India's China+1 Lessons Lie Within Its Own States: ECMS, PLI

The Lift Line

“They choose a State, and with it, the land, power supply, approvals, workers and suppliers.” (P.S. Srinivas and Anisha Sircar, The Hindu, on how global firms pick a location in India)

Why This Editorial Matters for Your Exam

In the news: in an op-ed in The Hindu on 15 October 2026, P.S. Srinivas and Anisha Sircar of the East Asian Institute, National University of Singapore, argue that India’s China+1 lessons lie at home, in Tamil Nadu and Karnataka, because global firms choose a State, not “India” as a whole. The column draws on 50 interviews with senior industry executives, policymakers and experts for the authors’ 2026 study.

This is a signed column: every argument below is the authors’, not the newspaper’s. It turns a familiar Mains theme, manufacturing and the China+1 opportunity, into a federal question: what does a State have to offer before a factory comes up there?

GS Paper 3: Indian economy and issues of growth, development and employment; changes in industrial policy and their effects on industrial growth; investment models. GS Paper 2: government policies and interventions; the roles of the Centre and the States in attracting investment. It also helps GS Paper 1 answers on the factors that decide the location of industries.

For Prelims: the Electronics Components Manufacturing Scheme (ECMS), the PLI scheme for large-scale electronics manufacturing, Press Note 3 (2020) and the State-wise FDI data of the Department for Promotion of Industry and Internal Trade (DPIIT).

Background and Context

The national schemes the column cites

The authors name three national levers. Here is what each one is, from the official record (background).

The ECMS approvals in numbers

Keep the two apart. “Eight States” describes the January 2026 tranche only; the scheme as a whole had approvals in 11 States by February 2026.

Where the FDI is recorded: DPIIT data

DPIIT maintains State-wise data only from October 2019, so these shares cover six and a half years, not one year.

Electronics: output and trade

• Production: Rs 1.9 lakh crore in 2014-15 to Rs 11.3 lakh crore in 2024-25 (PIB).
• Exports: Rs 38,000 crore to Rs 3.27 lakh crore over the same period; electronics was the third largest export category in 2024-25 (Economic Survey 2025-26).
• Trade in 2025-26: exports about $48.0 billion and imports about $116.17 billion, according to Commerce Ministry data as reported.
• Target: a USD 500 billion electronics ecosystem by 2030-31.

The Analysis

The authors’ argument runs from the unit of choice, to two State models, to the limits of national policy.

1. The State is the unit of choice. A veteran investor told the authors to look at specific States rather than at India. The national conversation, they write, runs the other way: India is told to study Vietnam’s industrial parks, Mexico’s nearshoring or Poland’s supply chains, while two instructive cases sit at home. Global firms do not pick India as one block. “They choose a State, and with it, the land, power supply, approvals, workers and suppliers.”

2. Tamil Nadu: an ecosystem decades in the making. The authors point to Sriperumbudur, near Chennai, where Foxconn employs tens of thousands of people assembling iPhones, and to Tata Electronics’ expansion at Hosur. The authors write that the ECMS approvals of January 2026 included Tamil Nadu projects for mobile-phone enclosure units by Yuzhan Technology, a Foxconn-linked firm, and Tata Electronics, and add a caution of their own: “These are commitments rather than finished factories”. None of this, they argue, began with China+1. Tamil Nadu, they write, invested in technical education, built an automobile and components industry around Chennai, and developed the suppliers, skills and administrative experience that new manufacturers look for. Its base took four or five decades to build, and no industrial-park announcement or round of subsidies can conjure that up.

3. Policy continuity is part of the offer. Investors told the authors that commitments must be honoured regardless of political turnover, a principle the authors see being tested after the change of government in Tamil Nadu in May 2026. The authors add that the State faces limits in land, power and labour, relies on migrant workers from the northern and central States, and is now trying to move from labour-intensive assembly towards more capital-intensive manufacturing and innovation-led exports.

4. Karnataka: a different path. In the authors’ account, Bengaluru began with software and engineering talent, not Chennai’s automobile base. The authors describe Foxconn’s campus at Devanahalli as a 300-acre site that aims to create around 50,000 jobs, and write that Tata Electronics took over Wistron’s iPhone plant at Narsapura in a deal agreed in late 2023 and has grown rapidly since. Two States, two routes, one lesson: the ecosystem came first.

5. National incentives help, but the factory has to land somewhere. One manufacturer explained the effect of tariffs and the PLI to the authors: “If the duty is 20 per cent and I get a PLI of 6 per cent, competitors cannot compete with me. This is working right here.” The 6% is the top of the LSEM PLI band (4% to 6%); the 20% duty is the manufacturer’s own figure. The authors also cite the ECMS tranche of January 2026 (22 proposals across eight States, a spread the Centre describes, the authors note, as geographically balanced) and the easing of Press Note 3 approved in March 2026. These measures help attract investment, they argue, but whether it takes root depends on what a State can offer. In their words, “The factory still has to come up somewhere.”

6. The FDI numbers mislead. Tamil Nadu ranks only fifth in DPIIT’s FDI equity data for October 2019 to March 2026, behind Maharashtra, Karnataka, Gujarat and Delhi. The authors’ explanation is that DPIIT records FDI against the State where the receiving company has its head office, not where the money is spent, so the figures say little about where factories are built.

7. Assembly is only the first step. An electronics executive told the authors that “very few components are manufactured in India” and that there is a “huge reliance on China for major parts and supply chains”. Backward linkages remain thin: another respondent’s firm had fallen well short of its sourcing target for India after two or three years, and, in a line the authors quote, value addition “is a four-to-five-year process”. The trade figures make the point: exports of about $48 billion in 2025-26 against imports of about $116 billion. One executive called the exports “assembled products with 20 per cent inputs in India”.

