For thirty years, China did something that appeared almost impossible.
It transformed itself from a poor, overwhelmingly agrarian country into the industrial workshop of the world.
The transformation was not merely about cheap labour. China built ports, highways, industrial parks, power plants, factories, supplier networks, logistics companies, machine-tool industries and eventually sophisticated technological capabilities. It created an economic machine in which one factory created demand for ten suppliers, those suppliers created demand for another hundred, and an entire ecosystem emerged around production.
The world became dependent on that machine.
Today, however, the world is beginning to discover the danger of depending too heavily on any single machine.
The question for India is therefore not:
Can India become the next China?
That is the wrong question.
The better question is:
Can India become the world's most credible alternative to China?
And if India gets the next fifteen years right, the answer could be yes.
But this will require India to understand something that is often missed in the discussion about "China+1".
China+1 is not fundamentally a story about moving factories from China to India.
It is a story about rebuilding resilience into the global economy.
And India's opportunity is much larger than simply receiving relocated factories.
It is the opportunity to build a new economic architecture in which manufacturing, logistics, software, artificial intelligence, services and geopolitical trust reinforce each other.
That is the opportunity before us.
China did not win because of cheap labour
It is tempting to reduce the Chinese economic miracle to one sentence:
China had hundreds of millions of cheap workers, so factories moved there.
That explanation is incomplete.
Cheap labour was the starting advantage.
It was not the final advantage.
China's real achievement was to turn that labour advantage into an enormous production ecosystem.
A multinational company arriving in coastal China did not merely find workers.
It found ports.
It found roads.
It found electricity.
It found industrial land.
It found banks willing to finance investment.
It found component suppliers.
It found packaging companies.
It found tooling companies.
It found logistics providers.
It found engineers.
And, critically, it found other factories.
That last factor is enormously important.
Manufacturing has network effects.
A smartphone factory is valuable.
But a smartphone factory surrounded by PCB manufacturers, camera-module manufacturers, battery suppliers, plastics manufacturers, precision-machining companies, packaging firms, testing laboratories and logistics providers is vastly more valuable.
China spent decades creating precisely this density.
The result is visible in China's continuing industrial dominance. China accounted for an average 14.4% of world merchandise exports during 2023–25, according to the WTO, while its merchandise exports reached approximately $3.77 trillion in 2025.
India is nowhere close to replacing that ecosystem.
We should not pretend otherwise.
But that is not the requirement.
The requirement is to create a sufficiently large second ecosystem that global companies no longer have to place all of their bets on China.
That distinction changes everything.
The world does not need to leave China
This is perhaps the most important correction to the usual "China+1" narrative.
A German automobile company does not necessarily want to close its Chinese factory and open an Indian factory.
An American electronics company does not necessarily want to dismantle its Chinese supply chain.
A Japanese manufacturer does not necessarily want to abandon decades of accumulated industrial knowledge.
What these companies increasingly want is something much simpler:
Options.
They want a second manufacturing base.
A second supplier base.
A second logistics route.
A second source of components.
A second market.
A second country in which to locate engineering and R&D.
The strategic objective is not:
China out, India in.
It is:
China plus India.
And then perhaps Vietnam, Indonesia, Mexico, Eastern Europe and others.
The world is moving from efficiency at all costs toward a greater balance between efficiency and resilience.
This is an enormous change.
For three decades, globalisation rewarded concentration.
The company that could put its entire supply chain into one extraordinarily efficient geography often had the lowest costs.
But geopolitical tensions, pandemic disruptions, shipping disruptions, sanctions, export controls and strategic rivalry have changed the calculation.
A supply chain that is 5% cheaper but 100% dependent on one country can be less attractive than one that is slightly more expensive but substantially more resilient.
That is India's opening.
India's first advantage: scale
India possesses something that very few potential manufacturing alternatives possess.
Scale.
Not merely population.
Economic scale.
A company establishing a factory in India is not entering a small export platform.
It is entering one of the world's largest consumer markets.
That creates a powerful combination:
produce in India → sell in India → expand production → export from India.
China used precisely this combination.
India can now do the same.
But there is another advantage.
India already possesses a gigantic services and engineering economy.
This matters because the manufacturing economy of 2035 will not resemble the manufacturing economy of 1995.
The factory increasingly contains software.
The machine contains sensors.
The supply chain contains cloud systems.
The warehouse contains automation.
The product receives software updates.
The vehicle is increasingly a computer on wheels.
