Policy

India rated as best alternative option for companies planning to relocate out of China

TE Raja Simhan Chennai | Updated on February 12, 2021

India’s major advantage, the report says, is its strong logistics system   -  The Hindu

Foreign companies taking advantage of PLI scheme to expand their operations

India, along with Vietnam, is rated as the best alternative options for companies which are planning to relocate their operations out of China, says a survey by Agility Logistics, a global logistics player. The US-China trade war first made companies, especially those in the US, to sit up and consider the possibility of de-risking their operations by reducing their dependence on China when it comes to sourcing. When the Covid-19 pandemic struck China and caused supply-chain disruption, their mind was made.

Indian government has been taking measures to attract such capacities. It even sharply reduced the corporate tax rate to attract companies. The move has already started with Germany’s Eickhoff Wind Ltd to invest ₹621 crore to manufacture gearboxes for wind energy production, near Chennai. This is a relocation of the company’s production facility from China and Germany.

India’s major advantage, the report says, is its strong logistics system. Foreign investment in India has continued too, it adds. Salcomp, the world’s largest manufacturer of cell phone chargers, began operations at Sriperumbudur during 2020. The company, which already produces around 8 million phone chargers per month in India, plans to rapidly expand operations, adding one thousand to its already 7,500 strong headcount, said the Agility Emerging Market Logistics Index survey.

Manufacturers’ interest

Wistron, Foxconn and Pegatron – all manufacturers for Apple along with Salcomp – are seeking to expand Indian operations and take advantage of the government’s production-linked incentives (PLI) scheme, which provides as much as $6 billion over five years in subsidies for Indian-made cell phones and accessories. At least 20 electronics manufacturers have expressed interest following the announcement of the scheme, which may be extended to other consumer electronics products, says the report.

Manufacturers and retailers, as they reassess their sourcing locations, look for a number of factors, including proximity to suppliers and customers, availability of transportation capacity on specific lanes, overall lead time, storage locations and modal mix amongst others.

“After several decades of increasingly global supply chains, a combination of increased trade barriers and vulnerabilities exposed by the pandemic are forcing an assessment of global, regional and local options, of how and where to consolidate sourcing, and how to mitigate risk through dual- and multi-sourcing,” the survey said.

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Published on February 12, 2021
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