The Strategic Shift: Unpacking the Potential Benefits of Relocating Manufacturing Facilities to India

In an era of shifting global supply chains, rising geopolitical tensions, and a growing emphasis on economic resilience, India has emerged as a compelling destination for manufacturing relocation. With its ambitious $2.7 billion plan to boost electronics parts production, unveiled on March 28, 2025, India is signaling its intent to become a global manufacturing powerhouse. This initiative, coupled with a broader policy framework like the "Make in India" campaign, positions the country as an attractive alternative to traditional manufacturing hubs like China. But what exactly are the potential benefits of relocating manufacturing facilities to India? This article dives deep into the economic, strategic, and societal advantages that make India a frontrunner in the global manufacturing landscape.

A Booming Opportunity in Electronics Manufacturing

India’s latest $2.7 billion subsidy program for electronics components production is a game-changer. Approved by the federal cabinet, this scheme offers financial incentives over six years to manufacturers, aiming to attract $7 billion in investments and generate $54 billion in production value. The focus on electronics—a sector critical to modern economies—reflects India’s strategic vision to capture a slice of the global supply chain pie, especially as companies diversify away from China due to trade tensions and supply chain vulnerabilities exposed by events like the COVID-19 pandemic.

The success of India’s earlier Production-Linked Incentive (PLI) scheme for smartphones provides a blueprint. Companies like Apple and Samsung have ramped up exports, with mobile phone shipments soaring from virtually zero in 2014 to $15 billion annually by 2025. This has catapulted India to the world’s second-largest smartphone producer, trailing only China. Extending this model to electronics components—such as batteries, semiconductors, and displays—promises to deepen India’s manufacturing ecosystem, reducing reliance on imports and fostering self-sufficiency.

Economic Benefits: Cost, Scale, and Growth

One of the most immediate benefits of relocating manufacturing to India is cost competitiveness. India boasts a large, skilled workforce with relatively low labor costs compared to Western nations and even some Asian peers like Vietnam. While wages are rising in China, India offers a cost-effective alternative without sacrificing quality, thanks to its robust education system producing engineers and technicians in droves.

The scale of India’s domestic market further sweetens the deal. With a population exceeding 1.4 billion, India is not just a manufacturing base but also a massive consumer market. Companies setting up shop here gain proximity to this demand, reducing logistics costs and enabling faster market responsiveness. For instance, the growing appetite for smartphones, laptops, and other electronics among India’s middle class provides a built-in customer base, minimizing the need for extensive export logistics in the initial stages.

Moreover, India’s economic growth trajectory enhances its appeal. The country aims to become a $5 trillion economy by 2025, driven partly by manufacturing. The $2.7 billion electronics plan alone is projected to create 91,600 direct jobs, with ripple effects across ancillary industries like logistics, packaging, and retail. This job creation fuels economic growth, increasing purchasing power and, in turn, demand for manufactured goods—a virtuous cycle that benefits both local and foreign firms.

Strategic Advantages: Diversification and Geopolitical Stability

The global supply chain disruptions of recent years have underscored the risks of over-reliance on a single country, particularly China. The U.S.-China trade war, coupled with concerns over intellectual property and national security, has prompted companies to adopt a “China Plus One” strategy. India stands out as a prime candidate due to its geopolitical stability and warming ties with Western nations.

Unlike some Southeast Asian competitors, India offers a large, unified market under a stable democratic government. While bureaucratic hurdles and infrastructure gaps remain, recent reforms under Prime Minister Narendra Modi’s administration—such as streamlined regulations and improved ease of doing business rankings—signal a commitment to investor-friendly policies. The strategic partnership with the U.S., highlighted by Modi’s 2023 state visit to Washington, further bolsters India’s appeal as a trusted manufacturing hub for American and European firms.

Relocating to India also mitigates risks associated with regional tensions. For example, border disputes with China have strained India’s reliance on Chinese components, pushing the government to prioritize domestic production. Companies that align with this shift can secure a foothold in a market less exposed to the volatility of Sino-centric supply chains, enhancing long-term resilience.

Policy Support: Incentives and Infrastructure

India’s government is pulling out all the stops to lure manufacturers. The $2.7 billion electronics subsidy is just one piece of a broader incentive framework. The PLI scheme, launched in 2020 and expanded across 14 sectors with a $26 billion outlay, offers cash rewards tied to incremental sales, encouraging both foreign and domestic firms to scale up production. For electronics, this has already attracted giants like Foxconn and Wistron, who are now assembling iPhones and other devices in India.