The factory itself is becoming a cyber-physical system.
The old division between "manufacturing" and "software" is therefore breaking down.
And this may be one of India's greatest opportunities.
India has already demonstrated that the manufacturing machine can start
The electronics sector provides an important case study.
In 2014–15, India's electronics production was approximately ₹1.9 lakh crore.
By 2025–26, the government reports that it had reached approximately ₹13.11 lakh crore.
Electronics exports increased from roughly ₹38,000 crore to ₹4.24 lakh crore over the same period.
Mobile-phone exports increased from around ₹1,500 crore to approximately ₹2.59 lakh crore.
Smartphones became India's largest merchandise export category in calendar year 2025, with exports of approximately $30.13 billion.
These numbers matter for a reason that goes beyond mobile phones.
They demonstrate that India can insert itself into global manufacturing value chains at scale.
But the next stage is much more important.
Assembly is not enough.
India must manufacture the components.
Then the machinery.
Then the materials.
Then the intellectual property.
Then the design.
Then the automation.
Then the software.
That is the difference between being an assembly location and becoming an industrial power.
There are encouraging signs.
As of August 2026, 106 projects under India's Electronics Components Manufacturing Scheme had been approved, involving projected investment of ₹69,548 crore and projected production of ₹5.34 lakh crore. The scheme covers PCBs, passive components, camera modules, optical transceivers, electro-mechanical components and capital goods used in electronics manufacturing.
This is exactly the direction India needs.
Build the ecosystem underneath the factory.
The real prize is the supplier ecosystem
Suppose tomorrow India receives a major European electronics factory.
That is good news.
But it is not transformative by itself.
The transformative moment comes when ten Indian companies begin supplying it.
Then fifty.
Then five hundred.
The transformative moment comes when those companies themselves require:
- precision machinery,
- specialty chemicals,
- industrial software,
- testing equipment,
- logistics,
- financing,
- engineering services,
- skilled technicians,
- packaging,
- component suppliers.
And then those suppliers create another layer of demand.
This is how industrial ecosystems emerge.
China's extraordinary achievement was not that it attracted factories.
It was that it densified the ecosystem around those factories.
India must therefore change the way it measures manufacturing success.
Instead of asking:
"How many factories have arrived?"
we should ask:
"How much of the value chain has arrived?"
And even that is insufficient.
We should ask:
"How much of the value chain is becoming Indian?"
That is the real measure of sovereignty.
The European opportunity may be bigger than we realise
India has an enormous potential partner sitting directly across the Eurasian economic space:
Europe.
The relationship is already much deeper than the popular narrative suggests.
The European Union's 2026 economic-footprint report estimates that around 6,000 EU companies are active in India, generating €186 billion in turnover in 2024—roughly 5% of India's GDP and nearly a quarter of India's manufacturing-sector turnover.
Those companies supported approximately six million jobs, generated €23.5 billion in exports and made approximately €218 billion in cumulative investments between 2014 and 2024. Manufacturing accounted for 40% of their activity.
That is not an embryonic relationship.
It is an existing economic network waiting to be expanded.
And something even more significant happened in January 2026.
India and the European Union concluded negotiations for a Free Trade Agreement.
The agreement is not yet legally in force—it still requires the necessary ratification and internal procedures—but it potentially represents a major structural improvement in the India–Europe economic relationship. The European Commission says the agreement would eliminate or reduce tariffs on more than 96% of EU goods exports and could potentially double EU goods exports to India by 2032.
This is precisely the kind of development that can turn a manufacturing opportunity into a manufacturing ecosystem.
And then there is IMEC
The India–Middle East–Europe Economic Corridor may eventually prove to be one of the most consequential pieces of infrastructure for India's next economic phase.
But we should be precise.
IMEC is not India's strategy.
IMEC is an enabler of India's strategy.
The strategy is:
Become a major production and technology node in the global economy.
IMEC can help connect that node to Europe.
The corridor was announced in September 2023 by India, Saudi Arabia, the UAE, the European Union, France, Germany, Italy and the United States. India and the UAE subsequently signed an intergovernmental framework agreement concerning logistics platforms, digital ecosystems and supply-chain services.
The potential is obvious.
Imagine an Indian manufacturing cluster connected by efficient freight infrastructure to an Indian port.
From there:
India → Arabian Peninsula → Mediterranean → Europe.
This is not merely about reducing shipping time.
It is about creating an economic geography.
