India saw limited success in capturing China Plus One strategy: Report

India has seen limited success so far in capturing the China Plus One strategy, according to Niti Aayog’s report on India’s trade statistics for the first quarter of the financial year 2024.

Vietnam, Thailand, Cambodia and Malaysia have become bigger beneficiaries of the strategy, the report found.

Factors such as cheaper labour, simplified tax laws, lower tariffs and proactiveness in signing Free Trade Agreements (FTAs) played a critical role in helping these countries expand their export shares.

In 2024, the international trade landscape was heavily influenced by several significant geopolitical developments. For example, the US has implemented stricter export controls and higher tariffs on Chinese goods to limit China’s growth and expenditure towards technological progress. This has led to a fragmentation of global supply chains, prompting multinational corporations to seek alternatives to Chinese manufacturing.

The trade war has caused increased costs and production delays, impacting global markets.

For India, this situation presents both challenges and opportunities. “On one hand, 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. This shift offers India a chance to enhance its domestic manufacturing capabilities, particularly in high-tech industries,” the report read.

According to the report, recent geopolitical developments such as heightened geopolitical tensions in West Asia pose significant risks to global stability. India’s dependence on the region for both energy and agricultural exports makes it vulnerable, with key markets — such as Iran for basmati rice and tea — seeing sharp declines.

The report also highlighted that, in 2024, Asia’s economic growth had a significant impact on global trade, shaping regional dynamics.

The region is projected to grow by 4 per cent.

After achieving 6.7 per cent growth in FY24, India is expected to maintain robust momentum with 6.5-7 per cent growth in FY25, fuelled by public investment and stronger integration into global supply chains.