India vs Thailand for Manufacturing

India and Thailand are the two most actively competing destinations for manufacturing FDI in Asia outside of China and Vietnam. India offers a 22% concessional corporate tax rate for new manufacturing companies under Section 115BAA (effective ~25.17%) -- a lower 15% rate under Section 115BAB applied only to manufacturers that commenced production by 31 March 2024 and is no longer available to new entrants -- plus PLI incentives across 14 sectors, and the world's largest domestic consumer market at 1.44 billion people. Thailand counters with an established automotive and electronics supply chain, up to 8 years of corporate income tax exemption through the BOI, and duty-free access to 15 countries via ASEAN and RCEP.

The bottom line: India is the better choice for companies targeting the Indian domestic market or qualifying for PLI incentives. Thailand wins for export-oriented manufacturing serving ASEAN, Japan, and global automotive OEMs.

This comparison uses 2025-2026 data from government investment agencies, PwC tax summaries, and industry reports to give foreign manufacturers specific numbers for making this decision.

Quick Comparison Table

Manufacturing Incentive Schemes: PLI vs BOI

Both countries have built aggressive incentive frameworks to attract manufacturing FDI, but they work in fundamentally different ways.

India's PLI (Production Linked Incentive) Scheme

Launched in 2020 and expanded to 14 sectors, the PLI scheme provides cash incentives of 4-6% on incremental sales over a base year for 5-6 years. By March 2025, the scheme had attracted INR 1.76 lakh crore ($21 billion) in realized investment across 806 approved applications, generating INR 18.7 lakh crore ($222 billion) in incremental production and creating 12.6 lakh (1.26 million) direct and indirect jobs.

Key PLI sectors relevant to manufacturing:

• Large-scale electronics (mobile phones): 4-6% incentive on incremental sales; attracted Apple, Samsung, Foxconn to India
• Automobiles and auto components: Sales-based incentive of 13-18% for Advanced Automotive Technology products
• Pharmaceuticals: 3-10% depending on product category
• Textiles (MMF, technical textiles): Up to 15% in year 1, tapering to 11% by year 3
• Specialty steel: 4-12% on incremental production

The PLI is performance-based — you earn the incentive only after hitting production targets. Combined with the 22% concessional corporate tax rate under Section 115BAA of the Income Tax Act (effective ~25.17%), PLI-driven cash incentives can still bring India's effective manufacturing tax burden well below headline rates for high-growth operations. Note that the lower 15% rate under Section 115BAB applied only to manufacturers that commenced production by 31 March 2024 and is no longer available to new entrants.

Thailand's BOI (Board of Investment) Incentives

Thailand's BOI offers a different model: upfront tax holidays rather than performance-linked cash incentives. For BOI-promoted projects in priority sectors, the benefits include:

• Corporate income tax exemption: Up to 8 years of 100% CIT exemption, with possible extension for projects in targeted industries or special development zones
• Import duty exemption: Waiver on import duties for machinery, equipment, and raw materials used in production
• 100% foreign ownership: BOI promotion overrides the Foreign Business Act's ownership restrictions, allowing full foreign ownership in promoted projects
• Land ownership: BOI-promoted companies can own land for approved business use
• Work permit facilitation: Streamlined visa and work permit process for foreign experts and technicians

In 2024, Thailand's BOI received 3,100 new project applications worth approximately $32 billion — the highest in over a decade. For SMEs, the BOI extended CIT exemption from 3 to 5 years and increased the exemption rate from 50% to 100% of investment value in 2025.

Incentive Comparison Table

Labour Costs and Workforce Quality

India has a significant labour cost advantage. The national floor minimum wage is INR 178/day (~$2.10), though state-level minimum wages are higher — Delhi sets INR 710/day (INR 18,456/month) for unskilled workers with effect from 1 April 2025. Factory floor workers in manufacturing hubs like Tamil Nadu, Gujarat, and Maharashtra earn $1.50-2.50/hour for unskilled roles and $3-5/hour for skilled positions. Employer statutory contributions (EPF at 12%, ESI, gratuity) add 15-20% above gross salary.

