![Will India be the first choice of companies’ to move out of China? Will India be the first choice of companies’ to move out of China?](https://varindia.com/storage/news/uploads/2018/02/5ebd0c42b1871.jpg)
Amid global pandemic, India is seeking to lure U.S. businesses, including medical devices giant Abbott Laboratories, to relocate from China to India. It’s been recent that President Donald Trump’s administration steps up efforts to blame Beijing for its role in the coronavirus pandemic.
The government in April reached out to more than 1,000 companies in the U.S. and through overseas missions to offer incentives for manufacturers seeking to move out of China, according to Indian officials who asked not to be identified, citing rules on speaking with the media. India is prioritizing medical equipment suppliers, food processing units, textiles, leather and auto part makers among more than 550 products covered in the discussions, they said.
Trump’s move to blame China for its handling of the COVID-19 outbreak, which has killed more than a quarter-million people worldwide, is expected to worsen global trade ties as companies and governments move resources out of the world’s second-largest economy to diversify supply chains. Japan has earmarked $2.2 billion to help shift factories from its neighbour, while European Union members plan to cut dependence on Chinese suppliers.
For Indian Prime Minister Narendra Modi, a surge in investment would help shore up an economy battered by an eight-week nationwide lockdown to control the Covid-19 outbreak, and help him make up ground hitting a target to grow its manufacturing sector to 25% of gross domestic product by 2022 from 15%. The need to create employment is now even more urgent after the pandemic left 122 million people jobless and forced India to shut down all major cities.
The push by Modi’s government comes as India tries to regain lost ground after many companies chose countries like Vietnam over India as an alternative destination when Trump started his trade war with China. Modi has tried to shore up U.S. investments and improve ties through corporate tax cuts, two massive public rallies with Trump in Houston and India, and a $3 billion defense deal.
‘Replace China’
“My read is that the network, if it pans out, will look to India and Vietnam to replace China in the global supply chain network,” said Derek Grossman, researcher at the Washington-based RAND Corporation who held positions in the U.S. Intelligence Community for more than a decade.
“This would be a rough fit in terms of replacing China’s immense manufacturing capabilities, but perhaps the U.S. has high hopes that India and Vietnam can quickly ramp up to at least equal Chinese capacity.”
India in April partially lifted a ban on the export of Hydroxychloroquine and paracetamol following a request from Trump. It also approved 130 billion rupees ($1.7 billion) worth of investments to make more bulk drugs and medical devices, and to boost local manufacturing of drug intermediates and active pharmaceutical ingredients to cut dependence on imports from China.
“India is a bigger market than Vietnam or Cambodia so it should be a bigger draw for investors looking to move operations out of China,” said Ajay Sahai, director general and chief executive officer of the Federation of Indian Exporters. “But apart from ensuring land, water and sewerage, the most important change India needs to make is to give a clear guarantee that the government will not introduce retrospective tax amendments.”
Some states including Maharashtra have ensured that supply chains for foreign manufacturers remained functional through India’s national virus lockdown. Others like Tamil Nadu in the south and Uttar Pradesh in the north have offered concessions for those planning to move.
“There’s abundant capital in the U.S. that’s looking for geographies outside, and we can see India responding,” said Mukesh Aghi, president of the U.S.-India Strategic and Partnership Forum, a Washington-based group that advocates for policies that further business ties between the countries.
“Companies realize that while large supply chains in China may have been economical, there’s no point in keeping all your eggs in one basket,” he concluded.
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