1 Why are manufacturers relocating supply chains to India?
India’s appeal as a manufacturing base reflects a combination of external tariff pressures and improving trade and investment conditions.
US tariffs on Chinese goods peaked at 145% in 2025, while the tariff position for Indian exports has improved significantly following recent US–India trade developments. India and the EU also concluded free trade agreement negotiations in January 2026, widening prospective market access. India’s continued investment in manufacturing incentives further supports this shift, with a larger $6.6 billion electronics programme succeeding the previous $4.3 billion scheme in 2026.
2 What incentives support manufacturing in India?
India’s Foreign Trade Policy 2023 shifted the focus from incentives towards trade facilitation. Key instruments include:
Production Linked Incentive (PLI) – 4–6% cash incentive on incremental sales across 14 sectors; rates and remaining tenure vary by sector.
Remission of Duties and Taxes on Exported Products (RoDTEP) – rebates otherwise unrefunded embedded taxes as transferable duty credit scrips.
Export Promotion Capital Goods (EPCG) – duty-free capital goods against an export obligation of six times the duty saved.
Advance Authorisation (AA) – duty-free inputs against 15% minimum value addition.
Duty Drawback – refunds duty paid on inputs used in exported goods, through a standard All Industry Rate or an exporter-specific Brand Rate.
Manufacture and Other Operations in Warehouse Regulations (MOOWR) – a bonded manufacturing framework allowing eligible imported capital goods and inputs to be warehoused and used in manufacturing with customs duties deferred.
Special Economic Zones (SEZs) and Free Trade Warehousing Zones (FTWZs) – zone-based benefits, including duty deferral until goods enter the domestic market.
3 How can duty optimisation reduce landed costs?
Duty optimisation can involve selecting and, where permitted, combining available incentives to reduce upfront duty costs, improve cash flow, and support the intended manufacturing and export model. MOOWR, EPCG, AA, Duty Drawback, and RoDTEP can each provide benefits at different stages of the supply chain.
MOOWR, for example, allows manufacturers to defer customs duties across the manufacturing cycle:
Capital goods and inputs – imported without upfront payment of basic customs duty and, under the current framework, integrated goods and services tax (IGST).
Warehousing and production – imported goods can be warehoused and used for manufacturing without an export obligation or minimum investment.
Export or domestic sales – exports may be made on payment of IGST followed by a refund claim, or under a Letter of Undertaking without upfront IGST payment. Domestic clearance triggers applicable customs duties on imported inputs.
4 What should investors assess before relocating?
Key matters for investors to assess before relocating include:
Site selection – assess location, logistics, and available zone benefits. Minimum land requirements for certain electronics SEZs have fallen from 50 hectares to ten, while FTWZs can support duty-deferred storage and re-export.
Classification – confirm the applicable tariff classification, as errors risk lost concessions and additional duty, interest, and penalties. Furthermore, related-party imports require careful customs valuation.
Advance rulings – consider an advance ruling where classification, valuation, or origin remains uncertain.
Destination market – determine where finished goods will be sold, as this affects sourcing, rules of origin, and customs structuring, particularly where preferential market access is sought.
Duty structure – compare MOOWR, EPCG, AA, and available zone or incentive structures against cash flow and operational requirements, rather than headline benefits.
Successful relocation requires investors to align site selection, customs planning, available incentives, and supply-chain design with their long-term commercial objectives.
