India plans to lure global manufacturing giants

By Hu Bofeng in New Delhi and Song Lin in Beijing Source:Global Times Published: 2019/10/21 21:03:40

Hopes to benefit as multinationals weigh China plans amid trade war

A view of India. File photo: VCG

India plans to lure global manufacturing giants that operate in China but may leave because of the China-US trade war, the Hindustan Times has reported.

However, experts noted on Monday that India's weak infrastructure and lackluster business climate would be major deterrents to the migration of global manufacturing giants.

A "blueprint" that aggressively courts global companies moving all or part of their production from China is set to be rolled out by India, according to the newspaper.

Indian Finance Minister Nirmala Sitharaman said that it might be important for the government to move "now and see and meet up with industries and invite them [to India]." 

Sitharaman said the focus could be on some specific sectors including electronics, lithium ion batteries and semiconductors, the report said. 

Affected by market uncertainty caused by the trade war between China and the US, some foreign companies in China intend to move their production lines away from China, an Indian source familiar with the matter told the Global Times on condition of anonymity.

These foreign businesses have "China+" plans to build development bases elsewhere, hoping to avoid market risks. Vietnam and India are among the new destinations, according to the source.

However, it is difficult to say whether India could realize its aspirations, since it has poor infrastructure, a less-skilled labor force and a relatively immature business environment compared with China, said the source.

Industrial relocation is a dynamic process regardless of whether there is a trade war or not, and what really decides companies' movements is the comprehensive assessment of their operating costs and future markets across the world. India does not have an absolute predominance over China, said Zhang Jianping, director general with the Center for Regional Economic Cooperation under China's Ministry of Commerce.

It is true that some labor-intensive industries in China have been shifting production to South or Southeast Asia, or deliberating such a shift, due to China's industrial upgrading and rising labor costs, Zhang said.

Even with its vast, low-cost labor force - two of its biggest advantages - India's relatively weak infrastructure is a critical constraint. This is particularly significant for high value-added industries such as smartphone producers, which need to be supported by an adequate air transport capacity, Zhang noted.

By comparison, China has relatively sound industrial chain and advanced infrastructure facilities. The number of new foreign-invested enterprises across the country stood at 30,871 from January to September, with foreign investment up 6.5 percent to 683.2 billion yuan ($96.6 billion).

India's low administrative efficiency is another barrier for foreign investors, Zhang noted.One example is Foxconn, which intended to invest in some 10 factories in India with certain tax breaks that apparently haven't materialized yet, said Zhang. Whether "Make in India" could be promoted effectively also depends on the implementation of preferential policies.The country is also facing strong competition from Southeast Asia, where production is more efficient and costs are lower, Zhang noted. 


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