India in the Indo-Pacific Supply Chain Realignment

By Kangkana Hazarika

Stretching from the eastern coast of Africa to the Pacific Ocean, the Indo-Pacific accounts for a major share of global trade. For decades, global supply chains were heavily concentrated around cost-efficiency trade policy in the Indo-Pacific region, with China emerging as the “World’s Factory” leveraging its vast manufacturing base, infrastructure and integration into global trade networks. However, a confluence of structural disruptions has precipitated a fundamental reconfiguration of these arrangements.

Geopolitical instability, from the Russia-Ukraine war and the Israel-Palestine conflict to present day U.S.-Iran tensions have introduced systemic volatility into energy, food, and electronics markets. Simultaneously, the intensifying U.S.-China strategic rivalry, operationalized through trade wars, tariffs and technology restrictions, has eroded the foundational assumptions of hyper globalization. Moreover, Covid-19 pandemic further disrupted the global market, highlighting the need for a resilient supply chain restructuring plan. In economic term, when risk is concentrated, capital moves to diversify. Therefore, we witness a major supply chain realignment in the region, where production networks and trade routes are restructured or reshoring. Leading firms to adopt the strategy of “China+1”, wherein multinational firms seek to relocate a portion of production to alternative manufacturing hubs such as Vietnam, Indonesia, Mexico and increasingly, India.

For India, this shift offers major opportunities. India's emergence as a credible node in this reconfigured supply chain architecture is grounded in a set of interconnected structural competencies. Firstly, India has a large and growing labour force, with a young population relatively lower labour costs compared to developed economies, India has the potential to attract industries looking to relocate production away from China. Secondly, situated along major Indian Ocean trade routes, India lies close to key maritime chokepoints with a stable political economic system. And thirdly, the Production Linked Incentive (PLI) scheme initiated by the Government of India, launched in 2020. Where a company sets up or expands its factory in India and sells more products than it did in a previous base year and the government rewards it with a cash incentive of around 4-6% of those extra sales up to 5-7 years

Apple’s India Manufacturing Pivot

For decades, Apple's production model was predicated on China's unmatched combination of infrastructure, supplier density and skilled labour. However, the rising geopolitical and economic disruptions have compelled Apple to adopt a “China+1” strategy. Through contract manufacturers Foxconn and Pegatron and crucially through the Tata Group's acquisition of Wistron's India operations, Apple has expanded its Indian manufacturing footprint substantially. By 2024-25 estimates, India accounts for approximately 12-14 percent of global iPhone production, with annual output exceeding $14-15 billion and exports surpassing $10 billion, constituting a significant and growing share of India's electronics export basket. The fact that Apple now assembles its latest iPhone models in India, rather than older versions, signals a qualitative deepening of confidence in India's manufacturing ecosystem.

Structural Constraints and Systemic Challenges

Notwithstanding these opportunities, India's supply chain ambitions are circumscribed by a set of well-documented structural constraints. 

Upskilling Workforce- a mismatch between the size of the labour force and its technical preparedness for high-value manufacturing remains a fundamental bottleneck.

Research &Development- India's comparatively low research and development expenditure, relative to peer manufacturing economies, limits its capacity to ascend the value chain from assembly operations toward innovation-intensive production. 

Logistics cost- high logistics costs that is estimated to be around 13–14% of GDP, impose a persistent competitiveness penalty on export-oriented manufacturing.

Trade protectionism- India's historically protectionist trade posture, most prominently reflected in its withdrawal from the Regional Comprehensive Economic Partnership (RCEP), has constrained its integration into regional value chains and limited the network effects it can derive from deep trade partnerships. 

India’s Institutional Frameworks and Multilateral Engagement

India has sought to address these constraints partly through active engagement with an evolving architecture of regional and multilateral frameworks to strengthen its role in the Indo-Pacific supply chain realignment. One key platform is the Supply Chain Resilience Initiative (SCRI) between India, Japan and Australia representing a targeted trilateral effort to diversify critical supply chains and establish what proponents describe as a "virtuous cycle" of mutually reinforcing economic growth among aligned partners. India's participation in the Indo-Pacific Economic Framework for Prosperity (IPEF) extends this multilateral engagement to a broader coalition, with emphasis on to enhance cooperation in trade, supply chain resilience, clean energy and fair economy.

Additionally, India's recent membership to PAXSILICA which is a U.S.-led twelve-member strategic coalition, marks a significant escalation of its alignment with Western-led efforts to reduce dependence on Chinese-controlled supply networks. This coalition launched in December 2025, aims to secure supply chains for critical minerals, semiconductors and AI technologies. Finally, the conclusion of India-EU Comprehensive Free Trade Agreement negotiations in January 2026, marks a historical move for EU-India trade relations The deal covers goods, services, investment and trade remedies, significantly enhancing export competitiveness for India. EU’s move to diversify its value chain to India reveals the momentum of the current situation and a positive faith towards India’s political- economic capacity.

Towards a Full-Spectrum Manufacturing Leadership

For India to transition from a promising alternative to a genuine anchor of Indo-Pacific production networks, India needs to develop a full spectrum of the trading ecosystem. A suitable environment for foreign trade investment is not substantial if it lacks components like resourcing, processing, manufacturing and finally producing the finished group. The geopolitical opportunity is historically unprecedented; whether India can marshal the institutional coherence to seize it will define its standing in the emerging Indo-Pacific economic order.

Kangkana Hazarika is a postgraduate in Diplomacy, Law and Business from Jindal
School of International Affairs, O.P Jindal Global University. The views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect the views of Kalinga Institute of Indo-Pacific Studies.