Companies are moving away from China, following negative overseas sentiment, to pitch their tents in India.
A significant movement is taking place in the auto-parts industry, which has its global hub in China, if two recent trends are to be taken as fact – first, global automotive entities have been voicing opinion on the China Plus One model and second, at least 30 international purchasing bodies that procure parts have become active in India taking the rise in their presence from 8-10 bodies earlier.
Should all the elements hold together then it could propel India’s automotive parts industry – which is currently valued at around $50 billion, as against China’s $550 billion – as a suitable option.
Business and geopolitics
There are added geopolitical issues as well as China’s attempt to raise costs of conducting operations in the country for overseas players.
Enter India which has already announced its aspirations of becoming a major global manufacturing hub as companies seek to de-risk their supply chains and their over-reliance on China.
The Indian government has left no stone unturned in its bid to boost manufacturing and invite overseas players. Corporate tax rates have been slashed and customs duties re-shaped to ensure that India can potentially stake a claim as the world’s biggest factory. The annual 2021-2022 budget was a statement of intent for Narendra Modi and his finance minister Nirmala Sitharaman to showcase their aspirations of transforming the country’s economy and seek higher growth rates. As Sitharaman said, “Our customs duty policy should have the twin objectives of promoting domestic manufacturing and helping India get onto the global value chain and export better… The thrust now has to be on easy access to raw materials and exports of value added products.”
Indian government remains proactive
Despite these new trends the Indian government continues to push the principles of Atma Nirbhar Bharat (self-reliance). To this end the authorities have increased the share of manufacturing in India’s GDP from 17-18 percent currently to 25 percent. The cut in corporate tax to 22 percent for existing companies and 17 percent for new entrants and the production linked incentive (PLI) plan across a wide range of sectors have been designed to boost manufacturing.
