A lot of US-based companies want to leave China and want to relocate their manufacturing to other Asian countries especially India and Vietnam.
Companies have now realized that they cannot just be dependent on one country for their production needs. This has resulted in a lot of companies to rethink of relocating.
A lot of Indian publications have written about the Modi government luring about 1000 US companies to shift their base from China to India. Here India is prioritizing medical equipment suppliers, food processing units, textiles, leather, and auto part makers among others.
For instance, a few of these companies are already present in India though on a smaller scale. An example is medical equipment manufacturer Abbott.
This would help the creation of jobs in the nation. At present, the unemployment rate in India is well above 24%. And this number might increase further as India enters its 4th phase of lockdown due to COVID-19.
Donald Trump has different plans. He’s election manifesto was “Make America Great Again” which meant bring back jobs to America. Mr. Trump wants to get these companies back to America. This was evident from his comments on Apple. Apple was considering moving to India from China and to this, Mr. Trump warned them of serious consequences in the form of new and more taxes.
Donald Trump said he could levy new taxes on American companies that move their manufacturing bases from China to any country other than the United States. Donald Trump has termed taxation as an incentive for companies to return the manufacturing to the United States, news agency PTI reported citing an interview.
PM Modi also has other plans. In his last speech, he announced Atmanirbhar Bharat which translates to Self Reliant India.
He wants Global companies to come to India. And also wants India to be self-reliant.
Is Globalization Dead? – Nope!
China is the global manufacturing hug because of its supply chains, it has achieved those economies of scale which have given a lot of companies an edge over their manufacturing cost.
Let’s take an example of Apple again. Making all of the iPhone’s parts in the U.S. would push the price of the iPhone’s components from the current $190 to around $600 (source). So we can guess what the retail price would be for the phone.
Companies might not completely move out of China but they would partially shift their manufacturing operations out of China.
Globalization surely isn’t dead, it has had some impact due to coronavirus. Ther would be a lot of structural changes in the economy as the governments and companies take policy decisions to safeguard the economy and the company.
For India, this can be a great opportunity to strike out a lot of deals with global companies and help them set their manufacturing facility in the country. Globally companies have realized the importance of Diversification due to Coronavirus.
What do you think?