Why is there a shift of labour-intensive industries from China to South and Southeast Asia? Discuss the advantages and challenges for India in this context. (Answer in 250 words)

Reasons for the shift:

1. Strategy of friend-shoring and on-shoring by the West

Shifting industries to reliable partner countries.

2. China plus one strategy of the European Union & USA.

Demanding diversified supply chains.

3. Rise of Vietnam, ASEAN and South Asian economies as manufacturing hubs.

4. Investor-friendly policies of these states.

5. Demand of labour at cheap rates met in these nations.

Certain Chinese factors are also responsible:

1. Increased per capita incomes

2. High wages demand

3. Stagnant economy

Advantages for India in this context:

1. Growth of manufacturing sector

currently contributing only 11-14% of GDP.

2. Employment generation

3. Rise of R&D as well as technology transfer.

4. Increased share in global trade

Currently - 2.8%.

5. Development of global supply chains across India as a hub.

Challenges for India:

1. Low Skilled proportion

@ '60-72%' demand-supply gap in emerging sector (India Skills Report 2025)

2. Lack of employability of Indian educated professionals

Only 69% of graduates are employable (Anomose survey)

3. Less capital availability & stringent labour codes

4. Absence of freedom to industry management

Unionization of workers

5. High logistics cost

(14% of COP) → targeted to be (C-8%).

6. Localized and regional imbalances

7. Low Human capital → HsI - 121/132

Therefore, the shifting base of labour-intensive industries present a golden opportunity for India to achieve the goal of 'VIKisit Bharat 2047'.

— Vishwajeet Gupta · AIR 67