The world’s most populated country and the second-largest economy China is going to face a great challenge soon. Due to the ongoing COVID-19 outbreak and its attempt to hide the situation, China has been considered as untrustworthy by the world. And because of the COVID-19 outbreak including the US-China trade war, many companies have committed to leaving China.
Even there was a time when every company tried to go to china because of its excellent infrastructure for business. But after this COVID-19 outbreak companies are trying to leave China as soon as possible.
In fact, if we go through with the report of the American chamber of commerce in South-China. We find that 64% of U.S companies in the south of the country are considering moving their production some elsewhere.
Companies leaving China.
Due to the COVID-19 outbreak, shut-down in China and the continuous closure of companies mainly three sectors, automobile, pharmaceutical, and electrical has been affected very badly across the world.
And approx 50 multinational companies belong to these sectors have already declared to move some elsewhere out of China.
The prime company which has declared to move its manufacturing units out of China is FOXCONN. FOXCONN manufacture iPhones and other electronics is exploring another batter places for business. And considering India and Vietnam as its potential partners in the future.
And if we talk about the world’s two best laptop seller companies DELL & HP. Then these companies are also planning to move their unit outside of China somewhere in south Asia.
Big opportunities for India.
When most of the U.S companies are considering leaving China after the COVID-19 outbreak, India has got a huge opportunity to take advantage of this event. But it seems like India is wasting this crucial time and isn’t responding properly as like previous time in the US-China trade war.
Keeping the circumstances and its curiousness in mind. The Indian government should take some immediate good actions to lure these companies in India. Because India has so much to offer to these companies but the thing only needed is a good strategy or planning.
Cheap workers & other facilities.
Now, if we talk about what India is a handful in? then India can provide good well-qualified but cheap labor. Because of the developing economy and low living cost, the average starting salary of the well-qualified hard-working labor is around 12000 to 15000 INR Rs.
But If we talk about China, then the similar level salary of a worker is around three times more than an Indian worker. This results in an increased cost of manufacturing companies. And India can be a good substitute for this.
Apart from cheap human resources, India also provides some other facilities. Like low operation costs, competitive infrastructure, and special economic zones for companies. That offer duty-free exportation among extra advantages and reasons to support for manufacturing companies. Which can serve as a mortal combination with low salaries and low fees?
India as a large consumer market.
According to the world economic forum, India is expected to be the world’s third-largest consumer market by 2025. Behind the U.S and China.
And the top 40 Indian cities and many other small cities will be creating opportunities worth over US$ 1.5+1.2 trillion by 2030 for companies. Which is a very large amount
Last year in 2019, the Indian government took a very engaging step. Indian government reduced the corporate tax rate the first time in the last three decades. which is a very attractive step for companies leaving china.
In this move, the Indian government reduced the corporate tax rate from 25% to 15% for newly emerging manufacturing units. And this is valid between the time duration of October 1, 2019, to March 31, 2023.
The appealing step taken by the Indian government will not only increase the net profit margin of manufacturing companies but will also help India in competition between emerging Asian economies.
Besides these, many other initiatives like Make in India initiative will also lure foreign companies to invest in India.
And because of all these points around thousands of companies currently working in China are engaged in conversation with the Indian government and authorities to move their firms in India. And around 300 companies are in their final conversation.
But the Indian government needs to get more active now because previously when such kinds of opportunities arose. Out of 56 companies shifting from china, only three in them chose India as their future business place. So here comes a question!
Why companies leaving China don’t come to India?
There are some major reasons which don’t allow companies to choose India for their future business place. India suffers from a high cost of production, high electricity tariffs, high capital costs, high incidence of taxes, and regulatory red tape.
And because of all the reasons mentioned above, companies prefer other countries rather than preferring India with so many good facilities provided.
But India is working and recently took some good actions which will absolutely help India in the future. Like the Government of India is working to correct or improve logistics and hard infrastructure of the country.
Apart from this, India has also played another game to lure companies leaving china. India is developing a land pool which would be nearly double in the size of Luxembourg if compared.
And a total area of 461, 589 hectares have been picked across the country in many different states such as Gujrat, Maharastra, Tamil Nadu, U.P, and Andhra Pradesh. Such that the government is working for every possible option to bring companies in India.
But the government must keep this thing in mind that such kinds of big opportunities don’t come often. This is why the Indian government needs to play the game carefully and actively.
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