Policies of the Government to take advantage of the China plus one strategy

China, is considered the world’s manufacturing factory for multiple products like electronic equipment, steel, machinery, toys, transport equipment, automotive components etc. China exported goods worth $ 3.36 trillion in 2021, accounting for almost 15% of the global exports alone, almost twice that of the second placed USA.

Lately due to the pandemic, China’s Zero Covid policy and the increased cross border tensions with countries, there have been supply chain disruptions on a large scale and companies have started to follow, what is popularly known as the China Plus one strategy.

China Plus strategy is a strategy being adopted by companies to build alternate manufacturing options and supply sources apart from those in China to de-risk their business’s due to the apprehensions of such disruptions again in future owing to the current strong dependence on China. They seek to diversify their production and supply sources outside China to ensure smooth and seamless production and supply of components and raw materials for their business.

India is being highly regarded to be an ideal country to diversify their manufacture bases and supply sources due to a multiple of factors like the low per capita wage rate, high amount of young population, availability of skilled workforce, strategic location, availability of key resources, huge domestic market, cheaper availability of land etc.

However, there are a few shortcomings which India as country face like high logistic costs, inadequate infrastructure within the country, multiple compliances and approvals required, high cost of finance and lack of adequate availability of power, hence the Government has come up with 2 exciting policies and schemes to benefit companies and overcome the shortcomings of India as an attractive investment destination for the global companies.

·??????Production Linked Incentive (PLI scheme): The Government came out with the PLI scheme in early 2021 in a bid to boost the domestic manufacturing, exports and investment within the country with an aim of fulfilling the dream of an “Aatmanirbhar Bharat”. The scheme, one of the biggest in recent times in India, was launched for the periods from FY 2021-22 to FY 2025-26 setting aside R.s. 1.97 lakh crore across 19 labor intensive sectors like automotive manufacturing, telecommunications, electronic components, semiconductors, steels etc. to compensate the companies for the loss they would have to face in manufacturing within the country due to inadequate infrastructure and level playing field with the other nations like in areas of finance, transportation, logistics, inadequate availability of power, limited design capability, inadequacies in skill development and strong focus on R&D by offering the manufacturing companies an additional incentive which vary from as low as 1% for electronics and technology to as high as 20% for critical industries starting drugs or drug intermediaries of the incremental sales over the base year within the limit specified for a period of 5 years subsequent to the base year which is defined by the companies.

·??????National Logistic policy (NLP): Currently the logistic cost for companies within the country is 13-14% of the GDP and the government in a bid to reduce the cost to around 8% of the GDP has launched the NLP, aiming to put India in the top 25 countries of the National Logistic Index(NLI) by 2030, which would build the pathway for accelerated efficiency and seamless movement of goods at the lowest possible cost within the country by ensuring quick last mile delivery, end transport related challenges, minimize transportation related wastage etc. At the moment the industry is highly defragmented and complex involving more than 20 government agencies, 40 PGAs, 37 export promotion councils, 500 certifications, 10000 commodities, 160 billion market size. It also involves 12 million employment base, 200 shipping agencies, 36 logistics services, 129 ICDs, 168 CFSs, 50 IT ecosystems and banks & insurance agencies. Further, 81 authorities and 500 certificates are required for EXIM. The policy would be a comprehensive tech enabled system to reduce bureaucracy, cost, overall travel time across various modes of transportation like road, railway, vessel and aircraft. Unified Logistics Interface Platform (ULIP) will bring all the digital services related to the transportation sector into a single portal, freeing the exporters from a host of very long and cumbersome processes for compliance. The policy focused on building robust highways connecting states within the country, leveraged by the countrywide implementation of Fastag to drastically reduce the transportation time and cost. Increasing the total capacity of ports within the country and digitizing movement through vessels to a single online platform to reduce the huge compliances and lag which is faced by the companies at ports. Lastly focus is also on adding at least 40 more air cargo terminals, equipping 30 more airports with air cargo facilities and building 35 multi modal hubs within the country. The National infrastructure policy pipeline is worth almost 100 lakhs crore. The PM Gati Shakti - National Master Plan (NMP) which brings together 16 ministries to enable integrated planning and coordinated implementation of infrastructural connectivity, is expected to lower logistics costs significantly would be integrated and work in tandem with the NLP to achieve the expected benefits.

Hence these 2 policies are at the forefront of the country to become the manufacturing hub of the world and help India reach its plans of increasing the share of manufacturing in GDP to 25% by 2025 and develop the core manufacturing sector at par with the global manufacturing standards, which would help the country reduce their dependence on China and become the Global superpower in the years to come.?