India: US-China Trade War Boosts India's Appeal As A Manufacturing Hub

Last Updated: 26 July 2019
Article by Vasundhara Rastogi

As the US-China trade war escalates, hundreds of American companies are looking to shift their supply chains away from China to avoid any tariff backlash – with India as a potential benefactor.

In a recent media interview, US-India Strategic and Partnership Forum (USISPF) – a US-based advocacy group, said that it has been discussing plans to move capacity out of China with as many as 200 US companies and helping them set up an alternative base in India, post 2019 general elections.

But long before the trade war started in 2018, several top global brands such as Nokia, Adidas, Delta Electronics Inc., and Samsung had already begun shifting their manufacturing base from China to reduce costs and diversify their supply chain.

According to experts, the trade war has only accelerated the process.

Last week, the US increased import duties from 10 percent to 25 percent on US$ 200 billion worth of Chinese imports – demanding China to reduce the massive trade deficit with the US, which climbed to over US$ 539 billion last year.

For companies looking to offset the cost of tariffs on China made products, India offers an ideal alternative.

India's rising appeal as a manufacturing destination

A series of policy initiatives under the present government, structural reforms in tax and intellectual property rights, has sparked global optimism about the Indian manufacturing sector.

In July 2018, Samsung electronics opened a new factory in India, which it claimed to be the world's biggest mobile phone manufacturing plant. This year, Apple started assembling its top-end iPhones in the country through the local unit of Taiwan-based Foxconn. The company's other manufacturer – Wistron Corp – already produces older models of iPhones at a plant in Bengaluru.

Low labor costs and large population

India's manufacturing appeal lies in its large pool of engineers, a young labor force, wages that are half that of China's, and significant domestic consumption of manufactured goods.

Cheap labor cost is the biggest advantage that the country offers. India's average labor costs are lower than those in China and almost all of the countries in Southeast Asia, with the exception of Myanmar.

Besides, India has a huge buyers' market – Vietnam has only about 90 million people in its domestic market compared to about 1.3 billion people in India.

Access to natural resources

The prices of raw materials are quite cheap in India compared with other countries.

The country offers direct access to natural resources needed in production—notably, iron ore and aluminum, making it a viable manufacturing alternative to China in industries ranging from apparel to auto components.

Lower tariff on India made products

An active player in Asia, India has several free trade agreements (FTAs) inside and outside the region. India is also a signatory to the ASEAN- India free trade area that can provide companies access to one of the world's largest FTA's.

Government policies

The Indian government has initiated several reforms and policies to strengthen the manufacturing sector in the country.

A part of these efforts includes the Make in India program, which was launched in September 2014 to facilitate investment, foster innovation, enhance skill development, protect intellectual property, and build manufacturing infrastructure.

In addition, the government has made several bold moves to address key concerns on multiple fronts including the implementation of goods and services tax, and other economic initiatives in the power sector, land acquisition, and labor laws.

While some of these reforms are making a difference on the ground, a few are stuck at the implementation level and are yet to take off.

Moving your business to India

While India's manufacturing holds tremendous potential, the sector is still rife with complex government regulations, plenty of red tape, and inadequate infrastructure.

The key to overcoming these challenges is to understand India as a collection of states, rather than one uniform market. India has a federal governing system, which means that the government policies, industrial incentives, labor and logistics costs, as well as infrastructure development often vary significantly from state to state and industry to industry.

States such as Andhra Pradesh, Gujarat, Maharashtra, Tamil Nadu, Telangana, and West Bengal have launched their own industrial policies that promote, facilitate, and develop the manufacturing sector.

While Gujarat offers incentives and facilities for setting up production units in chemical, pharmaceutical, textile, and jewelry, Maharashtra is a popular option for setting up automotive and auto-component manufacturing. Uttar Pradesh and Tamil Nadu have emerged as major hubs for electronics assembly and manufacturing.

The inherent diversity and sheer size of India make it critical for businesses to establish a sound understanding of the economy prior to identifying the optimum location for setting up a manufacturing facility.

It is advisable for businesses to use a professional service with knowledge in the region to assist firms to plan-out their manufacturing strategy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions