China’s Loss is India’s Gain – A Colossal Opportunity to become Manufacturing Hub

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Coronavirus was first detected in the Wuhan province of China and has gradually seeped in most of the countries. The novel virus has taken millions of life and million more are infected. It’s not just the health that is at stake but also the world economy that has already been reeling under recession threat from long.

As the world was gearing up to fight the inevitable recession, COVID-19 disaster engulfed the entire world. Most of the countries are blaming China for its reluctant approach and keeping the world in dark until the virus took shape of a pandemic affecting other countries as well.

Now, United States and Japan have come out in open to condemn China for its role in spreading the virus. In a latest turn of events, Japan has already announced the country’s largest ever economic stimulus package of USD 990 billion dollars. Japan Prime Minister Shinzo Abe stated that there stimulus package is 20% of the GDP. What is worth noting in this package is that Japan is incentivizing the companies to relocate their factories out of China. The Japanese Government has allocated over USD 2 billion for the incentivisation.

In United States, over 50 US companies already exited China just last year in the wake of aggravating trade war between both the countries. Situation has gotten worse with the companies thinking to exit China at much faster rate and find out an alternative for their supply chain.

Potential Gainers

As the world prepares to shut China, five countries stand to gain immensely with India being one of them. Other four countries who will compete with India in getting the contracts are Indonesia, Vietnam, Thailand and Malaysia, often known as The mighty five.

Even before the Covid-19 crisis, it was expected that India will benefit from the United States-China trade war with roughly 3.5% increase in export. One of the biggest strength that India has over rest of the world is its young population which would act as a backbone for the country when it bids for some of those contracts from the companies who are moving out of China. As a result of young population, it becomes easier for India to provide low cost labor which would be the need of the hour after the world comes out of the lockdown.

Foxconn, the contract manufacturer of Apple has already set up shop in Chennai and rolled out iPhone XR. Other manufacturers such as Flex and Wistron are already present in India.

What the experts say

A report from UBS stated that India will be most benefited as the companies are looking for a China alternative. Swiss Bank on the other hand stated that foreign direct investment pipeline in the country has grown to approximately $175 billion as compared to $87 billion from last years.

It is not just the phone makers who will consider India but also textile, food processing and pharma companies would weigh India as next best option for shifting their manufacturing base.

Of course, it is not an overnight job and India will have to respond quickly once the companies start showing interest. The Government would need to provide the land clearance and enough electricity. Moreover, China has strong interlinking supply chain and manufacturing ecosystem developed over the years that India needs to take lesson from, and quickly. Nevertheless, the country has gotten its much awaited opportunity to emerge as the global manufacturing hub in few years.


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An MBA in finance, I like to cover the wide range of topics related to Taxation, SEBI, Finance and anything that is Public Helpful. The motive is always to make it simpler for the taxpayers understand the system better and take informed decisions.

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