India’s Manufacturing Appeal is Rising – Even as Asia’s Competition Intensifies

The Asia Manufacturing Index (AMI) 2026, published by Dezan Shira & Associates, highlights a familiar reality: Asia’s leading manufacturing hubs – including China, Vietnam, Singapore, and South Korea – continue to outperform many peers on core indicators, such as infrastructure quality, trade facilitation, and business environment efficiency. India, while not yet among the region’s top-ranked manufacturing destinations per the report, shows steady improvements across multiple dimensions that are reshaping its long-term competitiveness.

Rather than signaling stagnation, the index’s findings point to a broader shift: India is evolving into a strategic manufacturing and supply chain node, particularly for firms seeking scale, diversification, and domestic market access alongside export potential.

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Further, while the index has scored countries on specific criteria, it admits that there is no single “best” manufacturing country. For investors and firms seeking global footprints and derisking to manage geopolitical vulnerabilities, the most attractive location depends on varying weightage given to factors such as cost structure, raw material access, production hubs and supply chain depth, regulatory environment, sector-wise incentives, infrastructure, and market access.

The Asia Manufacturing Index also offers customized advisory for businesses seeking decision-making data around metrics reflecting their strategic and sectoral priorities. For the customized ranking service or commercial reuse of the AMI 2026, please contact Holly McCleery (holly.mccleery@dezshira.com).

AMI 2026: India’s mid-table ranking reflects structural transition

In the AMI 2026 category rankings, India generally places in the middle tier across parameters such as:

• Economic conditions
• Political risk
• Business environment
• International trade
• Tax policy

This positioning reflects persistent challenges – including regulatory complexity, infrastructure gaps, and relatively high logistics costs – that continue to weigh on India’s short-term competitiveness when compared with more mature manufacturing hubs in East and Southeast Asia. At the same time, however, the index also captures a clear pattern of gradual but consistent improvement in several of the fundamentals that underpin long-term manufacturing growth. In particular, India has made notable progress in strengthening macroeconomic stability, expanding industrial output, and rolling out policy reforms aimed at improving the overall business environment.

These structural improvements are increasingly visible in headline manufacturing performance. India’s manufacturing sector expanded by 9.9 percent in FY2023–24, reflecting not only stronger domestic consumption but also the impact of sustained public investment in infrastructure, logistics networks, and industrial corridors. Rising capital expenditure has helped ease some long-standing bottlenecks in transportation, power supply, and industrial connectivity, creating a more supportive operating environment for both domestic manufacturers and foreign investors.

Together, these trends suggest that while India’s manufacturing ecosystem still faces operational constraints, the underlying direction of travel is positive. Incremental gains in infrastructure capacity, policy clarity, and industrial output are steadily strengthening India’s appeal as a production base – particularly for companies seeking scale, market access, and long-term growth potential.

Policy momentum is strengthening India’s manufacturing base

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One of the most significant drivers behind India’s improving manufacturing outlook is the government’s Production Linked Incentive (PLI) scheme, which now covers more than 14 strategic sectors, including electronics, semiconductors, pharmaceuticals, automotive, and renewable energy.

According to the Ministry of Commerce and Industry, PLI-supported sectors have already attracted over INR 1.76 trillion (US$19.41 billion) in committed investments, contributing to capacity expansion and export growth.

Electronics manufacturing offers a clear example:

• India’s electronics exports reached US$48.2 billion in 2025, driven largely by smartphone production.
• Apple and its suppliers now manufacture a growing share of iPhones in India, helping integrate the country into high-value global supply chains.

This industrial scaling aligns with the AMI’s emphasis on manufacturing growth and economic resilience as critical competitiveness factors.

Supply chain diversification is working in India’s favor

The AMI 2026 reflects how geopolitical risk and supply chain resilience have become central to manufacturing location decisions. While Southeast Asian economies score higher on logistics efficiency and trade facilitation, India’s scale advantage and domestic market depth remain compelling.

India offers:

• A workforce of over 500 million
• A domestic consumer market of 1.4 billion people
• Expanding port, rail, and industrial corridor infrastructure

The World Bank’s Logistics Performance Index shows India improving steadily, particularly in infrastructure quality and customs efficiency, even if it still trails regional leaders such as Singapore and South Korea.

