; logistics accounted for 14% of GDP in 2024 (China 8%). Reducing it to 10% could save $20 billion. 2) Power stability: Reliable electricity is essential; IT and electronics lost $1 billion in 2024 due to outages. 3) Digital foundation: 5G and data centers support AI and smart manufacturing; digital economy ($50 billion) accounted for 12% of GDP in 2024. 4) FDI attraction: In 2024, 50% of FDI companies prioritized states with strong infrastructure (e.g., Gujarat). 5) Employment and urban-rural connectivity: Infrastructure projects created 5 million jobs; rural road improvements increased labor mobility by 10% in 2024.

Progress: 1) Transportation: Total road length 6 million km (expressways 20,000 km), Bharatmala plan invested $10 billion connecting 100 industrial zones. Rail freight increased 10% (68,000 km); Ahmedabad-Mumbai high-speed rail trialed. 2) Power: Installed capacity 480 GW, renewables 40% (solar 100 GW). Sagarmala plan upgraded ports; Mumbai throughput up 15% in 2024. 3) Digitalization: “Digital India” promoted 5G (50% city coverage), data center capacity increased 20% supporting AI manufacturing. 4) Smart cities: 100 projects attracted $5 billion FDI in 2024, improving manufacturing efficiency.

Challenges: 1) Funding gap: 2030 target $500 billion; only $100 billion invested in 2024. 2) Land acquisition: 50% of projects delayed in 2024 due to disputes; rural protests up 5%. 3) Corruption: 10% of infrastructure funds ($10 billion) misused. 4) Urban-rural imbalance: Urban infrastructure budget 70%, rural 30%, limiting industrial expansion. 5) Technology shortage: Only 20% of projects used smart technologies (IoT), lagging behind China (50%).

Impact: Insufficient infrastructure increased manufacturing costs 15%; electronics exports lost $2 billion due to logistics delays in 2024. Rural infrastructure lag limited workforce participation, with only 10% entering manufacturing.

Outlook: By 2030, logistics costs targeted at 8%, full power coverage; $200 billion investment and anti-corruption reforms are required. Success would raise manufacturing to 25% of GDP; failure would forfeit opportunities.

Section IV: India’s Role in Global Supply Chain Diversification

Global supply chain diversification provides India with a historic opportunity, transforming it from a peripheral participant to a key node. In 2024, India accounted for 3% of global manufacturing and 2% of trade, rising in electronics, automotive, and pharmaceutical supply chains. The following analyzes roles, contributions, and challenges.

Roles and contributions: 1) Electronics supply chain: In 2024, India produced 25% of Apple iPhones and 10% of Samsung phones, exporting $50 billion, 5% of the global electronics supply chain. 2) Pharmaceutical supply chain: India provided 20% of global generics (exports $30 billion), 50% of vaccines (100 million doses), supporting Africa and South Asia. 3) Automotive and components: In 2024, automobile exports reached $10 billion; Tata and Mahindra supplied 10% of global EV components. 4) Energy and green tech: India exported $5 billion in solar modules (10% of global), supporting sustainable supply chains. 5) Geopolitical role: Through Quad and ISA, India offset Chinese influence; $2 billion aid strengthened Southeast Asian supply chain ties in 2024.

Policy support: 1) PLI scheme: $5 billion invested in 2024 to incentivize electronics and pharma manufacturing, attracting $10 billion FDI. 2) Trade agreements: FTAs with Australia and UAE increased trade 20% ($10 billion) in 2024; EU FTA negotiations ongoing. 3) Digitalization: ONDC promoted SME participation in global trade, $5 billion transaction volume in 2024. 4) Maritime and aviation: Sagarmala and UDAN plans improved port and air cargo; sea freight throughput up 15% in 2024.

Challenges: 1) China dependence: In 2024, 30% of electronic components and 50% of pharmaceutical raw materials imported from China, reducing supply chain autonomy. 2) Competition: Vietnam and Mexico attracted $15 billion “China+1” FDI in 2024, with lower taxes and efficient logistics. 3) Infrastructure: Ports and power shortages delayed exports 10%, losing $5 billion. 4) Geopolitical risk: Sino-Indian border tensions (LAC unresolved in 2024) and Pakistan instability affect investor confidence. 5) Environmental pressure: Manufacturing accounted for 40% of air pollution; international buyers demand green supply chains; only 20% of Indian companies comply.

Impact: Supply chain diversification created 1 million jobs, exports rose 10% ($100 billion) in 2024; however, China dependence and inadequate infrastructure limited role expansion. Rural participation low (10%), increasing inequality.

Outlook: By 2030, India targets 5% of global manufacturing and 4% of trade, requiring $100 billion investment in infrastructure, green technology, and domestic R&D. Success would establish India as a key supply chain node and consolidate superpower status; failure would be constrained by competition and geopolitical risks.