Can India replace China due to the Escalating Tarriff War?
By Ms. Sanyukta Kulkarni, Senior Route Development Manager – Indian Subcontinent, DB Schenker Inc.
India, now the 5th largest Economy in the World, is rapidly scaling up its position in the Global Markets. With abundant Land available for Manufacturing, Cheap labor & growing infrastructure capabilities, its importance in the Matured Western markets is growing more than ever. Especially to the USA, due to its Escalating Trade War with China. Let’s look at how India can Rise up to compete with China and become a Superpower for Manufacturing.
India Advantage
India has abundant land & labor – something that is required for large scale manufacturing. It now has the largest population in the World, higher than China. India’s median age is 28 years, whereas China’s is 40 years, thereby implying that more people available to enter workforce and manufacturing. This is certainly to India’s advantage. Moreover, India’s Government launched its PLI Program (Production Linked Incentive) for 14 sectors including aerospace, automotive, electronics, pharmaceuticals and textiles, that aims to lift share of manufacturing.
India Infrastructure and Logistics
India now has the 2nd largest Road Network in the World, only second to USA. Government has launched ‘National Logistics Policy’ (NLP) that aims to modernize the logistics sector by promoting multi-modal transportation, digital integration, and skill development. The policy aims to bring logistics costs down from the current 13-14% of GDP to around 8% by 2030, which is close to the Average in Developed countries. China’s Logistics cost is also around 14% to GDP, so If India is able to achieve lower logistics costs, it becomes more competitive in the Export market v/s China.
India’s Current position on Bilateral Trade with USA.
On April 2, USA announced ‘Reciprocal tariffs’ on imports from 90 countries that are around 10% across-the-board tax applied to all imports to the U.S, with an Exception that Goods from China are averaging around 124% on All Goods & 145% on certain Goods. This is a huge disadvantage to China & there has been a reduction in supply of Chinese goods to USA in Q1 2025 since tariffs are announced. India has a definite advantage on this over China, because India & USA Government is working on a Bilateral Trade agreement by Q3 2025. They have also agreed to buy More American Goods, so as to amicably resolve the Trade tensions with USA.
India – USA in the Next Decade
India aims to become the 3rd Largest Economy by 2047. It also aims to Improve its Bilateral Trade with USA to $500 Bn from the current estimated $130 bn. India has become a global leader in pharmaceutical & mobile-phone production in recent years. Industry leaders like Apple now manufacture their newest and most sophisticated cellphones in India, moving away production from China & plans to do more due to recent Tariffs on China. Similarly, pharmaceutical exports nearly doubled to $27.85 billion in 2023-24 from a decade ago. Almost 40% of Generic Medicines that US imports come from India.
In Summary
For India, the Time is Now! India’s Growth Story can be similar to what China’s was in the 1990-2010 decades. If India continues its efforts on improving its Manufacturing Ecosystem & reducing Bureaucracies & Roadblocks, then it can give a strong competition to China & become the Next Superpower of Manufacturing.
Author:
Ms. Sanyukta Kulkarni, is a Senior Route Development Manager for Indian Subcontinent, based in USA. She has been working in the International Logistics Industry the last 18 years across India & USA. For the last 10 years, her Focus has been Building the Trade Corridor between India & USA and to Improve the Business Growth between India & USA Trade Corridor with DB Schenker.