8. Concentration is a risk. One respondent said growth is “largely happening in the southern and western parts, not in the most populous States such as Bihar, Chhattisgarh and Jharkhand”. The authors’ conclusion: spreading subsidies thinly will not, by itself, recreate Tamil Nadu’s supplier networks or Karnataka’s technical labour pool. The questions worth asking are what these States did to prepare land, train workers, clear approvals, nurture suppliers and retain investors, which of those steps can be copied, and what rests on decades of accumulated capacity.

Data and Institutions Vault

Prelims-grade facts:

Schemes:

• ECMS: Cabinet approval 28 March 2025; notified 8 April 2025; turnover-linked, hybrid and capex incentives; not a PLI scheme.
• ECMS outlay: Rs 22,919 crore, raised to Rs 40,000 crore by the Union Budget 2026-27.
• ECMS targets: investment Rs 59,350 crore, production Rs 4,56,500 crore, 91,600 additional direct jobs.
• ECMS third tranche (2 January 2026): 22 proposals, Rs 41,863 crore projected investment, 33,791 direct jobs, eight States.
• ECMS cumulative (as of 3 February 2026): 46 applications in 11 States, Rs 54,567 crore.
• LSEM PLI: Cabinet 21 March 2020; notified 1 April 2020; 4% to 6% on incremental sales over base year 2019-20; tenure extended to FY 2025-26.
• PLI umbrella: Rs 1.97 lakh crore across 14 key sectors.

Investment rules and data:

• Press Note 3 (2020), 17 April 2020: investment from a country sharing a land border with India only through the Government route.
• Press Note 3 easing, approved by the Cabinet on 10 March 2026: up to 10% non-controlling beneficial ownership from land-border countries via the automatic route.
• Same approval: proposals in specified manufacturing sectors to be decided within 60 days.
• DPIIT State-wise FDI equity, October 2019 to March 2026: Maharashtra 31.35%, Karnataka 20.66%, Gujarat 14.82%, Delhi 12.88%, Tamil Nadu fifth (about 6%).
• DPIIT State data: kept only from October 2019, so these shares are cumulative.

Electronics:

• 2025-26 trade: exports about $48.0 billion, imports about $116.17 billion.
• Production: Rs 1.9 lakh crore (2014-15) to Rs 11.3 lakh crore (2024-25); target a USD 500 billion ecosystem by 2030-31.

⚠️ Watch the trap: the ECMS is not a PLI scheme; it uses turnover-linked, hybrid and capex incentives. “Eight States” is the January 2026 tranche only; by February 2026 approvals covered 11 States. The DPIIT shares are cumulative from October 2019, not one year’s inflow. The LSEM PLI band is 4% to 6% on incremental sales. And ECMS approvals are commitments, not finished factories.

The Debate

The authors’ case. Investment is local. A firm needs land, power, approvals, workers and suppliers in one place, and those come from a State’s long preparation, not from a national announcement. Tamil Nadu’s four or five decades of technical education and automobile manufacturing, and Karnataka’s engineering talent, explain why the factories went there. National schemes work best where that groundwork already exists.

The other side. National levers do real work. The manufacturer the authors quote credits the tariff and the PLI, both set in New Delhi, for his edge over competitors. The ECMS has approvals in 11 States, which shows a national scheme can widen the map. Clustering can also be efficient: suppliers follow assemblers, so concentration in a few hubs may be the price of scale in the early years. And a State with no base cannot wait four or five decades for an ecosystem to grow by itself.

The balanced verdict. Both layers matter, and they are complements, not rivals. The Centre sets incentives, tariffs and investment rules; the States make a site ready. For lagging States the lesson is to copy the preparation (land, power, skills, approvals, supplier development), not merely to bid with subsidies. This is competitive federalism with a cooperative backbone.

How to Think About This

Use a two-layer lens for any question on manufacturing and investment:

1. The national layer: incentives (PLI, ECMS), trade policy (tariffs) and investment rules (Press Note 3). These decide whether India is attractive.
2. The State layer: land, power supply, approvals, workers and suppliers. These decide where in India the factory comes up.
3. Three distinctions to keep: a commitment is not a factory; assembly is not value addition; where FDI is recorded is not where a factory stands.
4. The test for any policy: does it build a State’s readiness, or only spread subsidies thinly?

Diagram-in-Words

How the authors connect national incentives, State readiness and the gaps that remain.

Takeaway Box

• Core idea: global firms choose a State, with its land, power, approvals, workers and suppliers; India’s China+1 lessons lie in Tamil Nadu and Karnataka.
• National levers: LSEM PLI (4% to 6% on incremental sales), ECMS (Rs 22,919 crore, raised to Rs 40,000 crore), the Press Note 3 easing approved in March 2026.
• The gaps: thin component base (imports about $116 billion against exports about $48 billion in 2025-26) and concentration in the south and west.
• Mains use: GS3 industrial policy and manufacturing; GS2 Centre-State roles and competitive federalism; GS1 location of industries.

Revision Flowchart

Sources: The Hindu, op-ed by P.S. Srinivas and Anisha Sircar, “India’s China+1 lessons lie within its own States”, 15 October 2026; Ministry of Electronics and Information Technology, ECMS approvals (January 2026); PIB, Cabinet approval of the ECMS (2025) and PIB backgrounder on the ECMS, Union Budget 2026-27; PIB, Cabinet approval of the PLI for Large Scale Electronics Manufacturing (2020) and the MeitY notification extending its tenure (2021); PIB, Cabinet approval of changes to Press Note 3 (2026); DPIIT, FDI Quarterly Fact Sheet updated up to March 2026; Commerce Ministry data on electronics trade, 2025-26, as reported. Related: India Semiconductor Mission 2.0 and the looming crisis of world unemployment.

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