At the same time, India is emerging as a preferred “China+1” manufacturing destination for firms seeking to reduce concentration risk while maintaining access to large-scale production ecosystems.

Infrastructure investment is narrowing the gap

The AMI’s infrastructure-related indicators reflect a long-standing constraint for India. However, recent investment trends suggest the gap is narrowing:

• India’s total infrastructure spending has grown exponentially, with budget allocations rising to INR 10 trillion (US$110.28 billion) in 2023-24.
• Major projects include the Dedicated Freight Corridors, Bharatmala highways, port modernization under Sagarmala, metro rail network expansion, and new industrial corridors.

As of March 31, 2025, India’s road network spans over 6.3 million kilometers, making it the second largest in the world. National Highways account for 146,204 kilometers, up from 91,287 kilometers in 2013–14, representing an increase of around 60 percent over the past decade. During 2014–25 alone, India added 54,917 kilometers to its National Highway network.

Capacity expansion has accompanied network growth. The length of high-speed corridors expanded from just 93 kilometers in 2014 to 2,474 kilometers in 2025, with approximately 3,600 kilometers constructed over the past five years. Similarly, the length of four-lane and wider National Highways (excluding high-speed corridors) increased 2.5 times, from 18,278 kilometers in 2014 to 45,947 kilometers at present.

Construction capacity has also accelerated significantly. The pace of National Highway construction rose from 11.6 kilometers per day in 2013–14 to around 34 kilometers per day in 2025, while work awards and construction volumes increased by 108 percent and 150 percent, respectively, over the same period.

This expansion has been underpinned by sustained public investment. Ministry spending on road infrastructure increased 6.4 times between 2013–14 and 2024–25, and the road transport and highways budget rose by 570 percent between 2014 and 2023–24, reflecting the central role of transport infrastructure in India’s industrial and logistics strategy.

These upgrades directly address one of the AMI’s core evaluation pillars: logistics and trade efficiency.

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Regulatory reform is improving the business environment

India’s business environment scores in the AMI reflect ongoing complexity, but reforms continue to reduce friction:

• Goods and Services Tax (GST) has unified the domestic market and the GST 2.0 reforms have further streamlined the indirect taxation regime
• Rollout of the four new labor codes will simplify human resource management and clear longstanding labor compliance challenges under existing 29 laws
• Digital customs systems streamline trade procedures
• Single-window clearance platforms reduce approval timelines

For manufacturers, this means more predictable compliance frameworks over time.

India’s manufacturing value proposition is evolving

While the AMI 2026 shows that India has not yet matched Southeast Asia’s top manufacturing hubs on speed, efficiency, or infrastructure density, it highlights something equally important: India’s trajectory is upward.

India’s competitive strengths include:

• Scale and workforce availability
• Policy-driven industrial incentives
• Growing export capabilities
• Supply chain diversification appeal
• Expanding domestic demand

According to the World Investment Report 2025, India was among the top global FDI recipients in 2024, particularly in manufacturing (semiconductors and basic metals), renewables (battery and electric vehicle assembly facilities, solar farms, wind parks, LNG terminals, and power transmission infrastructure), electronics, and cloud infrastructure and AI. Overall, greenfield project announcements in India in 2024 amounted to 1,080 and international project finance deals 97.

Rather than competing solely on cost, India is positioning itself as a strategic manufacturing platform – offering resilience, market access, and long-term growth potential.

A strategic node, not just a low-cost base

The AMI 2026 reinforces an important shift in how global firms view manufacturing locations. Today’s decisions are no longer based only on labor costs or tax incentives. Companies are increasingly prioritizing:

• Supply chain resilience
• Market proximity
• Policy stability
• Industrial ecosystem depth

India may not yet top the AMI rankings, but its policy momentum, infrastructure investment, and manufacturing scale are steadily enhancing its role in regional and global supply networks.

For companies seeking a diversified, future-oriented manufacturing footprint in Asia, India is no longer just an emerging option – it is becoming a strategic anchor in global supply chains.

(US$1=INR 90.67)

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