India to woo MNCs looking beyond China: Sitharaman
WASHINGTON: India plans to come up shortly with a “blueprint” to aggressively court international companies either leaving China or taking a part of their production lines elsewhere as their current top destination Vietnam is understood by many to have hit a “saturation” point in labour availability and other facilities.
Finance minister Nirmala Sitharaman told reporters on Saturday that it might be important for the government to move “now and see and meet up with industries and invite them”.
“I will identify those multinational corporations (MNCs)… who are moving out of China or who probably are contemplating it,” she said, and added,“I will make a blueprint with which I will approach them and put forward to them as to why India is a far more preferable destination and make every attempt to invite them to India.”
The finance minister said the focus could be on some specific sectors such as electronics, lithium ion batteries and semiconductors, sectors in which India and China have “common capacity ecosystem building”. But the list could certainly be expanded, she added.
India has been mulling options to attract companies leaving China or branching out, that include financial incentives such as preferential tax rates and tax holidays. And the corporate tax rate cuts announced in September could help, but the finance minister said there is a need for a broader plan, a “blueprint”, which she will start on her return to India.
Sitharaman also said the negotiations between India and the US on a trade deal are going in “full speed” and expressed hope that an agreement will be structured soon. “In fact, I broadly mentioned it to Secretary Mnuchin, but that is something on which the Commerce minister and Mr (Robert) Lighthizer (US Trade Representative) are working. My inputs are that the negotiations are going in full speed and there’s a great intensity with which both sides are engaging and hopefully the deal will be structured soon,” Sitharaman said.
According to some industry estimates — not endorsed yet by the government—at least 200 businesses are looking to make a part or all of their value chain from China to India, amidst uncertainties arising out of the US-China trade war triggered by President Donald Trump. Some of them were already looking elsewhere because of rising costs in China. US toymaker Hasbro announced last July it is “increasingly spreading our footprint and adding new geographies for production globally” including at new facilities in India and Vietnam.
Sitharaman spoke to reporters after wrapping up the Indian delegation’s participation in the annual World Bank group meetings that were dominated by the ongoing slowdown of the global economy, which, member countries agreed, needed to be addressed differently in different geographies and not through a one-size-fits-all strategy.
The finance minister also had multiple bilateral meetings, including one with US treasury secretary Steven Mnuchin. It was a pull-aside this time as they will be meeting again for more broadranging and substantive talks when the American official travels to India in the first week of November.
The minister said she gathered from a number of her conversations with private sector, World Bank and government officials that Vietnam, which had emerged as a top destination, is “probably getting saturated; they don’t have enough manpower to address expansionary programmes” of investors and other infrastructure facilities.
“It is perceived, and this is not my view, but it is perceived that probably there is a level of saturation in Vietnam,” said the minister.
Asked how a cessation of trade hostilities between the US and China would impact her plans, the finance minister said, “The government’s decision is just not going to be purely on the basis what is happening today, but that could either aggravate the situation or (bear) influence at some level—but the fact remains that some companies are looking at relocating for various other reasons also”.