If a European company can locate a factory in India, source components from neighbouring Indian suppliers, move goods efficiently toward Europe and simultaneously sell into India's own enormous market, the economics of Indian manufacturing become substantially more attractive.
But there is a major warning.
IMEC is not yet a completed corridor.
Its implementation remains subject to geopolitical, financial and infrastructure challenges. Its funding, timelines and the effect of instability in the Middle East remain significant uncertainties.
Therefore India must not sit around waiting for IMEC.
India should build the economic capacity that makes IMEC worth building.
The corridor should be the consequence of economic demand, not a substitute for creating that demand.
The overlooked opportunity: trust
Here the story moves from factories to software.
And this may ultimately be the most interesting part.
The products of 2035 will increasingly be software-defined.
A car will contain enormous quantities of software.
A factory will depend upon industrial operating systems.
A medical device will be connected to cloud infrastructure.
A drone will contain autonomous navigation software.
An enterprise will depend upon AI systems.
And an AI assistant will sit directly between the user and information.
This creates a new attribute of economic competitiveness:
trust.
When you buy a physical object, you can often test the object.
When you use an information system, you are trusting the system to represent reality.
That distinction matters.
The debate around Chinese AI provides an early illustration.
DeepSeek's current terms explicitly state that it can use technical means including "risk filtering mechanisms" to review user behaviour and content for legal and compliance purposes. Its terms also place the service under mainland Chinese law.
Independent research has also found evidence of semantic-level information suppression in DeepSeek, including cases where sensitive information appeared during intermediate reasoning but was omitted or rephrased in the final answer.
This does not mean Chinese AI is technologically incapable.
Quite the opposite.
DeepSeek demonstrated that Chinese researchers and companies can produce highly competitive AI technology.
The problem is different.
Technological capability and global trust are not the same thing.
A model can be technically brilliant and still face adoption barriers if foreign users, corporations or governments believe that its information environment is subject to political constraints they cannot independently evaluate.
That is an important distinction for India.
India should not attempt to win the world by shouting:
"Chinese software is controlled by the Chinese state!"
That is too crude.
It should win through something much more powerful:
verifiable trust.
Independent audits.
Transparent data practices.
Clear legal jurisdiction.
Strong cybersecurity.
Predictable regulation.
Transparent AI governance.
Interoperability.
And, where appropriate, auditable systems.
The message should not be:
"Don't trust China."
The message should be:
"You can verify us."
That is a much stronger proposition.
India should become the "trusted alternative", not merely the "cheap alternative"
This distinction could determine India's position in the next phase of globalisation.
If India sells itself only on cheap labour, another country will eventually be cheaper.
If India sells itself on tax incentives, another country will eventually offer larger incentives.
If India sells itself only as China+1, it will remain psychologically subordinate to China.
India needs a higher-order proposition.
Something like:
India is the world's large-scale, democratic, technologically capable and increasingly integrated alternative production and services platform.
That is a much bigger proposition.
It combines:
Manufacturing
+
Engineering
+
Software
+
AI
+
Services
+
Domestic demand
+
Global market access
+
Institutional trust
That combination is difficult to replicate.
WPS is a useful warning
Consider WPS Office.
It is not a trivial or unsuccessful product.
Kingsoft reported hundreds of millions of monthly active WPS Office devices globally in late 2025, across desktop and mobile platforms.
So the claim that Chinese software simply cannot achieve global scale is demonstrably false.
But WPS also illustrates something important.
Global software markets are governed by enormous network effects.
Microsoft Office is not merely a piece of software.
It is a standard.
People learn it in school.
Companies train employees on it.
Governments use it.
Businesses exchange documents in its formats.
Employers expect applicants to know it.
Third-party software integrates with it.
Entire professional ecosystems develop around it.
Breaking such a network is extraordinarily difficult.
This is why India should not try to imitate established American software products blindly.
It needs to find areas where the global standard has not yet been fully established.
Artificial intelligence is one such area.
Industrial software is another.
Digital public infrastructure is another.
Multilingual AI is another.
Cybersecurity is another.
And perhaps most importantly:
the software layer of India's emerging manufacturing economy itself.
The factory of the future may be Indian hardware running Indian software
This is where the two halves of India's opportunity meet.
Imagine a European company builds a factory in Gujarat, Tamil Nadu or Maharashtra.
The factory contains:
- Indian-made components.
- European machinery.
- Japanese precision equipment.
