The race to become the West’s main trading partner.
As the geopolitical chessboard continues to shift dramatically in 2025, India finds itself at a historic crossroads. India has become a top contender due to growing tensions between the United States and China, with multinational firms actively pursuing “China Plus One,” a strategy to diversify their supply chains. Big companies like Boeing, Tesla, and Apple are expanding their presence in the Indian market. Adding to this momentum, reports suggest India may offer zero tariffs on select US goods as part of a broader trade facilitation push.
President Donald Trump, in a recent rally, even claimed he had spoken with Apple CEO Tim Cook about “big things coming” in India—comments that have further fueled speculation about India’s rising economic stature. However, the crucial question still stands: Will regulatory red tape and infrastructure constraints slow down the juggernaut, or will India really take advantage of this opportunity to overtake China as the West’s preferred partner?
At the heart of India’s rise is a confluence of strategic advantages. The country boasts a massive demographic dividend with a median age of 28—one of the youngest populations globally. This guarantees a consistent supply of skilled and semi-skilled workers, which is necessary for manufacturing processes that require physical labor. Together with a growing middle class and increasing consumer demand, India provides a profitable domestic market and a manufacturing base. The fact that Apple intends to manufacture 25% of all iPhones in India by the end of 2025—a significant increase over its 2022 figures—is not a coincidence.
Policy reform has also been a crucial accelerator. In order to boost domestic manufacturing and increase India’s competitiveness in the global market, the Modi administration has deliberately introduced policies such as the National Manufacturing Mission (NMM), the Production Linked Incentive (PLI) schemes, and Make In India. By attracting foreign investment, fostering innovation, and enhancing infrastructure and ease of doing business, the Make In India initiative, introduced in 2014, seeks to establish India as a worldwide center for manufacturing. This is complemented by the PLI schemes, implemented in 2020, and offers performance-based financial incentives to companies in 14 industries, such as electronics, semiconductors, pharmaceuticals, and textiles, to encourage domestic production and lessen reliance on imports. By creating industrial clusters, expediting regulatory clearances, and boosting talent development, the NMM, announced in the 2025 Union Budget, seeks to integrate India further into global value chains.
The PLI schemes for 14 sectors had attracted over ₹95,000 crore (about $11.1 million) in investments by September 2023, leading to production/sales of ₹7.80 lakh crore (about $91.4 million) and employment generation for over 640,000 individuals. Sectors such as semiconductors, electronics, pharmaceuticals, and textiles have been significant beneficiaries of these schemes. India’s manufacturing exports surpassed $450 billion in FY2024–25, with electronics and EV components emerging as the fastest-growing areas, demonstrating that these efforts are starting to pay off.
Corporate interest is operational rather than merely speculative. With the help of partners like Foxconn and Pegatron, Apple has increased its contract manufacturing in India, making it the country’s second-largest iPhone production base behind China. Following years of discussions, Tesla has finally been given permission to build a gigafactory in Gujarat. The company also intends to build EV charging stations all around the country. Boeing, which has long had ties to India through defense and aerospace partnerships, is increasing its commitment in the country’s aviation sector by collaborating with Tata Aerospace and HAL to produce parts for both military and commercial aircraft.
However, India’s path to displacing China is far from guaranteed. There are four interlocking challenges that continue to constrain India’s ambitions. First is the regulatory environment. Despite ongoing reforms, India still struggles with bureaucratic friction. Licensing, land acquisition, and state-level policy inconsistencies can stall projects for months. As Tesla CEO Elon Musk candidly noted during a 2025 visit, “India’s market is exciting, but navigating its regulatory maze still feels like playing Jenga blindfolded.”
Secondly, the state of infrastructure is still inconsistent. Even though major projects like the Delhi–Mumbai Industrial Corridor and Gati Shakti have made logistics better, there are still issues with port efficiency, power reliability, and last-mile connectivity. At 13–14% of GDP, India’s logistics costs are still far greater than China’s 8%, which reduces cost competitiveness.
Third, a large skills deficit in India. Many industries continue to cite a lack of personnel with the technical know-how needed for modern manufacturing, even with the impetus created by Skill India. Launched in 2015, this government initiative aims to train over 400 million people in different fields by 2025 through programs such as the Pradhan Mantri Kaushal Vikas Yojana (PMKVY), industrial training institutes (ITIs), and apprenticeship schemes. However, gaps remain between training curricula and industry needs—particularly in high-tech sectors. A lack of talent is cited by the semiconductor and automotive industries as a factor that may hinder scale-up.
Finally, there are other competitors in the “Plus One” race besides India. Mexico, Vietnam, and Indonesia are emerging as nimble rivals. Vietnam’s strong trade agreements with the EU and Trans-Pacific Partnership countries, quick decision-making, and reduced operating costs continue to draw businesses. In contrast to Vietnam’s centralized agility, India’s federal system, despite its democratic richness, frequently impedes the swift execution of policies.
That said, 2025 might still be the tipping point. According to a recent Reuters report, Modi’s post-election roadmap includes aggressive reforms: easing labor laws, rationalizing the tax code, and establishing a “Single Window” clearance system for strategic manufacturing projects. If implemented with urgency, these changes could significantly reduce friction and increase foreign direct investment (FDI), which stood at $83 billion in FY2024–25, a record high.
India is also fortifying its external stance strategically. In addition to strengthening its position in the Quadrilateral Security Dialogue of the United States, Australia, India, and Japan, and the Indo–Pacific Economic Framework, the nation is pursuing trade deals with the EU, the UK, and Canada. These economic-security alliances provide access to valuable markets as well as geopolitical leverage. India is a naturally appealing partner for the West as it seeks to reduce the risk of its economic reliance on China, thanks to its strategic location along key Indian Ocean trade routes and growing economic potential.
The road to replace China as the West’s preferred partner isn’t paved with certainty, but India is making a compelling case. It’s not just about being a fast-growing economy with scale. It’s about becoming an agile, efficient, and predictable partner in global production networks. The question is not whether India can replace China—it’s whether it can do so fast enough. The geopolitical window is open, but it won’t remain so forever. India’s global play is bold—but it now demands execution with surgical precision.