Thailand's minimum wage ranges from THB 337-400/day ($9.70-11.55) across provinces — roughly 4-5 times India's national floor. Manufacturing wages average $5-6/hour for skilled workers in industrial zones. Thailand's workforce, however, is more mature in precision manufacturing: the country's automotive workers have decades of experience supplying Toyota, Honda, and other Japanese OEMs who established factories in the 1960s-80s.

India is closing this skills gap rapidly. The PLI scheme has generated 1.26 million manufacturing jobs since 2020, and electronics manufacturing — led by Apple iPhone assembly through Foxconn, Wistron, and Pegatron — has created a new pool of precision assembly workers, particularly in Tamil Nadu and Karnataka.

Supply Chain and Infrastructure

Thailand's mature supply chain is its crown jewel. The country is the largest automobile producer in Southeast Asia -- roughly 1.46 million vehicles in 2024, ahead of Indonesia -- with automotive production accounting for 11% of industrial output. Japanese, European, and American OEMs have built dense supplier networks across the Eastern Economic Corridor (EEC), centered around the Laem Chabang deep-sea port. For automotive and electronics manufacturers, this ecosystem means shorter lead times, readily available Tier 2-3 suppliers, and established logistics networks.

India's logistics infrastructure is improving but still carries higher friction costs. Logistics costs at 13-14% of GDP compare unfavourably with Thailand's ~12% and global best practice of 8-10%. However, India's PM Gati Shakti master plan, dedicated freight corridors (Eastern and Western), and Sagarmala port modernization program are structurally reducing these costs. India's average import tariff of ~18% on components is a meaningful disadvantage for manufacturers who import raw materials — Thailand's ASEAN membership means 0% tariff on most inputs from ASEAN partners.

Which Should You Choose?

Choose India if:

• Your primary customer base is in India — the 1.44-billion domestic market justifies localized manufacturing
• You qualify for PLI incentives in one of 14 covered sectors, where 4-18% cash incentives on incremental sales dramatically reduce effective costs
• Labour cost is a primary driver — India's $1.50-2.50/hour unskilled manufacturing cost is 4-5x cheaper than Thailand
• You are setting up a new manufacturing entity and want India's 22% concessional corporate tax rate under Section 115BAA (effective ~25.17%) -- the lower 15% Section 115BAB rate closed to new manufacturers after 31 March 2024 and is no longer available
• You need a large English-speaking technical and managerial workforce
• You are in pharmaceuticals, chemicals, or textiles where India has established raw material supply chains

Choose Thailand if:

• You are building for ASEAN and RCEP export markets — 0% intra-ASEAN tariffs and preferential access to China, Japan, South Korea, and Australia
• You need an established automotive or electronics supply chain with mature Tier 1-3 supplier networks
• You prefer upfront tax certainty — BOI's 8-year CIT exemption is a straightforward tax holiday vs PLI's performance-contingent incentives
• You are in the EV sector — Thailand's BOI offers 8-year CIT exemption with 100% foreign ownership and a national 30/30 target
• Your manufacturing requires precision assembly with experienced workers, particularly for Japanese OEM supply chains
• You want full foreign ownership without sector-specific restrictions (BOI promotion overrides the Foreign Business Act)

Common Mistakes

• Comparing headline tax rates without factoring incentives. India's 22% concessional rate (effective ~25.17% under Section 115BAA) sounds higher than Thailand's 20%, but PLI incentives of 4-18% on incremental sales can still bring India's effective tax burden well below headline rates. Note that the lower 15% Section 115BAB rate applied only to manufacturers that commenced production by 31 March 2024 and is no longer available to new entrants.
• Assuming BOI promotion is automatic. Thailand's BOI has tightened requirements since 2024, particularly for automotive, electronics, and light manufacturing. Projects must demonstrate genuine transformation of raw materials (minimum HS code change) to qualify — assembly-only operations are increasingly rejected.
• Ignoring Thailand's Foreign Business Act when not BOI-promoted. Without BOI promotion, the Foreign Business Act restricts foreign ownership in List 1 (prohibited), List 2 (Cabinet approval + 51% Thai ownership), and List 3 (Foreign Business License required) activities. Penalties include fines up to THB 1 million, daily penalties of THB 10,000, and imprisonment up to 3 years.
• Underestimating India's import tariff impact on export-oriented manufacturing. India's average 18% import tariff on components means a manufacturer importing $5 million in parts pays $900,000 in duties. Thailand-based ASEAN manufacturers importing the same parts from Vietnam or Malaysia pay $0. This gap alone can negate India's labour cost advantage for export businesses.
• Setting up in India for ASEAN market access. India is not a member of ASEAN or RCEP. Indian-origin goods can claim preferential duty under the ASEAN-India Trade in Goods Agreement (AITIGA, in force 1 January 2010), but only where the product line was actually conceded and the goods meet AITIGA rules of origin -- autos and many auto-component and electronics lines were kept on ASEAN members' exclusion and sensitive lists and still face MFN tariffs of 5-15%. Goods made in Thailand move duty-free within ASEAN across the board, so if your target market is Southeast Asia, manufacturing in Thailand is usually structurally more cost-effective.

