India’s China+1 Lessons Lie Within Its Own States, Pg6

Key Highlights:

• India's success in the China+1 Strategy hinges on individual states' capabilities rather than a monolithic national approach.
• Tamil Nadu and Karnataka are highlighted as prime examples, attracting major investments from companies like Foxconn and Tata Electronics in electronics manufacturing.
• National incentives such as the Production-Linked Incentive (PLI) Scheme and Electronics Components Manufacturing Scheme (ECMS) are crucial, but their effectiveness depends on state-level implementation.
• The Centre approved 22 proposals under the ECMS in January, worth ₹41,863 crore, aiming to create 33,791 direct jobs across eight states.
• India's electronics exports reached approximately $48 billion in 2025-26, but imports stood at about $116 billion, indicating a significant trade gap and low domestic value addition.
• The Press Note 3 restrictions on investments from land-border sharing countries were eased in March 2026 to attract more foreign capital.

Detailed Insights:

• Tamil Nadu's industrial ecosystem, built over decades, includes strong technical education and an automobile and components industry around Chennai.
• Karnataka leveraged its software and engineering talent, with Bengaluru becoming a hub for technology-driven manufacturing.
• Foxconn's facilities at Sriperumbudur (Tamil Nadu) and Devanahalli (Karnataka) and Tata Electronics' expansions at Hosur (Tamil Nadu) and Narsapura (Karnataka) exemplify state-specific industrial growth.
• Policy continuity and honoring commitments are vital for attracting and retaining investors, as demonstrated by Tamil Nadu's long-term industrial development.
• The PLI scheme for large-scale electronics manufacturing concluded on March 31, 2026, with a successor approved on July 15, reflecting ongoing government support for domestic production.
• The Department for Promotion of Industry and Internal Trade (DPIIT) records Foreign Direct Investment (FDI) based on the head office location, not where the investment is physically spent, distorting state-wise investment figures.
• Despite impressive export growth, India's electronics sector still heavily relies on imports for components, indicating thin backward linkages and a need for deeper domestic manufacturing.
• Industrial growth remains concentrated in southern and western states, leading to regional imbalances and highlighting the need for other states to develop their industrial ecosystems.
• States must focus on preparing land, training workers, streamlining approvals, nurturing suppliers, and ensuring investor retention to fully capitalize on the China+1 Strategy.

Key Concepts Involved:

• China+1 Strategy: A business strategy where companies diversify their manufacturing and supply chains by investing in at least one additional country besides China to reduce risks.
• Production-Linked Incentive (PLI) Scheme: A government initiative offering financial incentives to companies on incremental sales from products manufactured in India, aiming to boost domestic manufacturing.
• Electronics Components Manufacturing Scheme (ECMS): A scheme launched by the Ministry of Electronics and Information Technology (MeitY) to promote domestic manufacturing of electronic components and reduce import dependency.
• Press Note 3: A 2020 government policy that mandated prior approval for Foreign Direct Investment (FDI) from countries sharing a land border with India, primarily aimed at regulating investments from China.