- Indian engineers.
- Indian industrial software.
- AI systems trained and deployed in India.
- Indian logistics.
- Indian financial services.
- Indian cloud infrastructure.
- Products exported to Europe through increasingly integrated trade and logistics networks.
That is a much more sovereign form of globalisation.
Notice the distinction.
Sovereignty does not mean:
"We make everything ourselves."
That is impossible and economically irrational.
Sovereignty means:
"We possess enough domestic capability and enough alternative relationships that nobody can easily shut down our economic system."
This is why China+1 is potentially good for India even if China remains enormously successful.
India does not need to defeat China.
It needs to make itself indispensable to the global system.
But there is a serious trap
There is one way this entire opportunity could fail.
India could become the world's assembly floor without becoming the world's industrial knowledge base.
That would be a mistake.
If an Indian factory imports:
- the chips from Taiwan,
- the machinery from Japan,
- the components from China,
- the software from America,
- the design from Europe,
and merely performs final assembly in India, then India has captured only a small portion of the value chain.
The factory is Indian.
The industrial capability is not.
That is not enough.
India must therefore pursue progressive indigenisation, not isolation.
Start with assembly.
Then components.
Then tooling.
Then process engineering.
Then design.
Then intellectual property.
Then automation.
Then advanced materials.
Then R&D.
This is how countries move up the value chain.
The Electronics Components Manufacturing Scheme is encouraging precisely because it moves attention from finished devices toward the components, materials and capital goods beneath them.
But the principle must extend beyond electronics.
It applies to:
- automobiles,
- aerospace,
- defence,
- pharmaceuticals,
- chemicals,
- renewable energy,
- batteries,
- machine tools,
- robotics,
- telecommunications,
- semiconductors,
- agricultural machinery.
India's objective should not be autarky.
It should be capability density.
India also has to fix the things that make manufacturing difficult
This is where optimism must stop and policy realism must begin.
India's manufacturing share of GDP remains modest, while agriculture still accounts for a very large share of employment. India needs greater investment, stronger labour participation, better access to finance, greater participation in global value chains, improved infrastructure, technology adoption and reduced compliance burdens if it is to sustain rapid growth.
That is the real challenge.
India cannot manufacture its way into prosperity through slogans.
Factories require:
reliable electricity.
fast logistics.
predictable taxation.
efficient ports.
industrial land.
skilled workers.
supplier finance.
stable regulation.
rapid dispute resolution.
access to export markets.
And they require all of these simultaneously.
The weakest link matters.
India's logistics performance has improved substantially over the long term, although it still has room to improve. The World Bank's 2023 Logistics Performance Index placed India 38th globally.
But India should treat logistics as an obsession.
Every hour saved.
Every customs form eliminated.
Every kilometre of freight rail improved.
Every port turnaround time reduced.
Every unnecessary licence removed.
Every reliable megawatt added.
These are not bureaucratic details.
They are industrial policy.
The next fifteen years should therefore be about building density
The goal should be to create dense economic nodes.
Not just cities.
Not just industrial parks.
Economic nodes.
A node where:
factory + suppliers + engineers + universities + logistics + finance + software + housing + power + export infrastructure
exist together.
Tamil Nadu can build one model.
Gujarat another.
Maharashtra another.
Karnataka another.
Telangana another.
Uttar Pradesh another.
And this is where India's federal structure could become a tremendous advantage.
The central government should establish the national architecture.
But states should compete relentlessly to attract production.
India should not attempt to create one centrally designed industrial geography.
It should create twenty.
Thirty.
Fifty.
Let the states compete.
Let companies choose.
Let successful models spread.
This is how a continental-scale economy should develop.
What should India do?
1. Build supplier ecosystems, not just flagship factories
Every major foreign factory should be surrounded by programmes designed to attract and develop its Indian suppliers.
2. Treat logistics as a national productivity mission
Ports, freight rail, highways, customs and warehouses should be evaluated by one metric:
How cheaply and reliably can a company move a product from factory to customer?
3. Finish the physical connectivity architecture
IMEC should be pursued aggressively, but India should simultaneously strengthen alternative routes through the Indian Ocean, Southeast Asia and other corridors.
Redundancy is sovereignty.
4. Make the India–EU economic relationship enormous
The recently concluded EU–India FTA should be treated not merely as a trade agreement but as an industrial strategy.
Europe should be encouraged to build its next generation of manufacturing capacity in India.
