India woos Chinese-based US companies to set shop in the country

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The PM’s Office is firming up plans along with Niti Aayog and the Department for Promotion of Industry and Internal Trade to offer incentives in order to attract companies looking to shift manufacturing units out of China.

With US President Donald Trump’s rhetoric against Beijing over coronavirus outbreak worsening global trade ties, India has started luring US companies to relocate from China with various incentives.

According to media reports, the government of India has reached out to more than 1000 companies, including medical devices giant Abbott Laboratories, through overseas missions in the last one month.  

The reports quoting officials who did not want to be identified said India was prioritizing medical equipment suppliers, food processing units, textiles, leather, and auto part makers among more than 550 products covered in the discussions.

The sources feel that the continuing blame game may compel companies to 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 neighbor, while European Union members plan to cut dependence on Chinese suppliers.

India expects to win over US companies involved in healthcare products and devices, and is in talks with Medtronic Plc and Abbott Laboratories on relocating their units to the country, an official said. Medtronic spokesman Ben Petok and Abbott spokeswoman Darcy Ross didn't 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 China supply chains to the country, according to an official. They're based out of financial center Mumbai and already work with large Indian hospital groups.

Officials have told companies that India is more economical in terms of securing land and affordable skilled labor than if they moved back to the US or Japan, even if overall costs are still higher than China. They have also offered an assurance that India will consider specific requests on changes to labor laws, which have proved a major stumbling block for companies, and said the government is considering a request from e-commerce companies to postpone a tax on digital transactions introduced in this year's budget.

The push by Prime Minister Narendra 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 US investments and improve ties through corporate tax cuts, two massive public rallies with Trump in Houston and India, and a $3 billion defense deal.

A News18 report said that India has identified a total area of 4,61,589 hectares of land to lure businesses moving out of China, the area is almost double of that Luxembourg. This includes 1,15,131 hectares of existing industrial land in states such as Gujarat, Maharashtra, Tamil Nadu and Andhra Pradesh, News18 quoted a Bloomberg report.

The land has been one of the biggest impediments for companies looking to invest in India, with the plans of Saudi Aramco to Posco frustrated by delays in the acquisition process.  The Prime Minister is working with state governments to change this, as investors seek to reduce reliance on China as a manufacturing base in the aftermath of the coronavirus outbreak and the resultant supply disruption.

The PM’s Office, Niti Aayog and the Department for Promotion of Industry and Internal Trade are firming up a plan to offer incentives in order to attract companies looking to shift manufacturing units out of China.

The benefits will be on the lines of those given to manufacture electronic and medical devices. These may include production-linked incentives such as capital expenditure benefits (with inputs from agencies).

Image Credit: Livemint

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