In an effort to challenge China's dominance in the global manufacturing and commerce sectors, India has recently made it plain that it intends to increase its involvement in these areas. Nirmala Sitharaman, India's finance minister, has stressed this shift in strategy, highlighting the country's intentions to boost its local consumer market and encourage production.
As a result of its decades-long dominance in the manufacturing sector, China was known as the "factory of the world." But this reliance is being reevaluated in light of current world developments.
Businesses around the world are worried about China for a number of reasons, including as its response to the COVID-19 outbreak, territorial issues with nations like Taiwan and India, and its growing economic and geopolitical aggression. Furthermore, India now has a chance to establish itself as an alternate manufacturing powerhouse due to the United States and China's continuing trade disputes.
Several signs point to India's rise as a viable alternative to China. Prime Minister Narendra Modi's administration has prioritized the logistics sector and launched massive infrastructure development projects. In order to cement India's position as a manufacturing powerhouse, these initiatives are considered crucial.
The extraordinary increase in Apple iPhone shipments from India is one such example. And because Apple plans to make India its main production and export hub, its contract manufacturers have ramped up their activities there.
Companies like Apple and Walmart are shifting their focus to India as they lessen their dependence on China, which is embroiled in trade issues with the US and has border concerns with India.
But even with all this, it's clear that India still has a long way to go before it can claim a larger portion of the global manufacturing market; hopefully, Budget 2024 will address this.
India is well-positioned to become the world's leading manufacturer of the future, thanks to its ability to develop industrial dominance in rapidly growing industries. As a result of this revolutionary change, India may now take the lead in export value chain industries that are seeing a boom in global demand.
If India wants to take advantage of this trend, it should work on trade agreements that help businesses diversify their exports and earn more money. Manufacturers may be prompted to make important manufacturing decisions by Free Trade Agreements (FTAs).
India has recently embarked on bilateral trade treaties or is in negotiations with a number of countries, breaking with its usual cautious stance towards such agreements. These nations include Australia, the UK, and Canada.
The Indian manufacturing industry is poised to thrive thanks to important government programs such PM Gati Shakti and the National Logistics Policy.
The country has liberalized its standards for Foreign Direct Investment (FDI), introduced the Production-Linked Incentive (PLI) program, opened up industries like military and manufacturing that were previously closed, and revised its labor laws, among other reforms. To put China's manufacturing hegemony to the test, several steps have been taken.
Nevertheless, it is imperative that the interim budget clarifies whether additional measures are intended to position India as a credible contender for the supply chain transition.
There is a rising chorus of voices demanding that the forthcoming Budget devote more resources to vocational and upskilling programs, alongside incentive-based initiatives like PLI. To go to the next level of industrial expansion, it is essential to hone the skills needed for new industries.
It is essential to have a well-thought-out budget plan that includes investments in infrastructure projects to reduce domestic logistics costs and financial and regulatory incentives like PLI schemes. Given India's present position near the bottom of the global Logistics Performance Index rankings, it is critical that the country invest in its transportation infrastructure to boost supply chain efficiency.
Incorporating these measures into the budget will help India maintain its status as a global manufacturing powerhouse.
Companies will be able to flourish in India provided the government maintains its focus on streamlining rules and regulations to make doing business easier, and this is something the budget must also address.
Still, obstacles are lurking around the corner. Fitch warns that international investors may be put off by regulatory roadblocks such as a difficult business climate and a lack of labor market reforms.
Union opposition has slowed efforts to implement labor reforms in several Indian states, including Karnataka and Tamil Nadu. India may also have trouble joining international supply chains due to its high tariffs and lack of free trade support.