India comes for China’s manufacturing crown as supply chains slowly shift

Reforms and incentives are attracting international investors looking to diversify away from China amid its intensifying rivalry with the US

But India still has a way to go – on trade ties, education and infrastructure, among others – if it wants to catch up to its giant northern neighbour

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Workers clean solar panels at Premier Energies Solar on the outskirts of Hyderabad last year. India has introduced production-linked incentives for sectors such as electronics and renewable-energy equipment. Photo: AP

Published: 9:30am, 23 Mar 2024Updated: 10:17am, 23 Mar 2024

Warm weather’s early onset isn’t sapping the spirits of officials in Tamil Nadu this year. Instead, the mood is upbeat as one high-profile overseas investment after another has flowed into the southern Indian state over the past few months.

The state, whose capital Chennai has been dubbed the “Detroit of Southern Asia” because of its new-found status as a carmaking hub, has quickly expanded its global footprint by hosting three of iPhone-maker Apple’s top contract suppliers: Foxconn, Pegatron and Tata Group.

Shipping and logistics giant UPS also established a global technology hub in the city, beginning in August last year, while leading renewables energy firm First Solar has invested in a manufacturing facility.

Robot arms assemble cars at a Hyundai Motor India Ltd. plant in Tamil Nadu. The southern Indian state has quickly expanded its global footprint by playing host to international businesses. Photo: Reuters

Chennai is just one of many Indian industrial hotspots that have started expanding as global firms look to diversify their manufacturing base amid intensified US-China rivalry and faltering growth in the world’s second-largest economy.

Two decades ago, China and India’s economies were neck and neck, and would famously often be compared as the Dragon and Elephant at investors’ meetings, where attendees would dwell on their relative merits. Over the years, the Dragon beat the Elephant hands down to emerge as the world’s factory.

But India now looks set to make a pivot, analysts say, and could soon challenge China’s manufacturing pre-eminence amid a changed world order.

Tamil Nadu is one of the country’s success stories. Home to more than 130 Fortune Global 500 companies, India’s southernmost state recently outlined an incentive programme aimed at encouraging investors to go beyond assembling low-value products, and manufacture high-value goods.

India comes for China’s manufacturing crown as supply chains slowly shift

Reforms and incentives are attracting international investors looking to diversify away from China amid its intensifying rivalry with the US But India still has a way to go – on trade ties, education and infrastructure, among others – if it wants to catch up to its giant northern neighbour

Reforms and incentives are attracting international investors looking to diversify away from China amid its intensifying rivalry with the US

But India still has a way to go – on trade ties, education and infrastructure, among others – if it wants to catch up to its giant northern neighbour