5. Make foreign companies bring ecosystems
India should actively seek not merely factories but:
suppliers + R&D + engineering + training + technology partnerships.
6. Build Indian industrial software
This may become one of the most underappreciated opportunities.
India has millions of software engineers.
We should be building the operating systems, enterprise software, AI systems, digital twins, industrial automation and cybersecurity platforms that operate India's physical economy.
7. Build a "Trusted Technology" brand
Not propaganda.
Not anti-China rhetoric.
A measurable standard based on:
privacy + cybersecurity + transparency + auditability + predictable jurisdiction + data governance.
If India can become the place where companies know that their digital infrastructure will operate under transparent and predictable rules, that itself becomes an export advantage.
8. Move from assembly to capability
The ultimate objective of every PLI-style programme should be:
assembly → components → machinery → design → R&D → intellectual property.
Subsidies should gradually give way to competitiveness.
9. Let Indian states compete
India's diversity is not an obstacle to industrialisation.
It can be the mechanism of industrialisation.
Tamil Nadu should compete with Gujarat.
Gujarat with Maharashtra.
Maharashtra with Karnataka.
Karnataka with Telangana.
Uttar Pradesh with everyone.
The centre should build the rails.
The states should race the trains.
10. Think in decades
Industrial ecosystems do not appear in five years.
China spent decades building its manufacturing density.
India must be prepared to pursue this relentlessly for fifteen or twenty years.
India does not need China's collapse
This is the central point.
There is a dangerous tendency in Indian strategic thinking to frame national success as:
China declines → India rises.
That is unnecessary.
China can remain an extraordinary industrial power.
China can continue producing batteries, machinery, electronics, vehicles and industrial equipment at enormous scale.
India can still win.
Because the global economy is large enough for multiple centres of production.
In fact, a strong China may even help India.
Chinese industrial competition forces Indian companies to become better.
Chinese manufacturing lowers the cost of technology.
Chinese supply chains provide inputs.
And China's success demonstrates what an enormous production ecosystem can accomplish.
India does not need to destroy that ecosystem.
It needs to build another one.
The great opportunity
The world is entering an unusual period.
The old model of globalisation is weakening.
The new model has not yet fully emerged.
The old model said:
Put production wherever it is cheapest.
The emerging model says:
Put production where it is competitive, resilient, connected and strategically trustworthy.
That is a fundamentally different world.
India has almost everything required to participate.
It has scale.
It has a young and increasingly skilled population.
It has an enormous domestic market.
It has software expertise.
It has engineering talent.
It has a democratic political system.
It has deepening relationships with Europe, America, Japan and other advanced economies.
It has improving infrastructure.
It has demonstrated that it can rapidly scale electronics manufacturing.
And it is beginning to build the component and semiconductor ecosystems beneath that manufacturing base.
The missing ingredient is not potential.
It is execution at scale and over time.
The next fifteen years
The great economic story of the last thirty years was China's transformation into the world's factory.
The great economic story of the next fifteen may be India's transformation into something different:
the world's alternative production platform.
Not an alternative based merely on cheap labour.
An alternative based on:
scale.
manufacturing.
engineering.
software.
AI.
services.
logistics.
market access.
and trust.
The opportunity is therefore much larger than China+1.
It is China+India+the world.
A European company does not need to choose between Germany and India.
It can design in Germany, manufacture in India, source components from multiple Asian economies, use Indian software, employ Indian engineers, and sell into a global market.
That is the economic architecture India should build.
And this is why IMEC matters.
This is why manufacturing matters.
This is why software matters.
This is why AI matters.
This is why digital trust matters.
They are not separate policy subjects.
They are components of the same national strategy.
India spent much of the twentieth century trying to become self-reliant by reducing dependence on the world.
That model failed.
The lesson of the twenty-first century should be different.
Sovereignty does not mean isolation.
Sovereignty means having enough capability, enough alternatives and enough connections that you can participate in the world without becoming dependent upon any single power.
China built one of the world's greatest economic machines.
India now has the opportunity to build another.
And the goal should not be to replace China.
The goal should be to make the global economy less dependent on any one country—and make India the country that benefits most from that diversification.
India does not need the world to abandon China.
It only needs the world to decide that its next factory, its next engineering centre, its next software platform, its next AI system, its next supply chain—and perhaps its next great economic relationship—can be built in India.
That is a fifteen-year opportunity worth taking seriously.
No comments:
Post a Comment