New Delhi [India], December 4 : India has had limited success in capitalizing on the opportunities presented by the China Plus One strategy, according to a report by NITI Aayog.
While the global trade landscape in 2024 has been significantly influenced by geopolitical developments, the NITI Aayog report noted that India has faced challenges in emerging as a preferred alternative to China.
The report highlighted that countries like Vietnam, Thailand, Cambodia, and Malaysia have outperformed India in attracting companies seeking to diversify their manufacturing bases.
It said "India has seen limited success so far in capturing the China Plus One strategy so far. Vietnam, Thailand, Cambodia, and Malaysia have become bigger beneficiaries of the strategy".
The report stated that the factors such as cheaper labour, simplified tax systems, lower tariffs, and proactive trade policies, including Free Trade Agreements (FTAs), have given these nations a competitive edge over India.
For India, NITI Aayog says that the ongoing geopolitical developments present both opportunities and risks. On the positive side, multinational corporations are eyeing India as a manufacturing hub, especially in high-tech industries.
However, India's progress has been slow, hindered by regulatory hurdles, high costs, and logistical inefficiencies. Additionally, India must guard against the risk of China dumping goods into its market, which could harm domestic industries.
"India has to navigate the disruptions in the global supply chain, and be wary of China dumping its products in Indian markets. On the other hand, India is seen as an attractive destination for companies looking to shift their manufacturing bases out of China" the report said.
The ongoing U.S.-China trade war has further fragmented the global supply chain. The U.S. has imposed stricter export controls and higher tariffs on Chinese goods, increasing production costs and pushing companies to seek alternatives to Chinese manufacturing. While this creates opportunities, it also brings challenges for India to navigate the shifting dynamics.
To make the most of the China Plus One strategy, NITI Aayog said India needs to improve ease of doing business, enhance its manufacturing capabilities, and actively engage in global trade agreements.
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