India's ambition to lead Asian manufacturing confronts tax, supply chain hurdles
(MENAFN) India is setting its sights on becoming Asia's premier manufacturing hub, leveraging the shifting global landscape as companies seek alternatives to China. However, to surpass Vietnam and emerge as the region's manufacturing powerhouse, India must address critical challenges, including tax reforms and supply chain efficiency enhancements.
The United States has embarked on a diplomatic strategy of bolstering alliances amid escalating competition with China. President Joe Biden's administration has actively encouraged American companies to relocate electronics and technology manufacturing operations from China to more favorable destinations, particularly Vietnam and India in the Asia-Pacific region. This approach aims to diversify supply chains and reduce reliance on China, perceived as a risk by many US companies.
A recent CNBC report highlighted the significance of this shift, quoting Mukesh Aghi, President and CEO of the US-India Strategic Partnership Forum. Aghi emphasized bipartisan concerns in the United States regarding China's growing influence, with corporate boards increasingly pressing CEOs to devise strategies for mitigating risks associated with Chinese operations.
India and Vietnam emerge as attractive alternatives for foreign investors and companies, driven in part by their competitive labor costs. However, Vietnam holds a significant lead, boasting total exports amounting to USD96.99 billion in 2023, compared to India's USD75.65 billion.
According to Sameer Kapadia, CEO of India Index and Managing Director of Vogel Group, Vietnam's established prowess in electronics manufacturing provides it with a distinct competitive advantage over India. While Vietnam has long been recognized for its manufacturing capabilities, India is still in the nascent stages of establishing itself in this arena, contributing to Vietnam's dominance in attracting foreign investment.
India's aspiration to rival Vietnam in manufacturing underscores its ambition to capitalize on the shifting global economic landscape. However, to realize this goal, India must prioritize tax reforms to enhance its competitiveness and streamline supply chain processes to match the efficiency achieved by its regional counterpart. Overcoming these hurdles will be imperative for India to emerge as Asia's foremost manufacturing powerhouse in the foreseeable future.
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