The Economic Survey 2024, tabled in the Lok Sabha, highlights the China Plus One Strategy as a crucial opportunity for India to reposition itself in the global supply chain. Amid rising global efforts to de-risk manufacturing from China, India is emerging as a strong contender in the “Plus One” club.
Global Shift: The Rise of the China Plus One Strategy
- Over the past five years, there has been a paradigm shift in global manufacturing.
- Major multinational companies like Apple have been actively reducing their dependence on China, long known as the world’s factory.
- COVID-19 disruptions, the US-China trade tensions, and rising operational costs in China have accelerated this shift.
- As a response, many firms have adopted the China Plus One Strategy—an approach that diversifies supply chains by adding an alternative destination alongside China.
According to a 2023 Boston Consulting Group survey, over 90% of North American manufacturers had already shifted part of their production to countries like Vietnam, Thailand, and Mexico.
What Is the China Plus One Strategy?
The China Plus One Strategy (also known as C+1) is a risk mitigation and supply chain diversification strategy. It involves companies maintaining operations in China while expanding manufacturing or sourcing to an additional country — the “Plus One.”
Key Objectives:
- Minimize supply chain risk
- Reduce overdependence on China
- Tap into new markets and innovation hubs
- Lower production costs
Why Was It Adopted?
- Western economies, especially the U.S. and Europe, grew cautious of their heavy manufacturing reliance on China.
- Though China offers benefits like low-cost labor, infrastructure, and a robust domestic market, the 2008 financial crisis and pandemic-induced supply shocks exposed the fragility of single-nation dependence.
Why India Fits Perfectly into the China Plus One Strategy
- Favorable Demographics
- India’s young population (65% under age 35) supports a consumption-driven economy.
- A youthful workforce enhances long-term labor productivity.
- Low Cost of Labour and Capital
- India offers competitive production costs, making it a cost-effective alternative to China.
- Infrastructure Expansion
- Massive investments via the National Infrastructure Pipeline (NIP) are reducing transport time and logistics costs.
- Business-Friendly Reforms
- Key initiatives:
- PLI Scheme (Production Linked Incentive)
- FDI liberalization
- Make in India & Digital India
- Result: India is climbing up Ease of Doing Business rankings.
- Digital Edge
- 43% internet penetration enables digital skilling and innovation.
- Unlike China, access to global platforms like Google and Facebook gives India a tech innovation advantage.
- English Proficiency
- English as a second official language ensures smoother communication with global clients, especially from the U.S. and EU.
- Large Domestic Market
- India’s 1.4 billion-strong market offers unmatched scale, especially when compared to smaller economies like Vietnam.
- Geopolitical & Diplomatic Leverage
- India’s strategic partnerships (QUAD, I2U2, EU, Africa) have enhanced trade access and improved its economic diplomacy game.
Sectors Poised to Benefit From the China Plus One Strategy in India
- IT & IT-Enabled Services (ITeS)
- Recognized as a global IT hub; government promoting IT hardware manufacturing through Make in India.
- Pharmaceuticals
- Third-largest pharma industry globally.
- Supplies 70% of WHO vaccines and maintains 33% lower manufacturing costs than the U.S.
- Metals and Steel
- Natural resource advantage.
- PLI for Specialty Steel projected to attract ₹40,000 crore in investments by 2029.
Challenges India Must Overcome to Realize the China Plus One Potential
- Bureaucratic delays and regulatory inconsistencies
- High logistics and energy costs
- Restrictive labor laws and complex tax regime
- Skill mismatch in the labor force
- Land acquisition hurdles delaying industrial projects
The PLI Scheme: Accelerating India’s Role in China Plus One
- Launched by the Government of India to incentivize incremental sales from domestic manufacturing.
- Total outlay of ₹1.97 lakh crore across 13 sectors, including:
- Auto, Aviation, Chemicals, Electronics, Food Processing, Medical Devices, Pharma, Renewable Energy, and more.
- Expected to boost MSME growth, employment, and export competitiveness.
Conclusion: India’s China Plus One Opportunity
India stands at a strategic inflection point in the global supply chain reconfiguration. With demographic strengths, policy reforms, and a growing domestic market, India is uniquely positioned to lead the China Plus One Strategy globally.
While challenges remain, targeted reforms, continued infrastructure investment, and strategic diplomacy can cement India’s role as a viable and competitive manufacturing destination in the post-China global economy.
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