Can India Regain Lost Global Manufacturing Ground from Vietnam?

It is no secret that Vietnam has become a hub for global manufacturing. Like China before it, the Southeast Asian nation has lured multinational companies to set up production in its rapidly developing economy. Whether it's sports equipment, smartphones or textiles, firms are making everything in Vietnam, and then shipping it all over the world.

India Joins Race

The "China Plus One" strategy has favored Vietnam above all other nations, and it's not difficult to see why. This younger nation offers a competitive corporate tax rate, trade policies that are efficient, a geographic position that is practically next door to China, and a young, rapidly growing workforce. By 2023, with these assets and more, Vietnam was producing nearly half of Google’s premium Pixel phones. 

The next event in this unfolding saga centers on India. Google is in negotiations with Indian manufacturers such as Dixon Technologies and Foxconn to pull part of its production of smartphones for the U.S. market out of Vietnam and relocate it to India. This is bound to become part of any conversation centered on the ambition of this next-corner nation to become a global hub for electronics.

Tariffs and Trade Winds Shift Favorably for India

For this pivot, one of the main reasons is the imminent threat of hefty US tariffs on imports from Vietnam. The United States recently slapped a 46% tariff on goods coming from Vietnam, compared to a 26% rate on exports coming from India. 

These tariffs are on hold for the time being, but in the face of such pronouncements from Washington, companies are re-examining where they should base their overseas operations. And in that climate, India has suddenly become a lot more favorable.

The Ripple Effect Beyond Smartphones

Alphabet's pivot might just be the beginning. Other sectors, such as electronics, apparel, furniture, and toys, all heavily reliant on Vietnamese manufacturing, are also under scrutiny. Given that companies like Nike, Hasbro, and Samsung are already deeply embedded in Vietnam, a broader shift could be on the horizon. As tariff policies continue to evolve, India stands to gain across multiple industries, provided it can scale up production and logistics quickly enough.

Vietnam still retains some advantages, such as a clear ease of doing business and reliable infrastructure. However, India's large domestic market and government incentives might finally give it the traction needed to become a manufacturing powerhouse.

Even though it is a favorable trend for India, there are hurdles to overcome. Progress is still held up by challenges in acquiring land, labor laws that are more hindrance than help, and the kind of bureaucratic red tape that can slow and sometimes stop even well-intentioned projects. If India is going to really seize this opportunity and not just play catch-up, it has to fix these structural problems, preferably with an eye toward the kind of infrastructure, policy stability, and supply chain logistics that will be necessary to keep the global manufacturing machine humming.