Beyond financial incentives, India is investing heavily in infrastructure. The Modified Electronics Manufacturing Clusters (EMC 2.0) scheme supports the creation of industrial parks with ready-built factories, cutting setup times and costs. Programs like Bharatmala and Sagarmala are upgrading transportation networks, while the PM Gati Shakti initiative integrates infrastructure planning to boost logistics efficiency. These efforts address historical pain points like poor roads and port delays, making India a more viable manufacturing base.

Special Economic Zones (SEZs) offer additional perks, including tax holidays, duty exemptions, and simplified regulations. States like Gujarat, Tamil Nadu, and Uttar Pradesh are rolling out complementary incentives, such as subsidized land and power, to sweeten the deal. For instance, Samsung’s $650 million display manufacturing plant in Noida benefited from Uttar Pradesh’s tailored support, showcasing how regional governments are aligning with national goals.

Technological and Innovation Edge

India’s reputation as an IT powerhouse is a hidden gem for manufacturers. With a thriving software industry and millions of skilled engineers, the country is well-positioned to integrate advanced technologies like AI, IoT, and robotics into manufacturing. Companies relocating here can tap into this talent pool to drive innovation, from smart factory automation to sustainable production practices.

The push for local component manufacturing—backed by initiatives like the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS)—further enhances this advantage. By fostering a domestic supply chain for high-tech parts, India reduces import dependency and positions itself as a hub for cutting-edge electronics. Collaborations with global tech leaders, such as Tata Electronics’ silicon carbide chip venture for electric vehicles, facilitate technology transfer, elevating India’s capabilities.

Societal Impact: Jobs and Skill Development

Relocating manufacturing to India isn’t just about profits—it’s about people. The $2.7 billion electronics plan alone promises tens of thousands of direct jobs, with indirect employment in related sectors potentially reaching millions. This aligns with India’s need to absorb its vast labor force, particularly its youth, into productive roles. The government’s skill development programs, like the Sector Skills Councils for electronics, ensure workers are trained for industry-specific demands, bridging the gap between education and employment.

For rural and semi-urban areas, where many manufacturing clusters are planned, this means economic upliftment. Women, in particular, stand to benefit as assembly-line jobs open up opportunities for financial independence. Companies gain a motivated workforce eager to upskill, while contributing to India’s social development goals—a win-win scenario.

Competitive Edge Over Rivals

How does India stack up against other manufacturing contenders like Vietnam or Mexico? Vietnam has a head start in electronics, with a simpler regulatory environment and established supply chains. However, its smaller market and labor pool limit scalability. Mexico benefits from proximity to the U.S., but its manufacturing ecosystem is less diverse than India’s. India’s unique combination of a massive domestic market, government backing, and geopolitical alignment gives it an edge for long-term growth.

That said, challenges remain. India’s infrastructure, while improving, lags behind China’s mature networks. Bureaucratic red tape and complex tax structures can deter investors, and the lack of a robust local component ecosystem means initial reliance on imports. Yet, these hurdles are being addressed with urgency, and early movers stand to reap first-mover advantages as India closes the gap.

Case Studies: Success Stories Paving the Way

Apple’s shift to India exemplifies the potential rewards. From assembling iPhones in Bengaluru and Chennai, the company now exports $10 billion worth of devices annually, leveraging India’s incentives and workforce. Samsung’s Noida plant, one of the world’s largest mobile manufacturing facilities, produces not just phones but also displays, showcasing vertical integration. These successes validate India’s model and inspire others to follow suit.

Emerging players like Tata Electronics, with its $2.75 billion semiconductor venture in Gujarat, highlight domestic innovation. Set to begin operations by late 2025, this facility will reduce India’s chip import bill and support industries from EVs to consumer electronics, reinforcing the country’s self-reliance push.

The Road Ahead: A Global Manufacturing Hub

India’s $2.7 billion electronics plan is a bold step toward realizing its manufacturing ambitions. By 2030, the sector could reach $500 billion, driven by demand for 5G devices, EVs, and IoT solutions. To sustain this momentum, India must continue streamlining regulations, boosting R&D, and nurturing local suppliers. Collaboration between government, industry, and academia will be key to overcoming bottlenecks and building a world-class ecosystem.

For companies, the benefits of relocating to India are clear: cost savings, market access, strategic resilience, and government support. Those who act now can secure a foothold in a market poised for exponential growth, shaping the future of global manufacturing. As India rises, it’s not just about making products—it’s about making history.