Major Supply Chains shift from China to India- An advantage to the Indian economy?

Major Supply Chains shift from China to India- An advantage to the Indian economy?

After Modi’s Incentives announced in March, Major Global Manufacturing Chains like Apple and Samsung pledge to shift their firms to India. This could result in a major boost and output for the Indian economy.

Clearly during the ongoing Pandemic of Covid-19, Prime Minister Modi announced incentives in March. They make niche firms and electronics manufacturers eligible for a payment of 4%-6% of their incremental sales. This is over the course of 5 years.

The outcome of this was two dozen of major companies pledged an investment of 1.5 billion dollars (over 11 billion rupees). This investment is to set up mobile-phone factories in the country.

Along with the ongoing USA-China trade wars and tensions. Several major companies are scrambling around to find and diversify their chains. Apart from China. Currently Vietnam, Cambodia, Thailand are some of the most favoured destinations to invest their companies in. Nevertheless, India could snatch the bag and boost the Indian economy. with the incentives announced.

“There is a reasonable chance for India to gain in terms of incremental investment of supply chains within the country over the medium term. These programs are aimed at increasing India’s manufacturing share in the gross domestic product.” said Kaushik Das, The Chief Indian Economist at Deutsche Bank Ag, Mumbai.

Modi’s aim is to increase the share of manufacturing in the Indian economy. From the current 15% to approximately 25% as a part of his ‘Make in India’ program. Taxes have already been lowered on companies. The tax rates are some of the lowest in the Asian Continent. This allows new investments in the Indian economy. Especially since, India heads for its first major contraction in more than 40 years because of the pandemic. (source: ThePrint)

Potential Benefits to the Indian Economy

The latest output-linked incentive plan is a “big win for Make in India,” said Amish Shah. An analyst at BofA Securities,in a report to his clients. The Indian government anticipates the investment from electronic firms. This could result in about $153 billion worth of manufactured goods over the next five years and will provide employment to about one million people.

This would inject investments of $55 billion over the course of five years, adding 0.5% to India’s economic output. It could shift global smart-phone production to India to an extra 10% within 5 years. Most of it will be deviated from China, claimed a report on 10th August by analysts led by Neelkanth Mishra at Credit Suisse Group AG.

India has also expressed to extend similar incentives to the pharmaceutical, automobiles, food processing and textile Industries.

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