Over 200 US companies look to move their manufacturing bases to India from China

ABOUT 200 US companies are planning to move their manufacturing operations to India from China as part of a major expansion programme to extend their activities into new growing markets.

China is currently the most important manufacturer and industrial producer in the world, manufacturing more goods than any other country. However, as the economy has expanded, about $34bn worth of products are subject to a 25% Chinese tariff, forcing some businesses to expand their manufacturing and production outside China.

According to the US-India Strategic and Partnership Forum's (USISPF), American companies are talking to them about how to set up an alternative to China by investing in India. USISPF president Mukesh Aghi said that their recommendation to the new Indian government after its forthcoming elections would be to accelerate reforms and bring about transparency in the decision-making process to enhance investment.

Mr Aghi added: “We would advise to bring more transparency in the process and to make it more consultative because in the last 12 to 18 months, we are seeing US companies look at some of the decisions being made, either e-commerce or data localisation, as more domestic-oriented than global. We need to understand how we can attract those companies.

"That means all the way from land issues to customs issues to being part of the global supply chain are critical issues. There’s a whole plethora of reforms that need to go further down and I think that is also going to create a lot of jobs."

He said that Mark Linscott, the former assistant US trade representative for south and central Asian affairs, is working with USISPF member companies to come up with a recommendation as to what India needs to do to enhance its exports and work up from that perspective. Mr Aghi added that they have also formed a high-level manufacturing council within the member companies, led by John Kern, the senior vice president of supply chain operations at Cisco, who are putting a document together detailing what India needs to do to turn it into a manufacturing hub.

“One recommendation, which I strongly believe is going to help India is that we should now start thinking of a Free Trade Agreement (FTA) between India and the US. I think if India is concerned about cheap goods coming from China, an FTA will eliminate that need.

"You can put barriers to Chinese goods and still have the US providing access to the Indian market and Indian companies having more access to the US market.  We plan to have the document ready by the time elections are over as part of recommendation," he said.

Mr Aghi added that at the moment most US companies are waiting for elections to be over on May 19 before making final relocation decisions. He pointed out, however, that there is a large deluge of companies keen to not only manufacture in India but also who want to go after the domestic market.

“If you look at our member companies, over the last four years, they have invested over $50bn. What they're saying is we want a backup strategy to start manufacturing in India," he added.

India is seen as the next major economic super power after China, so it is logical that US companies will locate there in the immediate future,. Over the long term, the world's other big emerging markets expected to attract investment too include Argentina, Brazil, China, Indonesia, Mexico, Poland, South Africa, South Korea, Turkey, Egypt, Iran, Nigeria, Pakistan, Russia, Saudi Arabia, Taiwan, and Thailand.