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Its advantage India as companies move out of China

"A recent UBS Evidence Lab survey of chief financial officers (CFOs) in China and North Asia including Japan, Korea and Taiwan reveals that many Asian manufacturers are planning to shift their production facilities out of China. This shift presents a golden opportunity for India to become one of the preferred destinations for these manufacturers to set up bases. India’s lower production costs along with and an absence of tensions associated with a potential trade-war is likely to fuel its popularity amongst these nations."

 

Its advantage India as companies moveA recent UBS Evidence Lab survey of chief financial officers (CFOs) in China and North Asia including Japan, Korea and Taiwan reveals that many Asian manufacturers are planning to shift their production facilities out of China. This shift presents a golden opportunity for India to become one of the preferred destinations for these manufacturers to set up bases. India’s lower production costs along with and an absence of tensions associated with a potential trade-war is likely to fuel its popularity amongst these nations. Its less complicated environmental laws and highly skilled workforce have already led its growing popularity as a preferred FDI destination over the past two years.

Ease of doing business and policy support

The UBS survey polled 244 respondents across various industry groups. Of this, 71 per cent respondentsIts advantage India as companies move out of China represented companies with less than Rs 5 billion in revenue. The survey revealed that around 85 per cent of respondents had received significant FDI enquiries and 87 per cent had received enquiries from Chinese manufacturers to collaborate in production.

India’s attractiveness as a preferred investment destination has increased significantly over the past three to four years mainly on account of its ease of doing business, financial penetration and policy focus. As per UBS Evidence Lab's CFO survey, India also lays out an improved outlook for the key success factors for various industries. The UBS India Industrials analyst’s ‘Infrastructure Availability Index’ has also indicated a significant improvement over the past 20 years.

Robust GDP growth expected, jobs creation on the anvil

The perception that Indian infrastructure is a major constraint in its growth is also untrue as India has a surplus power and ports capacity. Besides its lower production costs, the massive scale of its market also gives India an edge over countries as the country benefitted the most from the US-China trade war. These benefits along with its rising exports to the rest of world are likely to help the country achieve a GDP growth of over 8 per cent over next five years. This will also lead to the creation of around six million (including indirect) jobs per annum thus improving external stability and reducing currency volatility.

According to the survey, the sectors that are likely to benefit the most from this include apparels, chemicals, industrials, and electronics sectors. Industry leaders hope that though an increase in competitive populism could constrain the new government’s ability to pursue the opportunity through incentives or infrastructure building, interventions in form of increased labor demand do not offset the low-cost advantage that the country offers.

 
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