For an international company looking at India today, the most useful question is no longer simply, “Should we invest in India?”
The more relevant question is:
“Where does India make strategic sense for us?”
India has become increasingly relevant to global investors because of its scale, expanding manufacturing capabilities, supply-chain diversification and growing integration with international markets. At the same time, Vietnam and several other markets remain credible alternatives. Within India itself, the difference between one state, industrial cluster or site and another can be substantial.
So, India should not be approached as a country that needs to be “sold” to an investor. It should be approached as an investment proposition that needs to be tested.
The InsightKraft view can be summarised in three points
First, India has become strategically more relevant to international companies, particularly as global supply chains are being redesigned.
Second, India isn’t automatically the most competitive option; countries such as Vietnam can be highly attractive depending on the business model.
Third, once India is shortlisted, the investment case is ultimately decided by productivity, sector economics, location, infrastructure, suppliers, market access and execution.
The real question isn’t “Why India?”
It is:
Is India right for this particular investor, and if so, where and under what operating model?
India has become strategically more relevant
There are several structural reasons why India is receiving increasing attention from international companies.
The first is supply-chain diversification. For years, companies discussed the need to reduce excessive dependence on a single manufacturing geography. “China+1” became a familiar expression in boardrooms, but for many companies it is no longer just a strategy. It is becoming an operational question: where should the next factory, sourcing operation or supplier base actually be located?
The second factor is scale. India offers something that many alternative manufacturing locations cannot offer at the same level: a very large domestic market alongside a very large labour pool and an increasingly sophisticated industrial and engineering base.
The third factor is the development of India’s manufacturing and technology ecosystem. Investment interest is expanding across electronics, automotive, pharmaceuticals, renewable energy, semiconductors and advanced manufacturing.
India’s gross FDI inflows reached around $94.5 billion in FY2025-26. That is clearly significant. Though FDI inflows tell us that international capital is coming into India, they don’t tell us whether the economics of India work for a particular company.
That distinction is important. A foreign investor would ask, “How much FDI is India attracting?” The more useful questions are: where is that capital going, which sectors are attracting it, what type of companies are investing, and does the underlying investment logic apply to our business?
India isn’t just a consumer-market story
India is often presented primarily as a huge consumer market, and there is good reason for that. The size and long-term potential of the domestic market are important attractions.
But from an investment perspective, there are actually several different propositions.
A company might want to sell to India. It might want to manufacture in India for the Indian market. Or it might want to manufacture in India for global markets.
These are very different investment cases.
A company could conclude that India is an attractive consumer market but still decide to manufacture somewhere else. Another company might have relatively limited interest in the domestic consumer opportunity but find India attractive as part of its global manufacturing or sourcing strategy.
So before discussing incentives, states or industrial parks, the more fundamental question is:
What role should India play in the company’s global value chain?
That question determines much of what follows — the appropriate sector, the required skills, the preferred location, the importance of logistics, the relevance of trade agreements and even whether India should primarily be compared with Vietnam, Mexico, Eastern Europe or another market.
India versus Vietnam: the comparison matters
If an international company is considering a China+1 strategy, Vietnam will very often appear on the shortlist.
It would therefore be misleading to present the discussion as India versus Vietnam — who wins?
Vietnam has built a strong position in export-oriented manufacturing. Its manufacturing sector is deeply integrated into Asian and global supply chains, particularly in electronics and other export industries. The World Bank continues to identify manufacturing and exports as important drivers of Vietnam’s economy, while also highlighting the need to deepen domestic supplier linkages and improve productivity.
India offers a somewhat different proposition.
| Selection Criteria | India | Vietnam |
|---|---|---|
| Domestic market | Very large | Smaller |
| Labour pool | Very large | Smaller |
| Export manufacturing | Growing | Highly established |
| Electronics | Developing rapidly | Established ecosystem |
| Automotive | Large ecosystem | Smaller domestic market |
| Pharmaceuticals | Strong capability | More limited |
| Engineering base | Broad | Strong in selected areas |
| Supply-chain integration | Developing | Deep Asian integration |
| Investment proposition | Scale + market + manufacturing | Focused export manufacturing |
Vietnam can be particularly compelling for a company looking for an export-oriented manufacturing location that is already deeply integrated into Asian supply chains.
