India’s manufacturing acceleration
India’s GDP grew 8.2% in the second quarter of fiscal year 2026. This expansion marks a six-quarter high. Manufacturing grew 9.1% year on year. This figure outpaces the 2.2% growth from the same period last year. The secondary sector, which encompasses manufacturing and electricity, grew 8.1% annually. This surpasses the 4.0% growth recorded in the same period last fiscal year. Industrial output strengthened as the Index of Industrial Production rose 4.1% on average during the September quarter. This follows a 2.7% rise the year before. Private consumer spending, which makes up 57% of GDP, rose 7.9% year on year. Agriculture grew 3.5% in the second quarter. The mining sector contracted 0.04%.
New Delhi’s trade realignment
New Delhi shifted focus to China after U.S. tariffs hit 50%.
India’s exports to China rose 67% in December to $2 billion. Shipments to the U.S. dropped 1.8% to $6.8 billion. This drop followed steep tariffs from President Donald Trump. India’s trade with China reached $110.20 billion between April and December 2025. This value exceeded the $105.31 billion trade with the U.S. in the same period. India holds an $81.7 billion trade deficit with Beijing. It maintains a $26 billion trade surplus with Washington. India’s exports to mainland China rose nearly 37% during the first nine months of the fiscal year ending March 2026. Shipments to Hong Kong jumped more than 25% in that period. Relations between the two nations have thawed since Prime Minister Narendra Modi and Chinese President Xi Jinping met at the Shanghai Cooperation Organization summit in September. China acts as India’s largest goods trading partner. Foreign Secretary Vikram Misri met Vice Minister Sun Haiyan in New Delhi to discuss stabilizing bilateral ties. India’s trade secretary Rajesh Agrawal said the country is near a deal with Washington.
Vietnam’s industrial momentum
Vietnam’s GDP grew 8.4% in the second quarter of 2026. This follows 7.9% growth in the previous quarter. The industrial sector grew 10.5% year on year. This exceeds the 9.0% growth recorded in the first quarter. The agricultural sector grew 4.1% compared to 3.7% in the first quarter. FDI reached $13 billion in the first half of 2026. Samsung, Amkor, and LG Display drove these capacity build-outs. Vietnam is on track to record the fastest growth rate in ASEAN. The government targets 11.9% growth in the second half of the year. This aims to reach a 10% growth target for 2026. Vietnam’s GDP grew.
The shift in Asian investment flows
Total newly registered FDI into Vietnam reached $24.8 billion in the first five months of 2026. This represents a 34.9% increase year on year. Singapore led with $8.5 billion. South Korea followed with $6.7 billion. Mainland China ranked third in total registered capital. Indonesia recorded $1.74 billion in registered capital. These five economies account for 85% of total registered FDI. Large projects like the $4.9 billion Can Gio International Transshipment Port and the $2.2 billion GS Nha Be Metrocity project shaped the investment environment. The $2.1 billion AI data center in Tan Phu Industrial Park also contributed to these totals. Thai Nguyen province led FDI attraction with $7.6 billion.
Export product composition
Electronics exports dominate the Vietnamese economy.
Electrical machinery and equipment (HS 85) accounts for 40% to 50% of Vietnam’s top exports. In the first quarter of 2026, shipments of electronic products and semiconductors increased by over 40% year on year. Phone exports rose 23.1% in that period. The U.S. buys 32% of Vietnam’s exports. China buys 15%. Machinery (HS 84) grew 18.2% in the first quarter of 2026. Vietnam is the world’s second-largest coffee producer. It is the largest producer of Robusta beans. Footwear remains a major category. Vietnam produces shoes for Nike, Adidas, and Puma. Furniture (HS 94) exports benefit from the EVFTA. The U.S. is the largest market for Vietnamese furniture. The industry uses the substantial timber and wood-processing sector in Vietnam.
| Metric | India | Vietnam |
|---|---|---|
| Manufacturing Labor Cost | $2-3 per hour | $294-347 per month |
| FDI (Jan-May 2026) | Not specified | $24.8 billion |
| Top Export Market | Not specified | USA (32%) |
| Industrial Land Cost | $30-60 per m2 | $177-200 per m2 |
| Trade Agreement Access | Not specified | 16 active FTAs |
Comparative costs and incentives
India’s PLI scheme allocates INR 9,000 crore to electronics and IT hardware for 2025-26. This is an increase from INR 5,777 crore in 2024-25. The program covers 14 sectors. Vietnam’s new Corporate Income Tax Law, effective October 2025, offers a 10% preferential rate for 15 years in AI and semiconductors. This applies to projects in high-tech parks. In India, labor costs in the organized sector average $2 to $3 per hour. Vietnam’s factory workers earn VND 7.7 to 8.4 million per month. Social insurance in Vietnam adds 22% to base costs. India’s social security adds 17% to 20% to base costs. India’s labor costs remain 15% to 25% lower than Vietnam at comparable skill levels.
Infrastructure and land realities
Vietnam has many industrial zones. Northern zones have occupancy rates above 80%. Southern zones have occupancy rates between 89% and 92%. Land costs in northern Vietnam reach $177 to $200 per square meter. India’s Tier 2 cities like Pune or Coimbatore offer land at $30 to $60 per square meter. India’s National Infrastructure Pipeline involves INR 111 lakh crore. Dedicated freight corridors and Sagarmala port modernization support growth. You should prioritize India if you want to reach 1.4 billion consumers. Will the U.S. Section 301 investigation result in higher tariffs for Vietnam?
Direct market recommendations
Vietnam’s export story changed as it moved into electronics. The country is one of the largest furniture exporters. It is also a top three apparel exporter. The US market accounts for 32% of Vietnam’s exports. China remains a vital partner, acting as both a supplier and a second-largest buyer. Because the U.S. applied a new 12.5% levy on Chinese products in late July, manufacturers rushed to ship goods ahead of potential new tariffs, which drove Chinese exports up 23.9% to a total of $397.85 billion. India’s manufacturing grew. China’s exports rose. Vietnam’s GDP grew. India remains the best option for domestic market access. Vietnam provides a better platform for pure export operations.