Manufacturing may get leg-up from China woes

■ Supply chains shifting to India as part of strategy change

State-owned oil firms cut the rates of non-subsidised cooking gas by Rs 53, wiping away a third of the record Rs 144.50 per cylinder price hike effected last month. A 14.2-kg LPG cylinder now costs Rs 805.50 against Rs 858.50 previously. The Centre’s subsidy payout will fall by Rs 50 per cylinder to Rs 240. Jet fuel (ATF) prices has been slashed by a steep 10 per cent, or by Rs 6,590.62 per kilolitre, to Rs 56,859.01 per kl.

India is emerging as the top destination for companies shifting or diversifying their supply chains to escape US tariffs on Chinamade goods and disruptions from the coronavirus outbreak.

A UBS study concludes that India could be a major beneficiary of China PlusOne strategy of global companies.

The US CFO Survey of UBS Evidence Lab finds that 76 per cent of the respondents have either shifted their supply chain or are planning to shift in response to protectionist policies emanating from the US-China trade war.

Trade data also confirms an increase in exports of tariff-imposed products to the US from India.

UBS said it analysed earnings transcript of 44 global companies to spot nuances in language that signal a potential relocation of manufacturing to India. “There are incremental references of India and trade war,” the UBS report said, while it is expecting India’s export to pick up and drive India Inc earnings.

“It is too early to call

The country’s manufacturing sector activity slowed in February from a near eight-year high in January. The Nikkei Manufacturing Purchasing Managers’ Index, compiled by IHS Markit, declined to 54.5 last month from 55.3 in January. “This is the 31st consecutive month that the manufacturing PMI has remained above the 50point mark,” IHS Markit said on Monday.In the PMI parlance, a print above 50 means expansion.

The strong manufacturing

whether India will have major success, but the next three years should be better than the past five years,” it added.

In Asia, India is among the most sought after destination for moving products out of China, while data suggest that Indian export to the US market has seen a significant increase post sector expansion seen in India at the start of the year was maintained in February, with rates of growth for factory orders, exports and output holding close to January’s highs, IHS Markit said.

the imposition of US tariffs on China, experts said.

Since China is getting expensive, people are shifting to a China Plus-One strategy, experts said.

Many Indian firms in electronic, chemical and durable sectors are seeing a surge in sourcing enquires from global firms.

Several durable companies like Amber Enterprises, Dixon Tech, VGuard and Havells India are trying to cash in on the China Plus-One strategy of global companies.

China Plus-one strategy is about still using the resources allocated in China, but adding lower wages to the mix.

“We are optimistic that exports can have a huge potential market going forward on a long-term basis since the world is moving towards the China PlusOne strategy. We have already started talks with various original equipment manufacturers for export opportunities,” said Amber Enterprises, a contract manufacturer of airconditioners, in its earnings call with analysts.

Momentum is building up with top global firms like Apple, Intel, Samsung, Lenovo-Motorola and Panasonic revealing plans to set up facilities in India.

The Centre has set a target of Rs 26 lakh crore ($400 bn) turnover by 2025 for domestic manufacturing in electronic system design and manufacturing. The value of electric equipment being made domestically has risen to Rs 4.58 lakh crore in FY 19 from Rs 1.90 lakh crore in FY 15.