Why India hasn’t won the “China Plus One” race — and who has

The success of SEA in this race lies in its agility. Vietnam, Indonesia, and Thailand recognized early the opportunity to absorb investment redirected away from China. They improved trade policies, built economic zones, and invested heavily in logistics and digital connectivity. Vietnam in particular has become a leading hub in the approach, pulling in major manufacturers from Samsung to Apple suppliers.The data illustrates this trend. For example, Chinese outbound mergers and acquisitions into SEA rose from $1.1 billion in 2022 to $7 billion in 2023. Proximity also plays a crucial role. SEA’s shared time zones and established shipping routes allow firms to relocate production without overhauling logistics systems tied to Chinese networks. According to Vietnam-Briefing, Vietnam’s business-friendly governance, relatively predictable regulatory environments, and cost-competitive labor further reduce friction for investors. In contrast, India’s layered bureaucracy and uneven state-level implementation create bottlenecks that test corporate patience.

India’s promise cannot be dismissed. The country has a massive domestic consumer base, a young labor force, and growing demand for electronics and high-tech goods. Flagship policy drives such as “Make in India” and the Production-Linked Incentive (PLI) schemes are designed to support industrial growth by rewarding domestic manufacturing and export-oriented production. According to the Economic Times (2025), the 14 PLI schemes have already attracted investments worth ₹1.76 lakh crore, generated incremental production of about ₹16.5 lakh crore, and created more than 12 lakh jobs across sectors. The PLI framework works by offering financial incentives linked to incremental sales from products manufactured in India, thereby reducing dependence on imports and boosting competitiveness in sectors like electronics, automobiles, pharmaceuticals, and renewable energy. In recent years, these policies have resulted in progress in key sectors. For example, Apple has expanded its assembly footprint, Tata has entered semiconductor partnerships, and India has carved a growing role in auto components and pharmaceuticals.This progress has drawn optimism from industry leaders. David Hill, Deloitte APAC’s CEO, has even called India one of the world’s strongest ‘China Plus One’ opportunities. Especially in emerging fields like AI, green technology, and sustainability.

Analysts at the Asia Pacific Foundation of Canada likewise see India as a candidate to fill gaps in global tech manufacturing, positioning itself as an alternative to China’s established industrial dominance.But for every success story, India faces setbacks that stall momentum. Policy execution often lags behind ambition. For instance, by early 2025, only $1.7 billion of the $23 billion allocated under PLI programs had actually been disbursed.Investors who enter India with enthusiasm frequently encounter a maze of approvals, uneven state policies, and sudden regulatory changes that make long-term planning difficult.Unlike countries in Southeast Asia such as Singapore or Vietnam, which have developed single-window systems for investors, India’s federal structure creates a complex set of regulations that may delay project implementation. In Singapore, agencies are integrated through platforms like BizFile+ and the TradeNet system, enabling companies to register, obtain licenses, and handle customs clearance seamlessly. Similarly, Vietnam’s National Single Window connects ministries and agencies to streamline trade and investment procedures, reducing transaction time and costs. By contrast, India’s overlapping state and central jurisdictions, coupled with frequent regulatory shifts, often extend approval timelines and complicate investor entry strategies.

Beyond policy complexity, India faces stiff headwinds from global trade dynamics. U.S. tariffs, such as the recent 25% tariff increase on select Indian exports, have eroded cost competitiveness. Investors who initially planned large-scale shifts into India have paused, wary of being caught between tariff walls and regulatory uncertainties.Another challenge lies in India’s incomplete value-chain integration. While the country now assembles more iPhones than ever, accounting for nearly half of U.S. smartphone imports in mid-2025, most high-value components are still shipped in from China. Entrepreneurs have also raised a more structural critique: India’s innovation ecosystem struggles to generate homegrown breakthroughs in the way that China has fostered giants like Huawei or AI developers such as DeepSeek. Local founders argue that India’s fragmented R&D environment and capital constraints prevent the creation of globally dominant tech firms.

None of this means India has failed entirely. In certain sectors, progress is tangible. Electronics assembly has gained traction, and India’s auto components industry continues to expand exports, posting surpluses and earning a reputation for competitive reliability. Partnerships under initiatives such as the Supply-Chain Resilience Initiative (SCRI) with Japan and Australia, and India’s ‘Act East’ diplomacy, have also given the country more leverage in regional supply-chain conversations. Infrastructure projects like the East Coast Economic Corridor, India’s first coastal corridor supported by the Asian Development Bank to link industrial clusters, ports, and transport networks from Kolkata to Kanyakumari, represent attempts to close logistical gaps, though timelines are longer than expected.The reality is nuanced: India is neither the runaway winner nor a complete laggard. It has become a partial success story in select industries but has yet to orchestrate a system-wide transformation that would position it as the clear “Plus One” alternative to China. Meanwhile, SEA’s first-mover advantage continues to deepen, making the competition steeper each year.

India undeniably wields scale, ambition, and nascent manufacturing capabilities. Yet without cohesive policy execution, infrastructure depth, tariff alignment, and genuine value-chain integration, it risks remaining promising but underutilized. Much of the manufacturing shifting from China involves electronics (assembly, semiconductors, packaging & test), high-tech goods, and increasingly EV-related components, batteries, and solar/renewables sectors. zThese aren’t just small ancillary parts: companies are relocating entire fina -assembly lines, or back-end operations, to avoid trade restrictions or rising costs in China. In Southeast Asia, while Vietnam remains the primary beneficiary of this China-Plus-One migration, Malaysia has also attracted significant investments especially in semiconductor packaging & testing, chip substrates and electronic assemblies—as multinational corporations seek to diversify amidst geopolitical and tariff pressures. Indian states often function almost like semi‐autonomous units when it comes to import rules, approvals, and enforcement of regulations, which contrasts with Vietnam and Malaysia, where central government tariff schedules and investment rules are more uniformly applied across the country. In practice, this means an investor in India may face different tax regimes, licensing requirements, or bureaucratic procedures depending on the state, creating a patchwork that complicates scaling across the nation. By comparison, Vietnam and Malaysia administer most trade and investment processes centrally through single-window systems or national tariff schedules providing greater predictability and consistency, which is especially attractive for firms managing tight global supply chains; Examples include Apple expanding assembly in Vietnam, Logitech shifting production to Malaysia and Vietnam, Asus relocating over 90% of its PC and motherboard production to Thailand, Vietnam, and Indonesia, and Apple supplier Goertek moving operations to Vietnam. The paradox is that India has the raw ingredients to be the preferred “Plus One,” but has not yet managed to assemble them into a complete recipe. The next decade will determine whether the country can move beyond partial gains and seize the full opportunity, or whether the “China Plus One” story will remain Southeast Asia’s to tell.