Practical Example

NovaTech Inc., a US auto components manufacturer, plans to invest $10 million in a factory producing EV battery enclosures. Target markets: India (40%), ASEAN (35%), Japan/Korea (25%). Annual revenue target: $15 million by year 3.

India path: NovaTech incorporates a wholly owned subsidiary via SPICe+ in Tamil Nadu. As a new manufacturer setting up today, NovaTech no longer qualifies for the closed 15% Section 115BAB rate and instead pays the 22% concessional rate under Section 115BAA (effective ~25.17%). On $3 million annual profit, tax is approximately $755,100. PLI incentive for auto components: 13% on incremental sales of $15 million = $1.95 million. Labour cost for 100 workers at $2.50/hour average = $520,000/year. ASEAN exports ($5.25 million): battery enclosures fall outside the lines conceded under the ASEAN-India FTA in most ASEAN markets, so they face 5-10% MFN tariffs = $262,500-525,000 tariff cost (AITIGA preference applies only to conceded lines meeting its rules of origin). Japan/Korea exports ($3.75 million) face varying MFN rates.

Thailand path: NovaTech sets up a BOI-promoted factory in the EEC near Laem Chabang. BOI provides 8-year CIT exemption — tax on $3 million profit: $0 for 8 years (saving $600,000/year vs Thailand's standard 20% rate). Import duty waiver on machinery and materials. Labour cost for 100 workers at $5.50/hour average = $1,144,000/year — more than double India. But ASEAN exports carry 0% tariff (saving $262,500-525,000/year), and RCEP provides preferential access to Japan and Korea.

Year 3 comparison:

Result: For NovaTech's split-market strategy, the optimal structure is dual manufacturing — an Indian subsidiary for domestic sales plus PLI incentives, and a Thai BOI-promoted entity for ASEAN/RCEP exports. Total annual savings from dual structure vs single-country: approximately $1.2-1.5 million.

Key Takeaways

• India's 22% concessional manufacturing tax rate under Section 115BAA (effective ~25.17%) is now higher than Thailand's 20% standard rate for new entrants, since the lower 15% Section 115BAB rate closed to new manufacturers after 31 March 2024; Thailand's BOI tax holiday (up to 8 years at 0%) remains the better deal for the first decade of operations.
• PLI incentives of 4-18% on incremental sales are unique to India and can generate millions in cash benefits, but they are performance-contingent and sector-specific.
• Thailand's daily minimum wage ($9.70-11.55) is 4-5x higher than India's national floor ($2.10), making India significantly cheaper for labour-intensive manufacturing.
• Thailand's ASEAN/RCEP membership provides 0% tariff access to 15 countries; India has the ASEAN-India FTA (AITIGA) but sits outside ASEAN and RCEP, and autos and many auto-component lines remain excluded from AITIGA concessions, leaving 5-15% tariff costs on those exports to Southeast Asia.
• Thailand's automotive and electronics supply chains are more mature; India is catching up through PLI-driven investment from Apple, Samsung, and global auto OEMs.
• For split-market strategies (domestic India + ASEAN exports), dual manufacturing in both countries often produces the best financial outcome.

Evaluating India as a manufacturing base or structuring a dual India-Thailand operation? Beacon Filing provides comprehensive India entry strategy including entity setup, FDI advisory, PLI application support, and ongoing regulatory compliance.