Indian companies move to fill void left by China
Many manufacturers ramp up output sensing biz opportunities
NEWDELHI: India is looking to position itself as an alternative manufacturing destination for global companies after the coronavirus outbreak exposed how heavily they are reliant on China for raw materials and production.
Top government officials are holding meetings with industry representatives as the disruption in China due to a lockdown in huge swathes of the country has opened up opportunities for India to emerge as an alternative manufacturing destination.
“There is a lot that needs to be done. India needs to work on many issues such as taxation, regulatory mechanism, factor markets, the financial sector and data privacy,” contended NR Bhanumurthy, professor at the National Institute of Public Finance and Policy. Countries such as Indonesia and Vietnam would also try to seize the opportunity, he said. “Historically, we tend to move two steps forward and one step back on reforms.”
Emerging nations such as Vietnam have been attracting global manufacturers because of fewer regulations, lack of bureaucratic red tape and lower wage bills, although India has more skilled workers well-versed in information technology. Now, the imminent supply disruption from China is forcing India to take a hard look at the road ahead.
The need for India to build up self-reliance on manufacturing has become even more urgent as the deadly virus has spread to other manufacturing hubs such as South Korea, Singapore and
Taiwan.
As part of the plan to attract global investments, the environment ministry now aims to streamline processes and fasttrack clearances for establishing manufacturing units for drug raw materials. Indian drug makers rely on China for over twothirds of the supply of bulk drugs—key ingredients that give medicines their therapeutic value.
Three years ago, a draft pharmaceutical policy had proposed an enabling environment for mega bulk drugs industrial parks. It was not implemented due to a lack of urgency as supplies were coming from China, an official said on condition of anonymity.
“The coronavirus outbreak in China provides India an opportunity to increase capacity of bulk drugs in India,” said Bulk Drugs Manufacturers Association president VV Krishna Reddy. “India being the second-largest producer of bulk drugs in the world is best placed to provide an alternative to China in terms of API (active pharmaceutical ingredient) source. However, this would require a lot of investment and a strategic plan for the next 20-30 years.”
“The industry requires dedicated industrial parks providing effluent treatment facilities and solid waste disposal sites, apart from cheap power and finance at competitive rates, among others, to close the gap with China,” he said.
Environment clearances take months for such API units and this hampers industrial capacity and utilisation. India has an average capacity utilisation of between 30% and 40% as against China’s 75%.
Industry experts said the government’s lackadaisical attitude has exacerbated this problem gradually, according to a report from the commerce and industry ministry.
Indian manufacturers already sense a business opportunity and have ramped up production of medical goods such as masks. This comes amid a worldwide shortage because of a surge in demand in China.
Besides, lingering tensions between the US and China on trade issues may prompt Western manufacturers to shift to India if a conducive policy framework is provided, industry executives said.
MUMBAI: All eyes will be on Reserve Bank of India (RBI) governor Shaktikanta Das as he delivers the keynote address at the 13th Mint Annual Banking Conclave (ABC) on Monday and sets the tone for monetary policy in 2020-21.
The theme of this year’s ABC, “Indian Banking Sector: The $5-Trillion Challenge”, focuses on the financial sector’s role in helping the Indian economy realise its ambitions, despite myriad domestic hurdles and global uncertainties. Das and an ensemble of industry experts will discuss these issues threadbare.
The central bank has, under the leadership of Das, reiterated its intent to remain accommodative for as long as required and has lowered its key policy rates by 135 basis points between February and October last year. Even when the monetary policy committee (MPC) decided to hold rates in the last two bimonthly meetings, the central bank introduced direct measures to increase credit flow to certain sectors of the economy, apart from ensuring adequate liquidity in the system and hastening the pace of rate transmission to the eventual borrower.
RBI is faced with the twin challenges of rising inflation and a slowing economy and, as MPC’S three members highlighted in the last meeting, structural reforms are now inescapable. The government’s advance estimates have pegged FY20 gross domestic product (GDP) growth at 5%, the slowest in 11 years. Meanwhile, India’s retail inflation accelerated to 7.59% in January, beyond RBI’S targeted range. In February, the rate-setting committee had to revise its inflation expectations as measured by the consumer price index (CPI) upwards to 6.5% for the fourth quarter of FY20, higher than its mandated corridor of 2-6%.
Das said in the MPC meeting that while demand remains weak, there is uncertainty about the likely behaviour of inflation excluding food and fuel. Voting for a pause in the February policy, Das cited the prevailing uncertainty on the inflation front and said MPC should prudently await “more clarity based on incoming data”. “Barring the intensification of global risks, there is policy space that needs to be timed optimally and opportunistically to maximise its impact on growth,” said Das.
Apart from the governor, Mint ABC will have four panel discussions on opportunities in bad loans, fintech challenges for banks, developing loan markets, and a final star-studded panel of bank chief executives.
The panel on bad loans will feature Rajiv Anand, executive director for wholesale banking at Axis Bank; Rahul Chawla, MD and head of global credit trading at Deutsche Bank India; CS Setty, MD of State Bank of India; and Nikhil Shah, managing director of Alvarez and Marsal.
The second panel, on digital transformation, will have S Ganesh Kumar, executive director of RBI; Nitin Chugh, chief executive of Ujjivan Small Finance Bank; Sharad Saxena, chief technology officer of the Bank of Baroda, among others.
The next panel, on loan markets, will feature Rajat Verma, head of commercial banking at HSBC India; Jayesh Mehta, India country treasurer for Bank of America; K Balasubramanian, head of corporate bank at Citi (South Asia); Nilang Desai, partner at AZB and Partners; and Sanjay Singh, deputy CEO of BNP Paribas India.
The final panel discussion will have Aditya Puri, managing director of HDFC Bank; Ashu Khullar, chief executive of Citi India; Zarin Daruwala, chief executive of Standard Chartered Bank (India); Amitabh Chaudhry, chief executive of Axis Bank; Arijit Basu, managing director of State Bank of India; Sanjiv Chadha, chief executive of Bank of Baroda; and V. Vaidyanathan, chief executive of IDFC First Bank.