Amidst its trade wars going on with the US, India has started to offer incentives to the companies moving out of China. These incentives are said to lure companies for investments, while the sectors identified for this include electronics, consumer appliances, electric vehicles, footwear and toys.
These measures are taken to improve India’s trade deficits with China and majorly shall be a great step towards promoting the ‘Make in India’ initiative.
What Exactly is This?
Vietnam provides amazing incentives in the form of financial incentives that include preferential tax rates and tax holidays to lure companies from all around the world. A similar approach will be taken by India. In fact, along with Vietnam, economies such as Malaysia too have been undertaking the similar approach and have benefited from businesses trying to sidestep tariffs.
India has missed out on any such investment gains. Better late than never, the trade ministry is trying its best to cut reliance on imports, while boosting exports and awaits Finance Minister Nirmala Sitharaman’s approval.
What’s In It For India and Indians?
Among the discussed initiative, India has decided to set up affordable industrial zones along the country’s coastline and give preference to local manufacturers as an incentive to win over companies looking for an alternative production base.
This will in turn grow India’s manufacturing base, as in lines with Modi’s ‘Make in India’ initiative that promises to boost manufacturing to 25% of the economy by 2020.
Balancing the State of Imbalance with China
This is a major step towards strengthening India’s trade relationship with China, as the one with US is already not in a good place. Providing incentives to the companies moving out of China will help India improve its gigantic trade deficits with China.
China is India’s largest commercial partner. A report provided by the department overseeing FDI policies in India, show that these investments by Chinese companies can diversify in various sectors of the Indian market, including smartphones and components manufacturing, consumer appliances, electric vehicles and parts and daily use items like bed linen and kitchenware, 95% of which are already imported from China.
India is trying its best to fill up the spots that vacated by US in its trade war with India. The government has identified 150 such spots which it believes can be filled by good trade business with China. Some of these items include preserved potatoes, synthetic staple fibers of polyesters and t-shirts, hydraulic power engines and supercharger for motors.