India had 'limited success' in capturing 'China Plus One' opportunity: NITI Aayog

Last Updated06/12/2024

Even as a new NITI Aayog report, the ‘Trade Watch’, released on Wednesday, says that India has seen “limited success so far” in capturing the ‘China Plus One’ strategy adopted by multinational companies looking to de-risk their supply chains.

The NITI Aayog's latest Trade Watch report reveals that India has achieved limited success in capturing multinational companies’ shift to the "China Plus One" strategy. Other nations such as Vietnam, Thailand, and Malaysia have emerged as larger beneficiaries due to factors like cheaper labor, simplified tax laws, and proactive Free Trade Agreements (FTAs).

NITI Aayog CEO B.V.R. Subrahmanyam highlighted that the escalating trade conflict between the US and China presents significant opportunities for India:
Trade Diversion: Policies under US President-elect Donald Trump, such as tariffs on Chinese imports, could lead to increased global trade diversion benefiting India.
Expanding Market Share: India currently has less than 1% share in 70% of global trade, indicating vast potential for growth.

Iron and Steel Industry: India’s iron and steel exports declined by 33% in Q1 FY25 due to oversupply from China and weak domestic demand. The EU’s Carbon Border Adjustment Mechanism (CBAM) further exposes this sector to tariffs of 20–35%, increasing costs and reducing competitiveness.
Technological Exports: Countries like Malaysia and Thailand outperform India in sectors such as electrical machinery, indicating areas where India must strengthen its capabilities.

Impact of US Tariffs: Arvind Virmani, NITI Aayog member, noted that a general 10% US tariff on imports may not harm India, while a 60% tariff on Chinese goods could create significant opportunities for Indian exporters.
Iron and Steel Tariffs: Suman Bery, NITI Aayog Vice Chairperson, expressed caution about increasing import duties on steel, citing potential downstream effects on competitiveness.

The report attributes ongoing trade fragmentation to strict US export controls aimed at limiting China’s technological progress. Meanwhile, the EU’s CBAM regulations, effective from 2026, will impose additional compliance costs on high-carbon imports, particularly affecting developing countries in Africa and Asia.