Covid-19: India seeks to attract more than 1,000 US companies outside of China
In April, the government contacted more than 1,000 companies in the US. USA And through missions abroad to offer incentives to manufacturers seeking to move from China, according to Indian officials who asked not to be identified, citing rules for speaking to the media. India is prioritizing medical equipment suppliers, food processing units, textiles, leather and auto parts manufacturers among more than 550 products covered in the discussions, they said.
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Trump’s move to blame China for his handling of the Covid-19 outbreak, which has killed more than a quarter of a million people worldwide, is expected to worsen global trade ties as companies and Governments move resources from the second largest economy in the world to diversify supply chains. Japan has earmarked $ 2.2 billion to help change its neighbor’s factories, while members of the European Union plan to reduce dependence on Chinese suppliers.
For Indian Prime Minister Narendra Modi, an increase in investment would help shore up an economy hit by an eight-week national blockade to control the Covid-19 outbreak, and help it regain ground to achieve its goal of increasing its manufacturing sector. to 25% of the gross domestic product by 2022 of 15%. The need to create jobs is even more urgent after the pandemic left 122 million people out of work and forced India to close all major cities.
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It could also present an opportunity for India to finally push through long-stagnant land, labor and tax reforms that have hampered investment for years. Modi’s second term was marred by national protests and slow growth since his party won a landslide electoral victory a year ago, posing a risk to companies planning to move.
“There are opportunities for India to try to gain a place in global supply chains, but this will require serious investments in infrastructure and government,” said Paul Staniland, an associate professor at the University of Chicago who writes about India’s foreign policy and policy. “India faces stiff competition from other parts of South and Southeast Asia.”
Officials have told companies that India is cheaper in terms of securing affordable land and skilled labor than if they returned to the US. USA Or Japan, even if overall costs are still higher than China. They have also assured that India will consider specific requests on changes to labor laws, which have proven to be a major obstacle for companies, and said the government is considering a request by e-commerce companies to postpone a tax on introduced digital transactions. in this year’s budget.
Taxes, labor laws
India’s Commerce Ministry has requested detailed comments from American companies on the changes needed to make the country’s tax and labor laws more favorable to companies, one of the officials said. Modi’s federal government is working with states to guarantee long-term solutions, the official added, including developing land banks to ensure a quick start of the units.
India hopes to win over US companies involved in health care products and devices, and is in talks with Medtronic Plc and Abbott Laboratories to move its units to the country, an official said. Medtronic spokesman Ben Petok and Abbott spokeswoman Darcy Ross did not immediately respond to emails seeking comment.
Both Medtronic and Abbott have a presence in India, which may make it easier for them to move their supply chains from China to the country, according to an official. They are located in the financial center of Mumbai and already work with large groups of Indian hospitals.
The spokesman for the Indian Ministry of Commerce did not respond to an email seeking comment on the effort to attract American companies.
The Modi government boost comes as India tries to regain lost ground after many companies chose countries like Vietnam over India as an alternative destination when Trump began his trade war with China. Modi has tried to shore up American investments and improve ties through corporate tax cuts, two massive public protests with Trump in Houston and India, and a $ 3 billion defense deal.
Secretary of State Michael Pompeo said last month that the United States was working with India, Australia, Japan, New Zealand, South Korea and Vietnam on how to “restructure these supply chains to prevent something like this from happening again.” The administration was “pushing” an initiative to remove China’s global supply chains, Reuters reported this week, and an official said it is pressing for a “Network of Economic Prosperity” of trusted partners.
“My reading is that the network, if it works, will look to India and Vietnam to replace China in the global supply chain network,” said Derek Grossman, a researcher at the Washington-based RAND Corporation, who held positions in the United States Intelligence Community. for more than a decade “This would be a rough adjustment in terms of replacing China’s immense manufacturing capabilities, but perhaps the United States has high hopes that India and Vietnam can rapidly increase at least Chinese capacity.”
In April, India partially lifted the export ban on hydroxychloroquine and paracetamol following a request from Trump. It also approved investments of Rs 130 billion ($ 1.7 billion) to manufacture more bulk drugs and medical devices, and to boost local manufacturing of drug intermediaries and active pharmaceutical ingredients to reduce import dependency. from China.
“India is a bigger market than Vietnam or Cambodia, so it should be a huge draw for investors looking to move their operations out of China,” said Ajay Sahai, CEO and executive director of the Federation of Indian Exporters. “But in addition to guaranteeing 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 are kept functional through India’s national virus blockade. Others like Tamil Nadu in the south and Uttar Pradesh in the north have offered concessions for those planning to move.
“There is abundant capital in the US looking for geographies abroad, and we can see India responding,” said Mukesh Aghi, president of the EE Strategic and Association Forum. US-India, a Washington-based group that advocates for policies that foster trade ties between countries. “Companies realize that while the large supply chains in China may have been economical, there is no point in keeping all their eggs in one basket.”