Former RBI Governor Raghuram Rajan has raised strong concerns about India’s increasing obsession with the “China+1” strategy. Speaking at a recent event, Rajan argued that “the period of massive, low-wage manufacturing for export may be over”, as the global economy is shifting away from the traditional industrial growth model.
In a recent interview with Frontline as covered by Business Today, he further added that advanced technologies like automation and AI are reducing the need for labour-intensive manufacturing, and rising protectionism in developed countries is making large-scale export-led growth difficult. Simply put, Rajan believes India is chasing a playbook that no longer works and should instead invest in human capital, education, and innovation to build a resilient, future-ready economy.
So, Is “China+1” A Wrong Mindset?
Not entirely. While Rajan’s argument rightly points out that India shouldn’t dream of becoming “the next China,” the “China+1” model is not just about copying China’s manufacturing dominance—it’s about capturing specific opportunities from global supply chain diversification.
As multinational companies move operations out of China due to rising costs, geopolitical risks, and post-pandemic shocks, India stands as a strategic alternative. The idea is to tap into key sectors like electronics, mobile components, semiconductors, and textiles, while also strengthening tech and services in parallel.
Govt’s Push: Who’s Promoting China+1 in India?
One of the strongest proponents of this strategy is Union Minister Piyush Goyal, who has aggressively promoted India as a China+1 hub through Production Linked Incentive (PLI) schemes and global outreach.
The government has also taken steps to improve ease of doing business, reduce import dependency, and encourage global players like Apple, Samsung, and Foxconn to manufacture in India. Even broader initiatives like Make in India and Atmanirbhar Bharat reflect this thinking — not to replicate China, but to reduce vulnerabilities and build local strength.
What Should India Really Focus On?
India’s path shouldn’t be “China 2.0”. Instead, as Rajan emphasised, it should be about:
- Investing in education and skilling to prepare youth for the digital economy
- Building high-value services and tech-driven sectors
- Becoming a hub of innovation, clean energy, and digital transformation
- Using China+1 as a stepping stone, not the end goal
The real challenge? Balancing manufacturing ambitions without ignoring India’s bigger advantages—youth, digital infrastructure, and services.
