India becoming more attractive to foreign firms but path of reform will not be easy

By Wang Jiamei Source:Global Times Published: 2017/7/10 22:48:39

Renowned electronics manufacturers Foxconn, Midea and Samsung have been in the headlines recently after announcing high-profile plans to invest and produce goods in India. As low-cost manufacturing is gradually moving away from China, it is now critical for India and even the world whether it can replace China as the next "world's factory." The Indian government has rolled out aggressive reforms aimed at unifying the country's market, which is very attractive in the eyes of international investors, even though there are huge challenges such as poor infrastructure and difficulties in policy implementation across different states.

According to a report by The Times of India on July 4, Foxconn plans to invest up to $5 billion in building new factories in India. On June 29, Midea Group announced that it would invest 800 crore ($123.98 million) to set up a manufacturing facility in Pune, a city in western India, which is expected to be operational by the end of 2018 and aims to generate 500 jobs over the next five years. Also in June, Samsung was reported to have invested 700 billion won ($608.28 million) in India to expand its smartphone production capacity.

These moves all came on the heels of India's decision to implement the Goods and Services Tax (GST), the country's biggest tax reform since its independence in 1947. The new tax regime is expected to give a boost to the "Make in India" initiative because it is aimed at unifying various state and central taxes into a single tax system, thus laying the foundation for a common national market and improving India's manufacturing competitiveness.

In fact, since Prime Minister Narendra Modi launched the "Make in India" initiative in September 2014, the Indian government has been making aggressive efforts in unifying the country as a whole, with the aim of building it into an attractive manufacturing destination for global businesses. But it will not be easy for India to achieve its goal. Regulatory and bureaucratic challenges across the country's 29 states mean that implementation of the reform measures will be far from simple, while poor infrastructure and cultural complexity may also undermine India's advantage in terms of cheap labor.

Obviously, India is at a critical juncture for market opening-up and unification, which requires strong faith and assertiveness. Whether it can eventually pull off the current tasks will depend on whether the Modi government is steadfast in pushing forward with its reform program.

The author is a reporter with the Global Times.


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