Tomorrowland

In 2022, the Indian economy grew nearly twice as fast as the average emerging market economy, and the World Bank projects it will continue to expand at above 6 percent for the next three years. India may even surpass Japan by 2030 to become the world’s third largest economy.

In an article for The Wire China, DIIS senior researcher, Luke Patey, finds that it is not only India’s potential for growth that is appealing for western policymakers and business executives, but adding to India’s allure are the opportunities the country offers in diversifying critical supply chains away from China.

But success isn’t guaranteed. New Delhi has offered billions in incentives to multinationals across a long line of manufacturing sectors, but for years India’s industrial strategy has struggled to raise the share of manufacturing in the domestic economy and maintain steady growth in foreign investment. The biggest failure to date is the exit of Foxconn from a $19 billion joint venture with the Indian conglomerate Vedanta to establish semiconductor plants.

Indeed, making it in India is not easy, and what seems an obvious idea in geopolitical or boardroom foresight sessions is harder to get done in practice. If there is any chance of multinational corporations diversifying high dependencies away from China’s highly skilled workforce and well-oiled logistical machine, they must both negotiate New Delhi’s localization demands and overcome multiple domestic challenges, from thick bureaucratic red tape to patchy infrastructure.

India alone may not make a major dent in China’s overall role in global manufacturing, but alongside Vietnam, Mexico, and other de-risking destinations, it represents a critical multiplier in diversification strategies.