India becomes particularly interesting where a company wants to combine manufacturing with a very large domestic market, a large talent pool and broader industrial capabilities.
The point is not that one country is universally better than the other. The relevant question is:
Which country better fits the business model?
A company that primarily needs proximity to existing East Asian suppliers and wants to build a focused export manufacturing operation may find Vietnam highly attractive. A company looking for a combination of domestic demand, manufacturing, engineering capability and potential global exports may find India’s proposition more compelling.
Country selection should therefore follow the business model, rather than the other way around.
The productivity test
There is another issue that deserves much more attention when comparing India with Vietnam or other emerging markets: labour productivity.
It is easy to look at wages and conclude that a country is a low-cost manufacturing location. But lower wages don’t necessarily mean lower production costs.
Let’s imagine two factories. One has lower wages, but its workers produce considerably less output because the operation is less automated, supplier quality is inconsistent, equipment downtime is higher and processes are less efficient. Another factory may have higher wages but much better automation, management systems and supplier productivity. The second factory could ultimately have the better economics.
This is why investors should look beyond the wage rate and ask:
What output can we generate per unit of labour cost?
The OECD uses GDP per hour worked as its standard measure of labour productivity. India isn’t an OECD member, so it shouldn’t be presented as having an OECD country ranking. However, the OECD framework is useful because productivity isn’t simply about workers. It reflects how labour is combined with capital, technology, intermediate inputs, infrastructure, organisation and scale.
That distinction is particularly relevant to India.
India can offer a very large labour pool and relatively competitive labour costs. The investment case becomes stronger when companies can combine that labour pool with automation, technology, training, better management systems and supplier development.
India’s labour advantage therefore shouldn’t simply be described as cheap labour. A more useful way to think about it is as a large labour pool combined with the potential to improve productivity through capital, technology and management.
For an investor, the relevant question is not simply:
“How much does labour cost in India?”
It is:
“What productivity can our particular operating model achieve in India?”
Where is the opportunity?
If India passes the country-level test, the next question is the sector.
Several areas deserve particular attention: semiconductors and electronics, renewable energy, electric vehicles and automotive, pharmaceuticals, and advanced manufacturing.
These sectors are interesting for different reasons. Semiconductors and electronics are relevant because global companies are looking to diversify supply chains and because India is developing capabilities across several parts of the electronics value chain. Renewable energy represents a large investment requirement as India expands its energy infrastructure and manufacturing capabilities. Electric vehicles combine a rapidly developing market with an established automotive manufacturing ecosystem. Pharmaceuticals build on one of India’s strongest industrial capabilities, while also offering opportunities to move further into higher-value products. Advanced manufacturing is broader, but potentially important for companies looking to connect India’s engineering capabilities with global production networks.
However, these should not be treated as automatic investment recommendations.
The fact that a sector is growing doesn’t mean that it is right for every investor.
The more useful question is:
Where does India’s capability complement the company’s existing global value chain?
Semiconductors: an example of opportunity and execution
Semiconductors are particularly useful for understanding the direction of India’s industrial opportunity.
Investment in the India semiconductor doesn’t mean only the investment in advanced chip fabrication. The semiconductor value chain is much broader. It includes design, fabrication, packaging, testing, substrates, components and electronics manufacturing, along with a large supporting ecosystem.
India is developing capabilities across several of these areas, and some of the investments taking shape illustrate the direction of travel.
Micron’s facility in Sanand, Gujarat, is an important example. The project represents the entry of a major global semiconductor company into India’s semiconductor manufacturing ecosystem and focuses on assembly and testing rather than attempting to reproduce the entire fabrication value chain.
Kaynes Semicon is another important example. Its semiconductor facility in Sanand represents India’s move into outsourced semiconductor assembly and testing. This is significant because it shows the ecosystem beginning to move beyond policy announcements toward actual manufacturing capability.
