As the US continues blaming Beijing for the role it played in creating the COVID-19 virus and the Coronavirus pandemic, India is now looking to attract US companies away from China and promoting India company incorporation. This past April, the Indian government contacted over 1,000 US companies and provided incentives for them to leave China and establish their operations in India. The country has placed the highest priority on the following industries:
- auto parts manufacturers
- food processing units
- leather
- medical equipment suppliers
- textiles
According to Indian Government officials involved in the effort, more than 550 products could be affected by this relocation. In a recent interview, Prime Minister Narendra Modi stated an investment surge of this magnitude would shore up India’s economy which has been devastated by the lockdown that was put in place to combat the virus. Consequently, the need to create new jobs is even more urgent now that there are an estimated 122 million individuals that lost their jobs as a result of the pandemic.
With the constant blame and battering by US President Trump, China is seeing worsening global trade ties due to the mismanagement of the COVID-19 outbreak. With more companies planning to moving out of China for diversification of supply chain, many European Union members are looking to reduce dependence on China.
For India, a surge in the foreign investments will be a way to boost the battered economy due to the long lockdown to control the COVID-19 outbreak. It will help Prime Minister Modi realize the target of improving the manufacturing sector to meet the aim of 25% of GDP by 2022. Additionally, it will help push through the required reforms in taxes, land and labor laws. Most of the foreign forms have been informed that India is more economical than moving their manufacturing to their own countries.
Bringing in new India company formation would also provide an opportunity to pass labor, land, and tax reforms that have been stalled by bureaucratic red tape and have hindered significant business investments for many years. While this would also enable India to establish a strong presence in numerous global supply chains, it will require some very serious governance and infrastructure investments as well. It is well known that India has long been facing tough competition based in southeast and southern Asia.
In terms of affordable labor and the securing of land, India is better economically for companies than Japan or the US despite the overall costs being higher than what they are in China. The Indian Government has also offered assurances that they would consider requests to change the labor laws which have always been viewed as a major obstacle for many companies. The government is also considering delaying digital transaction taxes for e-commerce companies as well.
With abundant capital available in the US versus other countries, India is poised to respond those US companies looking to end their relationship with China. More and more companies are now realizing there is no longer a need to keep all of one’s eggs in a single basket, or in this case, China.
