NEW DELHI: Government think tank Niti Aayog has admitted that ‘India has seen limited success so far in capturing the China Plus One strategy. Niti Aayog, which released its first quarterly report on trade and commerce, said Vietnam, Thailand, Cambodia, and Malaysia have become bigger beneficiaries of the strategy.
It attributes factors like cheaper labour, simplified tax laws, lower tariffs and pro-activeness in signing free trade agreements (FTAs) have played a key role in helping these countries expand their share of exports. The US has raised barriers for imports from China, which the report says led to a fragmentation of global supply chains, prompting multinational corporations to seek alternatives to Chinese manufacturing.
The report says this situation presents both challenges and opportunities for India. First, India has to navigate disruptions in global supply chain, and be wary of China dumping its products in Indian markets. India is seen as an attractive destination for companies looking to shift manufacturing bases out of China. “This shift offers India a chance to enhance its domestic manufacturing capabilities, mainly in high-tech industries,” says the report.
As per Niti Aayog officials, even if India failed to capitalise in the early phase of China plus one strategy, a lot more opportunities could come India’s way. They said companies, which have invested in China, would like to diversify their supply chain. They have done so in countries like Vietnam and Mexico but these countries don’t have the bandwidth. India with its large market and economic reform undertaken in the last 10 years stands surely to gain from the opportunity.
Arvind Virmani, member, Niti Aayog says Donald Trump’s plan to levy a 60% tariff on Chinese imports would present an opportunity for Indian companies in the future. Even though, he foresees short-term shocks due to the move.
The report highlights potential risks of carbon tax, a levy by the European Union on high carbon emitting exporters. It says India’s iron and steel industry, which accounts for 23.5% of its EU exports, faces the highest exposure to carbon tax.
Cheap labour, low tariffs, FTAs played key role
Niti Aayog attributes factors such as cheaper labour, simplified tax laws, lower tariffs and pro-activeness in signing free trade agreements (FTAs) have played a critical role in helping these countries expand their share of exports. The US has raised barriers for imports from China, which the report says led to a fragmentation of global supply chains, prompting multinational corporations to seek alternatives to Chinese manufacturing