The question European boards are asking in 2025
For two decades, China was the default answer for European companies looking to manufacture or source in Asia. Low costs, massive scale, and a rapidly improving infrastructure made the decision almost automatic.
That calculus has shifted. Geopolitical risk, rising Chinese labour costs, post-COVID supply chain fragility, and the strategic desire to reduce single-country dependency have opened a serious conversation about India as an alternative — or complement — to China.
Where India genuinely competes with China
- Labour costs: India’s manufacturing labour costs are 30–40% lower than China’s coastal provinces and still falling relative to Chinese wage inflation.
- English language capability: India produces more English-speaking engineers and managers than any country in the world, reducing the communication friction that plagues China operations.
- Demographic dividend: India’s median age is 28 versus China’s 38. India’s working-age population will grow for the next 30 years while China’s shrinks.
- Government incentives: The Production Linked Incentive (PLI) scheme offers direct cash incentives for manufacturing in 14 sectors including electronics, pharmaceuticals, automotive, textiles, and food processing.
- Geopolitical alignment: India’s non-aligned position and growing strategic partnership with Europe reduces the political risk premium that now attaches to China operations.
Where China still leads — and India is closing the gap
Honesty matters here. China still outperforms India in several dimensions that matter to European manufacturers: infrastructure quality (ports, roads, logistics), ecosystem depth (supplier clusters for specific components), speed of execution, and scale of manufacturing capacity.
India is closing these gaps faster than most European executives realise. The National Infrastructure Pipeline has committed $1.4 trillion to infrastructure development through 2025. Major industrial corridors are operational or under construction. And for many categories of goods, India’s supplier ecosystem is now genuinely competitive.
The China+1 strategy in practice
Most sophisticated European companies are not replacing China with India — they are adding India as a second node in their Asia strategy. This ‘China+1’ approach reduces single-country risk, provides a hedge against further US-China trade escalation, and opens access to India’s domestic market at the same time.
The companies getting this right are those who enter India with a clear thesis: which product lines, which supplier relationships, which customer segments justify an India presence, and what is the realistic 3-year investment required to make it work.
RAW India Advisory helps European companies build and execute their India component of a China+1 strategy. Contact us at info@relationsatwork.com to discuss your specific sector and objectives.
