Southeast Asia outpacing India in attracting China-plus-one investment

Southeast Asian economies are increasingly winning the race to attract multinational companies seeking to reduce their dependence on Chinese manufacturing, a shift that poses challenges for India's efforts to position itself as a prime alternative production hub.

Data shows that countries across Southeast Asia—including Vietnam, Thailand, and Indonesia—are receiving substantially larger foreign direct investment flows linked to supply chain diversification strategies than India. The region's established manufacturing ecosystems, developed port infrastructure, and proximity to existing Asian supply networks have made it an attractive destination for companies implementing China-plus-one strategies.

India, despite its large workforce and competitive labor costs, has struggled to capture a proportional share of this investment wave. Analysts point to infrastructure gaps, regulatory complexities, and logistical challenges as factors limiting the country's ability to attract corporations relocating or diversifying production away from China. The gap is also evident in export growth, where Southeast Asian nations have outpaced India in capturing new manufacturing and export opportunities.

The disparity highlights the urgency for Indian policymakers to accelerate infrastructure development and streamline regulatory frameworks to enhance the country's competitiveness. Without significant improvements, India risks losing out on a historic opportunity to become a major beneficiary of the global realignment of supply chains reshaping Asian manufacturing.