India failed to create positive impression among businesses moving away from China, says House panel report

Despite resources, India has not been able to create a positive impression among businesses moving away from China, a parliamentary panel on commerce has said in its report tabled in the Rajya Sabha on Friday.

The report stated that India has not been able to take advantage of the “China Plus One Strategy,” through which multinationals shifted manufacturing and production away from China.

Also read: China-plus-one strategy puts India at a vantage position: Rajeev Chandrasekhar

It said that the other southeast Asian countries such as Vietnam, Thailand, Cambodia, and Malaysia have become bigger beneficiaries of the strategy.

The report said that India’s competitive position in the pharmaceutical sector is undermined by its high import dependence for bulk drugs or Active Pharmaceutical Ingredients (APIs), especially from China.

The Ministry informed the committee that in fiscal 2022-23, till November 30, the value of total import of APIs stood at ₹27, 209 crore, out of which imports from China stood at ₹18,973 crore, nearly 70% of the total share. The import increased despite the border row with China since mid-2020 when 20 Indian soldiers were killed in violent clashes with the Chinese soldiers in Ladakh’s Galwan Valley.

The committee headed by Congress leader Abhishek Manu Singhvi tabled the report on Friday.

PLI schemes

The government submitted that certain steps such as Production Linked Incentives (PLI) Schemes have the capability to make India a more attractive location for companies looking to diversify their supply chains away from China, adding that it is striving to simplify the compliances on businesses and to improve overall business environment in the country. It added that more than 3,500 provisions have been decriminalised by Ministries and States and the Jan Vishwas Bill to amend 42 Central Acts has been introduced to enhance trust-based governance.

The committee is of the view that the ‘China Plus One Strategy’ presents a rare opportunity to boost industrialisation and the country to emerge as a part of Global Value Chains (GVCs) replacing China in various strategic industrial sectors. “The southeast Asian nations such as Vietnam, Thailand, Taiwan and Malaysia have emerged as viable alternatives to machinery, automobiles, transport and electrical equipment industries shifting their manufacturing bases away from China. Factors such as cheap labour, lower corporate Income Tax, proactiveness in signing Free Trade Agreements (FTAs), conducive business environment, etc, are providing additional advantage to these countries along with their geographical positioning advantage,” the report said.

The committee recommended rationalisation of direct taxes and indirect taxes must be done in sync with the international norms and laws to increase the competitiveness of domestic industries in the global markets. It also asked the government to pursue Free or Preferential Trade Agreements with countries that seek to invest in India under the ‘China Plus One Strategy’.

The government informed that India has signed 13 Free Trade Agreements (FTAs) and six Preferential Trade Agreements (PTAs) so far, adding that FTA negotiatons with the U.K, Canada and the European Union will be concluded in the “upcoming year.”