CEA Nageswaran Highlights Enduring Relevance of China-Plus-One Strategy for Global Supply Chains
Chief Economic Adviser V. Anantha Nageswaran has affirmed that the China-plus-one strategy continues to hold significant relevance for multinational corporations, even as Indian exports face substantially higher tariffs in the US market compared to Chinese goods. In a detailed interview, Nageswaran pointed out that while India must intensify its efforts to capitalize on this strategic shift, the removal of these tariffs would significantly ease supply chain restructuring decisions for businesses.
Navigating the US Tariff Landscape and Its Impact on Indian Exports
Currently, a wide array of Indian products exported to the United States are subjected to steep tariffs of 50% on most goods. This follows a series of actions initiated by the Trump administration in 2025. The tariff structure began with reciprocal tariffs of 25% applied to Indian imports, effective from 6 August, with an additional 25% penal tariff later imposed for purchasing Russian oil, taking effect from 27 August.
Nageswaran elaborated, "These are, however, decisions taken by businesses with a longer time horizon of a decade or two or three, and the tariffs may not last that longer. From that perspective, the China-plus-one framework still remains very relevant for global business."
The tariffs impact numerous labour-intensive sectors in India, including:
- Textiles
- Gems and jewellery
- Leather goods
- Marine products
- Chemicals
- Engineering goods
These sectors now face the highest tariff rates imposed on any major US trading partner, with the exception of Brazil, which is confronting similar duties. In contrast, Chinese exports to the US are subject to a 30% tariff under a truce framework established in late 2025. Notably, certain Indian sectors such as pharmaceuticals, electronic goods, and energy products remain exempt from these heightened tariffs.
Building Long-Term Competitiveness Through Sustained Reforms
When questioned about implementing reforms recommended in the Economic Survey to enhance India's manufacturing competitiveness and drive innovation, Nageswaran described it as a long-term process without a fixed timeline. He emphasized that as reforms accumulate, India's global competitiveness will inevitably rise.
"In the last 12 months, we have been demonstrating our reform intent, including facilitating research and development, and continuing public investments, all of which will contribute to competitiveness. Over time, policy actions and decisions will result in economic outcomes that we are looking for," stated the Chief Economic Adviser.
He specifically highlighted measures outlined in the Economic Survey, such as facilitating research and development through funding mechanisms like the RBIF and ANRF, along with sustained public investment. Nageswaran noted that while establishing direct causality might be challenging, these initiatives will eventually manifest in enhanced competitiveness.
Multiple Factors Influencing Economic Outcomes and Reform Implementation
The CEA cautioned that economic outcomes are influenced by numerous factors beyond governmental control, suggesting that the government should maintain focus on actions within its purview rather than attempting to predict specific results. His recommendations emerge at a critical juncture where global supply chains are being reshaped not merely by cost considerations, but also by:
- Geopolitical dynamics
- Technology controls
- National security concerns
These factors collectively raise the bar for nations aspiring to attract long-term manufacturing investments. Reflecting on post-pandemic trends, Nageswaran observed that India has managed to achieve robust economic growth alongside declining inflation rates. This success is partly attributed to strategic public investments in infrastructure and digital infrastructure, improved credit access for SMEs, and various deregulation initiatives.
Addressing Reform Challenges and Free Trade Agreement Considerations
Regarding whether reforms aimed at boosting manufacturing competitiveness are politically easier to implement compared to state-domain reforms like land reforms, Nageswaran acknowledged that different reforms naturally demand varying levels of effort. He advised against speculating on the specific impacts of individual reforms, noting that even policies announced and legislated years earlier may require considerable time for notification and full implementation.
On the subject of free trade agreements (FTAs), the CEA resisted attempts to pre-identify 'binding constraints,' advocating instead for learning about constraints through practical experience rather than theoretical labels. He underscored that cost considerations are paramount, and reducing costs is central to improving competitiveness within the context of FTAs.
Nageswaran's insights arrive as India positions itself to leverage the China-plus-one strategy, emphasizing that sustained reform efforts and strategic policy actions will be crucial in enhancing the nation's manufacturing competitiveness and attracting global investment in an increasingly complex geopolitical and economic landscape.
