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The relationship between former U.S. President Donald Trump and Indian Prime Minister Narendra Modi has been marked by warmth and shared strategic interests. However, beyond the optics of strong diplomatic ties, economic and trade realities present significant challenges and opportunities for India. One of the key issues in the post-Trump era is the displacement of Chinese goods from the U.S. market and their re-routing through surrogate nations like Vietnam and Mexico. With these supply chain shifts, India must evaluate its role in the global trade landscape, particularly under the “China Plus One” strategy.

The Trade Displacement Effect and Its Second-Order Consequences

The U.S. trade policy under Trump saw an aggressive tariff regime against China, which led to a shift in supply chains. However, rather than completely shutting out Chinese goods, many found alternate routes through Vietnam, Mexico, and other countries. The challenge remains: U.S. protectionist policies did not entirely eliminate Chinese imports but merely altered their path.

For India, this presents a two-fold economic challenge and opportunity. If Chinese products face higher barriers in the U.S., firms will seek alternative manufacturing destinations. The question is whether India can capitalize on this shift or whether nations like Vietnam and Mexico will continue to act as intermediaries. The second-order effects of this trade redirection include global supply chain reconfiguration, changes in FDI flows, and sectoral employment shifts in manufacturing.

To attract displaced investment, India must present itself as a viable alternative. However, this is not just about offering cheaper labor but also about fostering a competitive and efficient manufacturing ecosystem. India’s challenge lies in convincing global investors that it can provide stable policies, skilled labor, and necessary infrastructure to serve as a long-term investment destination.

Can India Be the “China Plus One” Destination?

The “China Plus One” strategy has gained momentum as companies seek to diversify their supply chains beyond China to reduce geopolitical risks. Several factors determine whether India can emerge as a key beneficiary:

1. Ease of Manufacturing: While India has made improvements through initiatives like Make in India, bureaucratic red tape, inconsistent policies, and land acquisition hurdles still deter investors. A streamlined and transparent regulatory environment is necessary.


2. Skilled Workforce and Automation Readiness: The future of manufacturing is increasingly automated, and workers need to be equipped with skills to handle AI-driven production lines. Collaboration between industries and educational institutions is critical to building a skilled workforce.


3. Energy and Infrastructure Development: Competitive electricity pricing, industrial parks, and efficient logistics networks are crucial. Southern and western states such as Tamil Nadu, Karnataka, and Maharashtra have shown promise in attracting FDI in manufacturing, but a pan-India strategy is needed.


4. Tax and Policy Stability: Frequent changes in tax laws and unpredictable policy shifts create uncertainty for investors. A stable, investment-friendly tax regime would help build confidence among global firms.



While India has strong potential, nations like Vietnam, Indonesia, and Thailand have already made significant progress in attracting investments. India’s efforts must be proactive and aggressive in marketing itself as a stable alternative to China.

The Indian Rupee: A Strong or Weak Currency?

One of the most debated issues in India’s economic discourse is the value of the rupee. Should India aim for a strong rupee, or is a moderately weak rupee more beneficial for trade?

The Misconception of a “Strong Rupee”

A strong rupee is often perceived as a symbol of national strength, but in economic terms, its impact is more nuanced. A significantly appreciated rupee makes imports cheaper but reduces the competitiveness of Indian exports, which could hurt manufacturing and job creation.

Conversely, a weak rupee makes exports more competitive but increases the cost of imports, including energy and technology inputs. Given India’s reliance on crude oil imports, a significantly depreciated rupee could lead to inflationary pressures.

Managing Rupee Volatility vs. Targeting an Arbitrary Value

Rather than fixating on an arbitrary exchange rate, India’s policy should focus on reducing volatility. A stable rupee encourages investment and trade, as businesses can plan with greater certainty. A managed float system, where the currency moves within a reasonable band, may be the optimal approach.

The Reserve Bank of India (RBI) has historically intervened to prevent excessive fluctuations, and this approach is likely to continue. A moderate exchange rate, aligned with India’s trade competitiveness and inflation control, would be the most pragmatic path forward.

Technology, Financial Opportunities, and the Global Trade Shift

Beyond traditional manufacturing, India has a strategic opportunity in technology-driven industries and financial services. With global capital increasingly seeking diversified markets, India can position itself as a leader in digital trade, fintech, and data services.

1. Fintech and Digital Payments: India has seen rapid growth in digital financial services, and its payment infrastructure can be leveraged for global expansion.


2. IT and AI-Driven Manufacturing: Investing in AI and automation can help India leapfrog traditional manufacturing bottlenecks.


3. Supply Chain Digitalization: Indian firms can integrate blockchain and AI into supply chains to improve efficiency and attract multinational corporations.

A Pragmatic Strategy for India’s Economic Future

India stands at a crucial juncture where global trade realignments offer both risks and opportunities. The Trump-Modi relationship may have helped strengthen diplomatic ties, but economic strategy must go beyond political goodwill.

India needs to aggressively market itself as a “China Plus One” destination by improving ease of business, skill development, and infrastructure.

A pragmatic approach to the rupee should focus on stability rather than a rigid strong currency stance.

Strategic investments in digital infrastructure, fintech, and AI-driven manufacturing will be crucial in enhancing India’s competitiveness.


While India has made progress, much work remains. With the right policies, strategic vision, and execution, India can turn global disruptions into a lasting economic advantage.