For the past few years, global geopolitical unrest, disruptions to supply lines and the urge to develop diverse manufacturing footprints have radically transformed the business world. As multinational companies rethink their overdependence on China, India stands poised to emerge as a key player in the global manufacturing ecosystem—a viable “China Plus One” alternative. Budget 2025 provides an unprecedented chance to cement it through targeted policy action, infrastructure build out and encouragement of global manufacturers.
Why China Plus One Matters
The “China Plus One” strategy has become increasingly popular as the businesses pose a threat to its position as a leading manufacturer of the world. India is a promising location for supply chain expansion because of its robust labor pool, favorable demographics, and growing domestic hinterland.
India’s Manufacturing Potential
The manufacturing sector in India comprises ~16% of GDP and the plan of the government is to increase this value up to ~25% through the “Make in India” initiative. The country has all required ingredients for successful competition on a global level thanks to the large natural resources, a very young working population and an expanding middle class . However, infrastructural gaps, regulatory barriers, and logistically related limitations have repeatedly impeded progress.
Budget 2025 presents an opportunity to address these challenges and transform India into a world class manufacturing power house.
Key Priorities for Budget 2025
1. Boosting Infrastructure Development
However, a robust infrastructure base is required in order to support mass production. While highway, port and railway in India are growing, an opportunity still exists in quality improvement sectors. Budget 2025 must allocate significant funds for:
- Expanding industrial corridors and special economic zones (SEZs).
- Upgrading ports to enhance export competitiveness.
- Strengthening multimodal logistics for seamless movement of goods.
The 2022 launched FY, National Logistics Policy needs to be supported by enhanced budgetary allocation so as to bring about logistics cost savings from the current 14% of GDP to the international average of 8-10%.
2. Incentivizing Manufacturing Investments
In order for the government to attract global corporations, there must exist a particular type of incentive. The Production-linked Incentive (PLI) initiative, which has already secured US$26 billion of private investment in 14 industry sectors, can now be tapped to support green technology and high performance electronics applications. Budget 2025 could:
- Offer tax holidays for new manufacturing units.
- Reduce corporate tax rates further for export-oriented industries.
- Provide incentives to meet the demand for R&D and innovation in order to promote leading-edge manufacturing.
3. Skilling India’s Workforce
India”s demographic dividend will only materialize if the workforce can be properly skilled. Budget 2025 should focus on:
- Enhancing vocational training programs in partnership with industries.
- Programs of wider scale such as Skill India and the Pradhan Mantri Kaushal Vikas Yojana.
- Structure of Centers of Excellence regarding emerging manufacturing technologies (robotics, artificial intelligence, and the Internet of things).
4. Streamlining Regulatory Frameworks
Bureaucratic red tape is a long standing frustration for doing business in India. Budget 2025 can address this by:
- Simplifying land acquisition laws.
- Introducing single-window clearances for manufacturing projects.
- Reducing compliance burdens to make it easy for foreign investors to establish and run in India.
5. Promoting Sustainable Manufacturing
Budget 2025 should:
- Incentivize renewable energy adoption in industrial processes.
- Provide subsidies for eco-friendly manufacturing practices.
- Encourage investments in circular economy initiatives.
The Economic Impact of a Manufacturing Push
As a result, an estimated 500 billion US dollars worth of additional gross domestic product (GDP) per year could be created by the global manufacturing sector for India by 2030 (McKinsey). Not only will this cause millions of vacant jobs, but it will also lead to reduction of the trade deficit and strengthening of the country’s position in the world economy.
The Global Business Perspective
For MNEs, India’s value proposition resides in its potential to provide cost efficiency, stability, and entry to a rapidly expanding domestic market. By way of Budget 2025, government has the means to take those advantages even further, sending a powerful message worldwide that India is open for business.
Budget 2025 could finally be the “watershed” moment in India’s manufacturing dream. Through the solution to key issues and the provision of niche incentives, it is possible for the government to position India as the world’s China Plus One leader. When global firms look to spread out their supply chains, India has to do its best in order to grab this chance of gaining a footing in the global manufacturing sector.
The time to act is now. When the policy and investment and vision are present, India can evolve into one of the manufacturing centers of the world and, consequently, contribute to economic growth while changing its position in the world
