Saturday 20 / April / 2024
It has been a bad year for Chinese businesses working around the globe. Tariffs and the trade war between China and the US forced many companies to rethink supply chains and where they make and sell goods. Many other companies have been looking for alternatives because of the increased labour costs and more strict environmental laws. But that was just the beginning of China's problems.
The COVID-19 pandemic started in the country, led to shutdowns and forced people to stay at home. As it spread, factories, shops, restaurants and schools around the world were closed. Millions lost their jobs and economies went into tailspins. Though some countries are again open for business, recovery will be slow and painful. Talk of recession is everywhere.
China has come under scrutiny as the source of the virus and as a place to do business. The US has been most vocal, but they are not alone. Other countries are looking to shore up their manufacturing and businesses are looking for the path of least resistance.
Big plans
For India, this could be a big opportunity despite its lockdowns and economic troubles.
On May 12, the Prime Minister Narendra Modi, announced that his government would provide 20 trillion rupees (€242 billion, $266 billion) in helping to stabilise the economy. Part of the plan is around $60 billion of loan guarantees for small businesses, lenders and power companies.
Overall the plan will "focus on land, labour, liquidity and laws," said Modi. Besides stabilising the economy, he hopes this will also make India a more attractive partner. "These reforms will promote business, attract investment and further strengthen 'Make in India'," he said.
A technological solution
One way India wants to overtake its neighbours is with a new incentive program put in place in April called the "Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing." The plan targets makers of mobile phones and certain electronic components by offering them financial incentives to start or build up their existing domestic manufacturing capacity.
The programme will pay tech manufactures an incentive of 4-6% on incremental sales of goods manufactured in the country for five years starting August 1. To get the most out of the programme, manufacturers have to make at least $10 billion worth of goods between 2020 and 2025.
According to the government, the country's share of global electronics manufacturing has gone from 1.3% in 2012 to 3% in 2018. The programmeis meant to increase that even more by compensating the business for the country's "lack of adequate infrastructure, domestic supply chain and logistics; high cost of finance; inadequate availability of quality power; limited design capabilities and focus on R&D by the industry; and inadequacies in skill development," according to the official notice printed in The Gazette of India.
Though limited to a small sector of the overall economy, the scheme may already be having an impact. Last week it was reported that Apple may move some of its production out of China to India. It would be the first big tech company to take advantage of the new government scheme.
