Supply Lines: India sees an opportunity

Supply Lines
Bloomberg

Indian Prime Minister Narendra Modi is on a mission these days. As the pandemic ravages the globe, the leader of Asia's third-largest economy is quietly drawing up plans to take advantage of a possible shift in international supply chains.

For starters, his government is focusing on investors looking to add  manufacturing outside China after the coronavirus outbreak disrupted supplies at the start of the year. The plan is to woo global mobile handset makers, consumer durable companies and others willing to put out more than half a billion dollars. On offer: tax incentives, easy access to land and other infrastructure.

In short, India is borrowing a move out of China's playbook — the plug-and-play option to become an economic heavyweight.

As the country emerges from one of the world's longest shutdowns to check the spread of the virus, Modi is keen to get the economy off the ground and regain the mantle of the world's fastest-growing major nation. Activity ground to a halt after India enforced strict stay-at-home rules on March 25, prompting economists to predict an annual growth contraction for the first time in four decades.

India's efforts to chase China's production capability began in earnest six years ago with Modi's "Make in India" initiative that offered incentives to foreign companies to open factories. It is close to overtaking China as the world's most populous country and its working-age population is projected to top 1 billion by 2050. But the advantage of abundant and cheap labor has been offset by factors like inadequate infrastructure, outdated land and labor regulations, and bureaucratic lethargy.

That's all supposed to change. India launched a plan Tuesday to offer financial incentives of close to $7 billion and recruit five big global companies manufacturing mobile phones and related components. An incentive of 25% on capital expenditures will be provided for production of electronic components, semiconductors and other parts. Electronic manufacturing clusters with ready-to-use facilities will be offered.

Separately, India is developing an area of land bigger than New York's Long Island to lure businesses moving out of China. A total area of 461,589 hectares has been identified across the country and will be offered to investors along with with around-the-clock power and water supply. All regulatory approvals will be in place before the land is handed over.

Unni Krishnan in New Delhi

Charted Territory

Broken supply chains have left farmers across the globe with mounds of food waste. Facing the prospect of plowing over fields and euthanizing pigs, some of these farmers are mitigating their losses by going straight to consumers.

Today's Must Reads

  • Out the ring | Britain's services industry is being left out of the country's post-Brexit trade negotiations, putting a large part of the economy at risk of profound damage, according to a new report. There's been no progress in talks with the EU.
  • All together | New Zealand and its partners in a proposed Asia trade bloc continue to seek ways to bring India into the group, arguing that it will have a key role as the pandemic disrupts global trade.
  • Trying again | Tesla will rework plans for its factory near Berlin to appease environmental critics and ensure its first European outpost can start producing cars in about a year.
  • Collision course | The U.K. is heading for a damaging showdown with China as it takes on Beijing over Hong Kong and Huawei Technologies Co.
  • Crew relief | An oil tanker that discharged crude in South Korea and is en route to Singapore made a detour to Manila to change crew as port restrictions and limited flights continue to make it difficult for ships to swap workers.
  • Stephanomics podcast | This week's episode takes place in Madrid in a post-coronavirus world where travel is limited, outdoor dining mandatory and police decide how many tables are allowed. Host Stephanie Flanders also talks with Bloomberg Economics' Johanna Jeansson about the very different pandemic strategy adopted by Sweden. 

On the Bloomberg Terminal

  • In danger | Two service-sector industries — trade, transportation and utilities and leisure and hospitality — accounted for over half of the 20.4 million U.S. private-sector job losses in March and April combined, writes Bloomberg Economics.
  • Trade boost | Australian gross domestic income rose 0.3% in the first quarter, courtesy of a 2.9% advance in terms of trade as export prices rose and import prices declined, writes Bloomberg Economics.
  • Use the AHOY function to track global commodities trade flows.
  • Click HERE for automated stories about supply chains.
  • See BNEF for BloombergNEF's analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.
  • Click VRUS on the terminal for news and data on the coronavirus and here for maps and charts.
 

Before it's here, it's on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can't find anywhere else. Learn more.

 

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