How India is positioning itself as a supply chain alternative to China

12 April 2023

India has urged companies seeking to diversify supply chains away from China to source from its growing manufacturing sector, as it looks to become a bigger player in global supply chains.

Finance minister Nirmala Sitharaman said output-incentive plans and the growth of its domestic consumer market would help India benefit from companies looking to reduce their reliance on China for manufactured goods.

So-called production-linked incentive schemes cover 13 manufacturing sectors, such as semiconductors, and aim to create national manufacturing champions.

The schemes “are bringing global value chains into India,” Sitharaman said.

“By doing that, we hope to have production of many of these large, bulk-manufactured goods which can go from India,” she said.

India is using its chair of the G20 grouping to underline its position as an alternative to China for sourcing.

“It’s unrealistic to think that everything will get out of China,” Sitharaman added. Nevertheless, firms are increasingly seeking to diversify supply chains due to disruptions caused by policies such as China’s controversial zero-Covid lockdowns, as well as mounting US sanctions on trade with China, she said.

Sitharaman is on a weeklong trip to the US to attend World Bank and International Monetary Fund meetings.

She told a US audience at the Peterson Institute for International Economics that India offered policy certainty, skilled manpower and high digital technology adoption; meeting the requirements of a "fair and transparent" economy.

She pointed to how India had become a major mobile phone handset manufacturer, despite producing very few handsets in 2014.

Last week, SM reported that India believes it can almost triple its annual exports to $2tn annually by capitalising on companies looking to diversify sourcing away from China.

Commerce minister Piyush Goyal said: “We will achieve $2tn in exports by 2030, but we should ensure merchandise exports don’t fall behind services exports.”

This year India’s overall exports were predicted to hit $770bn – falling short of the previous $900bn target. Goyal blamed the shortfall on “global headwinds”.

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