MNCs seeking to move out of China, a mega opportunity for India
Last updated on February 13th, 2023 at 03:58 pm
Amid the outbreak of Coronavirus pandemic from China’s Wuhan city to countries across the world, it appears that the Mainland is facing global scrutiny in the global market. Due to the increasing disruption in the global supply chain, multinational corporations are strategizing to diversify and move their manufacturing structures away from China.
Experts are contemplating this development as a mega opportunity for India to replace China as the World’s factory through it’s ‘Make in India’ initiative. Launched by PM Modi in 2014, the Make in India initiative aims to make India a global manufacturing hub using domestic skills and talent. It has the potential to turn India’s economy upside down, all for good.
China is known as the biggest exporters of many products including mobile phones, toys, chemicals, garments, electronics, etc. However, due to the closing of production and transportation of goods and services across the world, there is a disruption in the supply chain of raw materials and final products. Companies are, significantly, reviewing this as an opportunity to diversify their supply chains, where India can play a crucial part. Notably, Japan has recently announced $2.2 billion in funding to encourage its firms to move out of China.
Analysts have also stated that a number of MNCs have reached out to government agencies and other consultants and discussed the potentials of bringing some of their operations into India. As per media reports, South Korean firms such as Hyundai Steep and Posco are planning on setting up their operations in India. Amidst the trade war between Washington and Beijing, Wistron and other Apple Inc. partners including Pegatron Corporation, Hon Hai and Precision Industry Co. have also stated plans of moving its manufacturing capacity out of China in order to re-shape tech supply chains. Some of these companies are targeting India, among other countries. Apple already has two manufacturing operations set up in India.
The Indian economy is fast-growing, providing a lucrative market with a substantial number of low-cost skilled and semi-skilled labor. Furthermore, cuts in corporate tax rates to as low as 15% can provide a boost for MNCs to set up their manufacturing firms in the country. The Indian government should steer on capitalizing on this rich opportunity by strategizing a phased action plan. The Narendra Modi-government has already started working on a scheme to help investors set up their manufacturing bases in the country. A committee has reportedly been set up the government which includes joint secretaries from various ministries and departments that will explore opportunities for foreign investment. Leaders of several states have also shown a proactive approach in the process.
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And not just for the foreign market, the Centre is planning to aggressively boost its ‘Make in India’ initiative to enhance domestic manufacturing and services, and generate employment.