There is also the CG Power–Renesas partnership, which is developing semiconductor packaging and testing capabilities in Gujarat. The importance of this type of project extends beyond the individual facility: it demonstrates how Indian companies can work with established international semiconductor players to develop capabilities that connect India to global automotive and industrial supply chains.
Intel’s proposed investment in Odisha as an example of how the semiconductor ecosystem could expand beyond Gujarat and into emerging locations. From an investor’s perspective, this is interesting not only because of the size of the proposed investment, but because it raises a broader question: can an emerging industrial location attract a major technology investment before the full supplier ecosystem is already in place?
But this is precisely where investors need to separate the headline from the underlying reality.
An announced project isn’t necessarily an operational facility. An MoU isn’t the same as completed investment. And government support isn’t the same thing as a mature industrial ecosystem.
For an investor, the practical questions are more important. Is the infrastructure actually available? Can the required talent be recruited? Are the suppliers available? Is reliable power available? Is sufficient water available? Can the finished product reach customers competitively?
Due diligence tells us whether it is investable.
India is not one investment location
Once the sector has been identified, the analysis changes again.
We’re no longer really looking at India. We’re looking at a particular state, industrial cluster and eventually a site.
Let’s consider a few examples.
Gujarat has developed a strong industrial base and is emerging as an important semiconductor location. The concentration of semiconductor projects around Sanand and other industrial locations could help build an ecosystem that becomes increasingly valuable over time.
Tamil Nadu has a deep automotive and electronics ecosystem, supported by a large network of suppliers. For a company that values supplier depth and established manufacturing capability, that ecosystem may be more important than an attractive incentive package on its own.
Maharashtra offers a strong business and financial ecosystem and a major industrial base. At the same time, land availability and cost can become important considerations, particularly for very large greenfield projects.
Odisha offers a different proposition. Large land parcels and an emerging industrial ecosystem can make it attractive for major greenfield investments, although an investor may need to consider how quickly the supplier and talent ecosystem can develop around the project.
Telangana has strong capabilities in pharmaceuticals, biotechnology and technology. At the same time, some industries have very specific infrastructure requirements, particularly around water, and those requirements need to be evaluated at the site level.
So if an investor asks:
Which is the best state in India?
The answer shouldn’t be immediate.
The better question is:
“Best for what?”
The best state for automotive may not be the best state for semiconductors. The best location for pharmaceuticals may not be the best location for export manufacturing. And the best location for a large greenfield project may not be the best location for a company that depends heavily on an established supplier ecosystem.
This is why location selection needs to move beyond state-level rankings and into the actual operating requirements of the project.
Incentives aren’t enough
This is an area where investors need to look beyond the investment brochure.
A state may offer an attractive incentive package, but incentives don’t solve every operating problem.
A serious location assessment should examine land first: is the required industrial land actually available, legally usable and capable of supporting future expansion? Power is equally important. It is not enough for industrial power to be promised; the question is whether reliable capacity will be available when the facility needs it.
Water can become a critical constraint for industries with intensive requirements. Logistics determines how efficiently raw materials reach the facility and finished products reach ports and customers. Supplier depth determines whether the company can plug into an existing ecosystem or needs to build one from scratch. Talent determines whether the operation can recruit and retain the technical and managerial skills it requires.
And then there is government execution.
How quickly are approvals actually delivered? How effectively does the local administration coordinate infrastructure requirements? How stable are the relevant institutional relationships?
This leads to a simple principle:
Incentives can improve the economics. They cannot fix a weak operating ecosystem.
Export economics and market access
For an export-oriented investment, the factory is only one part of the equation.
The complete business case also depends on market access.
Production economics include labour, productivity, energy and materials. The supply chain includes local suppliers, imports and lead times. Logistics determines the cost and reliability of moving goods from the factory to the port and ultimately to the customer. And the trade environment determines tariffs, standards, customs procedures and rules of origin.
This is becoming increasingly relevant for India.
The India–UK CETA entered into force on 15 July 2026, creating a new framework for bilateral trade. For companies considering India as a production base for the UK market, this can potentially improve the export economics.
The EU–India FTA negotiations were concluded in January 2026, although the agreement still needs to go through the relevant legal and internal procedures before becoming binding.
