DM Monitoring
New Delhi: India is seeking to lure US businesses, including medical devices giant Abbott Laboratories, to relocate from China as 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 US and through overseas missions to offer incentives for manufacturers seeking to move out of China, according to Indian officials. India is prioritizing medical equipment suppliers, food processing units, textiles, leather and auto part makers among more than 550 products covered in the discussions.
Trump’s move to blame China for its handling of the COVID-19 outbreak 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.
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. 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. They’re based out of financial center Mumbai and already work with large Indian hospital groups.
Offering incentives, tax breaks
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 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.
Build the network
Secretary of State Michael Pompeo last month said the US 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 ever happening again.”
“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.
Investment dependent
India in April 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. For Modi, a surge in investment would help shore up an economy battered by an eight-week nationwide lockdown to control the outbreak, and help him make up ground hitting a target to grow its manufacturing sector to 25 per cent of gross domestic product by 2022 from 15 per cent.
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.
