Context

• The global China+1 strategy, through which companies diversify manufacturing beyond China, offers India an opportunity to attract investment, generate employment and strengthen its industrial base.
• However, success depends not only on national incentives but also on individual States’ capabilities.
• Tamil Nadu and Karnataka demonstrate how infrastructure, skilled labour, supplier networks, administrative efficiency and policy continuity influence investment decisions.

Two States, Their Approaches

• Tamil Nadu: Decades of Industrial Development
  • Tamil Nadu has emerged as a major electronics manufacturing hub.
  • Foxconn employs thousands of workers assembling iPhones at Sriperumbudur, while Tata Electronics has expanded in Hosur.
  • In January 2026, the Centre approved projects under the Electronics Components Manufacturing Scheme (ECMS), including proposed mobile-phone enclosure units by Yuzhan Technology and Tata Electronics.
  • The State’s success reflects long-term industrial planning rather than merely the China+1 opportunity.
  • Investments in technical education, automobile manufacturing and supplier networks have created an established industrial ecosystem.
  • Investors also value policy continuity and the fulfilment of commitments despite political changes.
  • However, Tamil Nadu faces constraints involving land, electricity and labour, alongside dependence on migrant workers.
  • Its future growth requires a shift towards capital-intensive manufacturing, advanced components and innovation-led exports.
• Karnataka: Leveraging Technology and Engineering Talent
  • Karnataka has followed a different trajectory, building on Bengaluru’s strengths in software, engineering and technical education.
  • Foxconn’s proposed 300-acre campus at Devanahalli aims to generate approximately 50,000 jobs, with women reportedly accounting for around 80% of the workforce.
  • Tata Electronics has also expanded its iPhone manufacturing operations at Narsapura.
  • Karnataka demonstrates how technical expertise and established technology ecosystems can attract global manufacturers.
  • Together, the two States illustrate that different development pathways can produce industrial success.

National Policy, State-Level Delivery

• The Role of Central Government Incentives
  • National policies support domestic manufacturing through production-linked incentive (PLI) schemes, tariffs and regulatory reforms.
  • The large-scale electronics PLI scheme ended on March 31, 2026, and a successor was approved on July 15.
  • In January 2026, the Centre approved 22 ECMS proposals worth ₹41,863 crore, expected to create 33,791 direct jobs across eight States.
  • In March, it also approved easing Press Note 3 restrictions on investments from countries sharing a land border with India.
  • Nevertheless, incentives alone cannot ensure success. States must provide industrial land, reliable electricity, efficient approvals, skilled workers and dependable suppliers.
• Understanding Foreign Investment Data
  • Between October 2019 and March 2026, Tamil Nadu accounted for approximately 6% of FDI equity inflows, compared with Maharashtra’s 31%, Karnataka’s 21%, Gujarat’s 15% and Delhi’s 13%.
  • However, DPIIT records FDI against the State where the recipient company’s headquarters are located, not necessarily where factories are established.
  • Therefore, investment statistics may not accurately reflect industrial activity.
  • Policymakers should also examine actual capital expenditure, employment generation and domestic supplier development.
• Building Domestic Supply Chains and Value Addition
  • India’s electronics exports reached approximately $48 billion in 2025–26, while imports stood at around $116 billion.
  • This imbalance reflects continued dependence on imported components.
  • One manufacturer achieved $600 million in domestic sourcing against a $1 billion target.
  • Such experiences demonstrate the importance of backward linkages connecting final-product manufacturers with domestic component suppliers.
  • Developing these networks requires investment, technology transfer and skilled personnel. Meaningful value addition may take four to five years.
  • India must move beyond assembly towards component manufacturing, technological innovation and higher domestic content.

Challenges and The Way Forward: India’s Industrial Divide

• The Uneven Geography of Manufacturing
  • Manufacturing growth remains concentrated in southern and western India, while populous States such as Bihar, Chhattisgarh and Jharkhand attract comparatively less investment.
  • This imbalance risks widening regional inequalities and limiting employment opportunities.
  • Equal distribution of subsidies cannot automatically create industrial ecosystems.
  • States need suitable infrastructure, institutional capacity, trained workers and reliable supplier networks.
• Replicating Successful State-Level Practices
  • Other States should prioritise industrial infrastructure, technical education, streamlined approvals, logistics and investor engagement.
  • Their strategies must reflect local resources and capabilities rather than mechanically copying established manufacturing centres.
  • The Centre can support this transition through infrastructure funding, industrial corridors, skill-development programmes and incentives linked to measurable outcomes.
  • Regional industrial development must combine national coordination with State-level implementation.

Conclusion

• India’s China+1 opportunity offers a chance to transform its manufacturing structure.
• Tamil Nadu demonstrates the importance of decades of industrial development, while Karnataka highlights the role of technology and engineering talent.
• India must strengthen domestic supply chains, increase value addition, maintain stable policies and expand manufacturing across regions.
• National incentives can attract investment, but State-level delivery determines sustainable industrial success.
• By learning from successful States and adapting their practices to local conditions, India can build a competitive, diversified and inclusive manufacturing economy.