These developments can strengthen India’s position as an export platform, but they don’t automatically make every product competitive.
The real questions remain: what is the product, what tariff applies, what are the rules of origin, what standards must be met, and what are the logistics costs?
A trade agreement can improve an investment case.
It doesn’t automatically create a competitive investment case.
What can go wrong?
A balanced investment assessment also needs to look at the downside.
Infrastructure can become a constraint. Supplier capability may be weaker than expected. Imported components can create hidden dependencies. Skilled labour may not be available in the required quantity. Productivity may take longer to reach the expected level. Approvals may take longer than planned. Contractual or regulatory issues can create unexpected delays.
What makes these risks particularly important is that many of them don’t appear in the initial investment proposal. They emerge later — during site selection, construction, hiring, supplier onboarding and, most importantly, production ramp-up.
This is why a good investment assessment should ask two questions:
What assumptions does the business case depend upon?
And:
Which of those assumptions can be validated before we invest?
That is a much more useful approach than simply compiling a list of incentives, market-size statistics and government announcements.
A practical investment decision framework
The InsightKraft approach is to assess an investment opportunity through six connected dimensions.
The first is strategic fit: does India actually support the company’s global strategy?
The second is country competitiveness: how does India compare with Vietnam and other relevant alternatives?
The third is sector attractiveness: where does India’s capability fit within the company’s value chain?
The fourth is productivity and economics: can the operation achieve competitive unit economics?
The fifth is location and ecosystem: can the chosen state and industrial cluster support the business?
The sixth is risk: what could undermine the investment case?
These questions create a progressive decision process. If India doesn’t pass the country-level test, there may be little reason to go further. If India passes the country test but the sector doesn’t fit, the analysis may stop there. If the sector is attractive but the preferred location cannot provide the required infrastructure or supplier ecosystem, the project may need to move elsewhere.
This is why the investment process can be viewed as:
Country → Sector → State → Industrial cluster → Site → Investment decision.
The further down this chain the investor goes, the more important ground-level validation becomes.
Where InsightKraft fits
InsightKraft approaches India market and investment decisions from the perspective of the investor rather than from a predetermined destination.
The starting point is not a particular Indian state, industrial park or business partner, but the company’s strategic objective. Is the company looking for access to the Indian market, a manufacturing base, a sourcing location, an export platform, a technology partner or a joint venture? Once that objective is clear, the relevant countries can be compared and India can be assessed against the alternatives.
If India remains attractive, the analysis then moves progressively deeper — from country to sector, from sector to state, and from state to industrial cluster and potential site. At each stage, the focus is on testing the assumptions behind the investment case: the availability of suppliers and talent, infrastructure, logistics, productivity, market access, government execution and potential risks.
The objective is not simply to identify an opportunity, but to understand whether that opportunity can translate into a commercially viable investment.
This is where InsightKraft sees its role: turning cross-border complexity into strategic clarity. There is no shortage of information available to international companies considering India. The challenge is determining which information actually matters, which assumptions deserve to be challenged, which opportunities warrant deeper investigation and what needs to be validated before significant capital is committed.
The real question isn’t “Why India?”
India is clearly becoming more relevant to international investors, but that doesn’t mean it is automatically the right destination. Vietnam remains a strong alternative for export-oriented manufacturing, while other emerging and established markets continue to compete for international capital. For that reason, the starting point should not be a predetermined conclusion that India is the answer, but a structured comparison of where the investor can achieve the best strategic and commercial outcome.
The better question, therefore, is “Is India right for us?” If the answer is yes, the next questions become equally important: which sector offers the strongest fit, which state and industrial cluster provide the right operating environment, what productivity can realistically be achieved, which markets can be served competitively, and what risks need to be addressed before capital is committed?
That is the difference between an India opportunity and an India investment case. An opportunity may look attractive from a distance; an investment case has to continue making sense after its assumptions have been tested against competing locations, operating realities and execution risks.
InsightKraft’s approach is to start with the investor’s requirements and work backwards — objectively assessing the country, sector, location, ecosystem and risks before moving toward an investment decision.
