China+1: And Why India is Still Not The Obvious Darling?
Day 4 of uncovering The Manufacturing Sector of India
Today, I thought of going a bit deeper into China+1 and turned through the recent Press Information Bureau release on the export and import trends of India by the Ministry of Commerce & Industry Department of Commerce for January 2024-25, which weren’t very promising but made me question why we just had a growth of 7.21% in exports from India when China+1 is such a great avenue to capitalize on (altho Electronic Goods exports increased by 78.97 % from USD 2.29 Billion in January 2024 to USD 4.11 Billion in January 2025, but the slow growth in the other merchandises scaled down the cumulative growth).
Let’s go back to China Days-
For decades, the world's manufacturing engine hummed loudest in China, earning it the undisputed title of "World's Factory."
According to the United Nations Statistics Division, China produced 31% of the world’s manufacturing output in 2022—almost 15 percentage points ahead of the United States. With over $5 trillion in value added by its manufacturing sector, China contributed nearly 30% of its overall economic output. In fact, China’s manufacturing alone roughly equals the combined output of the next seven largest manufacturing nations!! This dominant position made China the world’s factory, drawing in billions of dollars in foreign investment and setting the stage for a global production model that many would later question.
Back in 2013, a new idea was born: China+1
It meant spreading out investments so that companies aren’t overly dependent on China. Even back in 2008, some companies in Japan and the US began looking for other options. However, when US-China trade tensions peaked and China's strict Zero-Covid policy caused factory shutdowns, the need for change became obvious Lockdowns slammed factory doors shut, exposing the fragility of over-reliance on a single source. Suddenly, the world woke up to a crucial lesson: putting all your eggs in one basket, even if it's a golden one, is a risky game.
China’s policies led to supply chain problems like container shortages and long delays. Also, new data rules made it harder for foreign tech companies to operate there.
Vietnam: The Clear Favorite in the New Era
As companies began shifting their focus away from China, Vietnam emerged as the standout destination. In 2024, Vietnam’s foreign direct investment (FDI) grew by 9.4%, reaching $25.35 billion, with a massive 66.9% of that money funneled into the manufacturing sector.
The manufacturing industry, particularly electronics and textiles, attracts significant FDI from giants like Samsung and Apple suppliers. The electronics and semiconductor sectors are booming, with Vietnam becoming a key production hub. Renewable energy is expanding, making Vietnam a top solar power producer, while e-commerce and fintech are thriving due to digital adoption. The automobile and EV industry, led by VinFast, is gaining global traction.
Exports in Vietnam also took off, climbing to $405.53 billion—a jump of 14.3%—with the United States absorbing about 19% of these exports (roughly $119.6 billion). Vietnam’s success comes from its low labor costs, simplified tax rules, and a business environment that’s refreshingly free of excessive red tape. While many nations get bogged down by bureaucratic delays, Vietnam rolls out the red carpet for investors, making it a top choice for companies eager to diversify away from China.
However, it’s not as real as it seems, the country’s heavy dependence on the US as an export destination makes it vulnerable to geopolitical shifts. If the US ramps up tariffs on Vietnam in response to trade imbalances or political tensions, the country’s booming exports could face serious headwinds. For now, Vietnam is enjoying its golden run, but the future remains uncertain if it doesn’t find ways to diversify its trade partners.
India: What’s making us unattractive?
Then there’s India—a country with huge potential. With 1.3 billion people, a young workforce, and manufacturing wages 47% lower than China’s, India seems perfect for the China+1 strategy. Yet, despite big plans like Make in India and the Production Linked Incentive (PLI) scheme, India’s progress has been slow.
Since April 2000, India has attracted a staggering $1 trillion in FDI. In the first half of the current fiscal year alone, FDI grew by nearly 26% to reach $42.1 billion. From these most of the inflows go to services sector & software development
.
India’s merchandise exports in January 2025 barely changed—USD 36.43 billion compared to USD 37.32 billion the previous year. Over a longer period, exports grew by only 1.39%. Meanwhile, rising imports and a growing trade deficit show that India still struggles with messy regulations, poor infrastructure, and slow policy reforms.
It’s like having all the ingredients for a great meal but not knowing how to cook them properly. India has the potential, but its complex rules and slow changes hold it back while other countries move ahead.
Here are some of the main reasons why India is falling behind:
Too Much Red Tape:
Unlike Vietnam, which offers simple, clear rules, India’s complicated regulations slow everything down.Slow Trade Policies:
Countries like Vietnam, Thailand, and Malaysia have quickly signed free trade deals. India, however, has been slow and protectionist, limiting its share in global trade.Bad Infrastructure:
Vietnam’s smaller size and focused projects make moving goods easier. In India, poor roads, inefficient ports, and high logistics costs make doing business much harder.Supply Chain Problems:
Global supply chains have been shaken by trade tensions and other disruptions. While Vietnam has taken advantage of this, India has been slow to adjust.
Vietnam vs. India: A Quick Comparison
FDI Inflows:
Vietnam: $25.35 billion in 2024, with nearly 67% going to manufacturing.
India: Attracts a lot of FDI overall, but too much of it gets lost in bureaucratic red tape & the majority goes into the services sector.
Export Growth:
Vietnam: Exports jumped to $405.53 billion—a 14.3% increase.
India: Exports grew by only 1.39%, showing little progress.
Business Environment:
Vietnam: Easy and fast processes make it attractive to investors.
India: Complex rules and slow reforms leave investors frustrated.
The China+1 strategy is not a passing fad—it’s a clear sign that companies need to spread out their risks in an uncertain world.
So maybe India’s China+1 story isn't fully written yet. Perhaps I believe things will shift, and the "China Plus One" landscape will look different down the road. India, after all, is a huge country, the world's largest democracy. Changing course, making big policy and system changes in a place that size, it's like turning a giant ship – it just takes time. Smaller countries can sometimes zip ahead faster, but India? And if history tells us anything, it's that India, in its own way, always finds its path.
That's all for today's deep dive. See you all back here tomorrow!