Thousands of companies mull China exit after Covid; India next global manufacturing hub?

As the world economy has taken a massive blow owing to the deadly Coronavirus Pandemic holding the world hostage, thousands of foreign companies are considering moving their manufacturing base from China to India, as per reports. The companies have been engaged in discussions with Indian authorities at various levels, inputs state. Accordingly, about 300 of these companies from sectors such as mobiles, electronics, medical devices, textiles and synthetic fabric, are actively pursuing plans of setting up manufacturing in India.

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Reportedly, officials from the government have expressed hope about the possible relocation of the manufacturing units after the COVID-19 crisis is controlled and India will emerge as an alternate manufacturing hub for the world. A majority of the nations such as the US, Japan, South Korea rely on China currently; however, they are contemplating making the switch after China's debacle in managing the deadly virus outbreak. Countries are insisting on their corporations to either relocate production units or set up alternate units outside China.

Meanwhile, the US has continued its onslaught on China with US President Donald Trump stating that the virus could have been stopped in China before it started and it wasn't, and the whole world is suffering because of it. 

Japan has announced USD 2 billion financial assistance for its companies to shift production out of China and other countries are speculated to follow suit.

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The Indian government has taken several reformative actions to attract foreign investment such as reducing corporate tax to 25.27 percent and further slashing it down to 17 percent for new manufacturers which is the lowest in South East Asia. With the reduced tax rate and the implementation of a single tax structure in the form of GST, India hopes to attract significant foreign investment in the manufacturing sector.

However, matching the production costs with China is a challenge for India given that the production cost difference between India and South East Asian countries is about 10-12 percent. Nevertheless, the large market size of India still attracts the manufacturers as they can sell their produce domestic market, unlike other countries where the only option is to export owing to small market size in the home country of the manufacturing unit.