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India is trying to become the new factory of the world,but it could take more than a global pandemic


China's zero-COVID policy may just be doing what Donald Trump didn't manage to fully achieve during his term as president — shifting global supply chains away from China for the first time in 40 years.


In 2018 and 2019, Trump levied stiff tariffs against China to counter what he called unfair trade deals with the US, spurring retaliation from Beijing and kicking off a trade war.


And while many companies started discussing moving supply chains out of China as a way to distance themselves from geopolitical risks, it was really the pandemic — and China's zero-COVID policy — that drove home the importance of not depending on one country for its supply chain.


"The geopolitical tensions in themselves may not have resulted into this level of realignment of supply chains, but COVID certainly provided that extra vision extra fillip, the extra fuel to the fire," Ashutosh Sharma, a research director at market researcher Forrester, told Insider.

Tech giant Apple provides the latest example of being burned by an overreliance on Chinese production lines, with iPhone output hit by China's relentless zero-COVID pursuit. Apple is now speeding up its push to shift its production out of China to other Asian countries. But where to go?

Major Apple supplier Foxconn's top pick is India, and so is that of other chipmakers, after the Biden administration in October imposed export controls on shipping equipment to Chinese-owned factories making advanced logic chips.


"India has a large labor pool, a long history of manufacturing, and government support for boosting industry and exports. Because of this, many are exploring whether Indian manufacturing is a viable alternative to China," Julie Gerdeman, the CEO of supply chain risk management platform Everstream, told Insider.


But the move is easier said than done.

India is the world's largest democracy, and that makes decision-making a lot more complicated

As a large economy with a young population, India has the potential to be a manufacturing powerhouse. But the South Asian country is also infamous for its bureaucracy and hindering red tape.

"It's far from a place where businesses can simply come in and open a shop without having too many company compliances," said Sharma, who is based in India. "I'm sure China has those issues too, but its ability to move fast on those compliance requirements is much higher than in India, because India is much more democratic and there are just too many stakeholders to satisfy here."


India came in at the 63rd position in a World Bank list of 190 countries ranked based on their ease of doing business in 2019. While this was an improvement from its position in the 142th position in 2014 when Prime Minister Narendra Modi took office — it still lagged behind China, which was in the 31st position in 2019 the last year the index was compiled before the World Bank discontinued it after a data rigging scandal. Data irregularities improved China's position in 2018, according to a World Bank audit published in December 2020.


India also has a history of protectionism, which makes it less competitive in terms of attracting large investments.


Read More at https://www.businessinsider.com/china-india-supply-chain-covid-sanctions-manufacturers-relocating-tariffs-options-2022-12



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