“Don’t look at India — look at what’s happening with specific States,” a veteran investor told these writers in one of 50 interviews with senior industry executives, policymakers and experts for a 2026 study at the East Asian Institute on how global firms are reworking their China+1 plans.
However, the national conversation tends to run the other way. Every few months, someone advises India to study Vietnam’s industrial parks, Mexico’s nearshoring or Poland’s supply chains. Meanwhile, two instructive case studies sit right at home — in Tamil Nadu and Karnataka. Global firms do not choose “India” as a homogenous monolithic edifice. They choose a State, and with it, the land, power supply, approvals, workers and suppliers.
Two States, their approaches
At Sriperumbudur, near Chennai, Foxconn employs tens of thousands of people assembling iPhones. Tata Electronics has expanded at Hosur. In January 2026, the Centre approved projects in Tamil Nadu under its Electronics Components Manufacturing Scheme (ECMS), including mobile-phone enclosure units by Yuzhan Technology, a Foxconn-linked firm, and Tata Electronics. These are commitments rather than finished factories, but they reflect the advantages of an industrial ecosystem that has taken decades to build.
None of this began with China+1. Tamil Nadu invested in technical education, built an automobile and components industry around Chennai, and developed the suppliers, skills and administrative experience that new manufacturers look for. Several investors told us that policy continuity is essential and that commitments must be honoured regardless of political turnover. That is now being tested following the change of government in Tamil Nadu in May 2026. One academic respondent argued that Tamil Nadu would have done well irrespective of China. Its industrial base took four or five decades to build; no announcement of an industrial park or round of subsidies can conjure that up. Karnataka followed a different path. Bengaluru began with software and engineering talent, and not Chennai’s automobile base. Foxconn’s 300-acre campus at Devanahalli, where women reportedly form about 80% of the workforce, aims to create around 50,000 jobs. Tata Electronics took over Wistron’s iPhone plant at Narsapura, in a deal agreed in late 2023, and has grown rapidly since.
Tamil Nadu faces limits in land, power and labour, and relies on migrant workers from the northern and central States. It is now seeking to move beyond labour-intensive assembly towards more capital-intensive manufacturing and innovation-led exports.
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National policy, State-level delivery
National incentives are integral, too. One manufacturer explained the combined effect of tariffs and production-linked incentives (PLI): “If the duty is 20 per cent and I get a PLI of 6 per cent, competitors cannot compete with me. This is working right here.” The PLI scheme for large-scale electronics manufacturing ended on March 31, 2026, and the Cabinet approved a successor on July 15. In January, the Centre cleared 22 proposals under the ECMS, worth ₹41,863 crore and expected to create 33,791 direct jobs across eight States. The Centre describes this spread as “geographically balanced industrial growth”. In March, the Cabinet approved easing Press Note 3, which introduced curbs in 2020 on investment from countries sharing a land border with India. These measures help attract investment, but whether that investment takes root depends on what individual States can offer. The factory still has to come up somewhere.
Still, Tamil Nadu ranks only fifth in the Department for Promotion of Industry and Internal Trade’s (DPIIT) data on foreign direct investment (FDI) equity inflows for October 2019 to March 2026, accounting for about 6%. This is behind Maharashtra (31%), Karnataka (21%), Gujarat (15%) and Delhi (13%).
However, DPIIT records FDI against the State in which the receiving company has its head office, rather than where the money is spent. So, the figures tell us little about where factories are being built.
Assembly is only the first step. One electronics executive told us that “very few components are manufactured in India” and that there is still a “huge reliance on China for major parts and supply chains”. Backward linkages remain thin. Another respondent said his firm had set a billion-dollar target for sourcing in India but, after two or three years, had managed to source “about 600 million out of that”. Such ecosystems cannot be built in a hurry: “Value addition is a process which takes time — it is a four-to-five-year process.”
Electronics exports touched about $48 billion in 2025-26, while imports stood at about $116 billion. Although export growth is impressive, the trade gap suggests that India still has considerable ground to cover in component manufacturing. One executive described the exports as “assembled products with 20 per cent inputs in India”.
India’s industrial divide
Concentration also carries risks. One respondent said growth is “largely happening in the southern and western parts, not in the most populous States such as Bihar, Chhattisgarh and Jharkhand”.
Spreading subsidies thinly will not, by itself, replicate Tamil Nadu’s supplier networks or Karnataka’s technical labour pool. The key questions are what these States did to prepare land, train workers, clear approvals, nurture suppliers and retain investors, and which of these measures can be replicated, and what rests on decades of accumulated capacity.
India’s China+1 debate keeps looking abroad for a model, even as some of the most instructive factories have been coming up all along on the outskirts of Chennai and Bengaluru.
P.S. Srinivas is Visiting Research Professor at the East Asian Institute, National University of Singapore. Anisha Sircar is a Non-Resident Fellow at the East Asian Institute, National University of Singapore. This article draws on 50 interviews for the EAI Special Report, “India, China, and the ‘China+1’ Strategies of Global Firms” (September 2026), and on P.S. Srinivas, Frank N. Pieke and Alfred Schipke, “India, China and the China+1 Strategy”, Global Policy (2026)