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Monday, December 4, 2023

India attracts Investments as COVID-19 backlash hits China

India is in the process of liberalising its economy in a bid to become the next warehouse of the world. It is seeking to take advantage of global anger over China and the coronavirus. Already, 200 US companies have announced plans to move to India, and Indians are waiting for them with their arms outstretched.

Von Wellx, a German footwear brand, is planning to set up its unit near Agra, India and is expected to generate 10,000 jobs. After Von Wellx recently decided to shift its manufacturing base from China. Although, it is not clear that the company took this decision, to move to India, as a result of the backlash against China post COVID-19. Indian economists are hoping that more will follow, to the country’s advantage.

India attracts investments as global anger against COVID-19 hits China

It is believed that around 200 American companies are also planning to move their production to India, as China is facing a global backlash because of the COVID-19 pandemic.

“Our investment rate was already dipping and thus this shift is going to help boost our economy. Though we may not see its immediate effect under the current crisis, the shift will certainly help us in the long-run,” said Pronab Sen, former head of the National Statistical Commission.

He said that a wave of anger against China due to the issues related to the pandemic may help India to become an alternate manufacturing hub in the region.

India revamps its rules to make itself FDI attractive

“India’s new foreign direct investment rules make it a competing destination to attract more foreign nations to invest in the country. A bonus is the availability of low wage skilled labor that makes India a suitable business destination,” said N.R. Bhanumurthy, professor at the National Institute of Public Finance and Policy.

Many Indian states have liberalized their labor and land acquisition laws, to facilitate businesses.

Bhanumurthy said the shifting of manufacturing units from China to India will help the country to gain 9-10% growth, thus taking the overall investment rate to 35-36%, something India has been aiming for quite some time.

Prime Minister Narendra Modi had held a high-level meeting last month to discuss a strategy to attract foreign direct investments.

The Indian push to become the next warehouse of the world

China’s weakened global position is a “blessing in disguise” for India to attract more investment, transport minister Nitin Gadkari said in a recent interview. The northern state of Uttar Pradesh, which has a population the size of Brazil, is already forming an economic task force to attract firms keen to ditch China.

India is also readying a pool of land twice the size of Luxembourg to offer companies that want to move manufacturing out of China, and has reached out to 1,000 American multinationals, Bloomberg reported.

“This outreach has been an ongoing process,” Deepak Bagla, chief executive of Invest India, the government’s national investment promotion agency told the BBC. “Covid will only accelerate the process of de-risking from China for many of these companies.

Read more: Coronavirus: Can India replace China as world’s factory?

However, all planning must be taken with a pinch of salt. As things stand, Vietnam, Bangladesh, South Korea and Taiwan seem to be favourites to benefit from the backlash against China. The latter two at the “high-tech end of the spectrum” and Vietnam and Bangladesh at the lower end, according to Mr Jacob.

200 US Companies to shift to India post Corona reaction 

In his speech on May 12, Modi had announced a self-reliant mission to accelerate domestic production, which many say, is to reverse the globalization and resorting to protectionism.
Following this the US-India Strategic Partnership Forum (USISPF) revealed that over 200 US companies are planning to move their bases to India, post the presidential elections.
“Businesses are talking to USISPF about how to establish China’s substitute by investing in India. US companies bring critical supplies and are part of global supply chains,” tweeted Mukesh Aghi, president of USISPF.

Aghi also said that if India is to be a $5 trillion economy, it needs $100 billion worth of FDI annually

“US companies would not abandon China completely but since they are looking for alternate sites, India can offer a replacement,” he further tweeted.

Read more: Lockdown will shake Indian economy to its foundations

Owned by Casa Everz Gmbh, German footwear Von Wellx is tying up with Latric Industries Pvt. Ltd., a company based in northern India’ city of Agra in Uttar Pradesh state. Besides hosting world-famous ivory-white marble mausoleum Taj Mahal, the city is known for its footwear business.

The brand selling orthopedic footwear for men and women has stores in over 100 million customers across 80 countries. It was launched in India in 2019 and is available at over 500 retail and online shops.

AFP with additional input by GVS News Desk