NEW DELHI: The Government is putting together a package of incentives to attract factories which are making their way out of China in the post-Coronavirus world.
“We have been brainstorming on this for quite some time and now there is a sense of urgency on the issue as we understand a large number of companies will be relocating out of China to reduce their country risk in the wake of the Coronavirus pandemic. We want to attract them, especially Japanese firms as there is a stated incentive plan by the Japanese Government to help their companies move out,” said top industry ministry officials.
The Industry ministry has been in talks with finance and commerce ministries to try and develop a package to woo firms planning to exit China. The suggestions for the package include tax and duty incentives, fast track clearances both at central and state levels with single window clearances where possible, easier availability of land. Other proposals include relaxations from a plethora of regulations, especially if the planned factory is in a SEZ.
Japan has promised an assistance package of $ 2.2 billion to Japanese firms which move out of China. However, most if it is for moving back to Japan, with a smaller portion ear-marked as help to move to other nations. US, European, Korean and other MNC companies are also believed to be interested in shifting some of their manufacturing out of China given their experience of their supply chain breaking during the pandemic. Experts say these firms wish to spread their risks by “not putting all their eggs in China.”
China’s frequent changes in rules, targeting of multinationals, persistent tensions with rivals like Japan and Korea besides a surge in labour wages saw some MNCs slowly moving out of the Asian power about 5 years ago. This move gained a new momentum after US President Donald Trump targeted China with higher tariffs. The latest trigger has been the Coronavirus pandemic which saw many firms and nations deciding to spread risks by broad-basing their supply sources.
“We will of course be in competition with rivals like Vietnam, so what we offer to attract business will count in the final decision making,” said Prof Biswajit Dhar of JNU and former Head, Centre for WTO Studies, Indian Institute of Foreign Trade.
A plan to encourage domestic manufacturing has been in the offing for quite some time, and successive budgets have done some amount of duty re-jig to make it attractive for part of global manufacturing, especially of electronics and mobiles, to shift to India.
Officials said mobile handsets bought by government departments and defence forces will compulsorily require indigenous manufacturing in the future as part of `buy Indian’ rules being brought in.
Officials said they believed several telecom and mobile manufacturers including Wistron Corp, one of Apple’s largest manufacturing partners have decided to shift significant capacity out of China. “Many of these firms have bases in India, so it would be easier for us to help them relocate here,” they said.
However, the move will not mean everything these firms make or require will be made in India. “What these firms are looking at is decreasing their country risk, so they will still work on a global scale and have factories all over the world including in India,” explained Dhar.