India Looks to Lure More Than 1,000 U.S. Companies Out of China

via Bloomberg:

India is seeking to lure U.S. businesses, including medical devices giant Abbott Laboratories, to relocate from China as President Donald Trump’s administration steps up efforts to blame Beijing for its role in the coronavirus pandemic.

The government in April reached out to more than 1,000 companies in the U.S. and through overseas missions to offer incentives for manufacturers seeking to move out of China, according to Indian officials who asked not to be identified, citing rules on speaking with the media. India is prioritizing medical equipment suppliers, food processing units, textiles, leather and auto part makers among more than 550 products covered in the discussions, they said.

Trump’s move to blame China for its handling of the Covid-19 outbreak, which has killed more than a quarter-million people worldwide, is expected to worsen global trade ties as companies and governments move resources out of the world’s second-largest economy to diversify supply chains. Japan has earmarked $2.2 billion to help shift factories from its neighbor, while European Union members plan to cut dependence on Chinese suppliers.

For Indian Prime Minister Narendra Modi, a surge in investment would help shore up an economy battered by an eight-week nationwide lockdown to control the Covid-19 outbreak, and help him make up ground hitting a target to grow its manufacturing sector to 25% of gross domestic product by 2022 from 15%. The need to create employment is now even more urgent after the pandemic left 122 million people jobless and forced India to shut down all major cities.

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It could also present India with a chance to finally push through long-stalled reforms on land, labor and taxes that have hindered investment for years. Modi’s second term has been marred by nationwide protests and slow growth since his party scored a landslide election victory a year ago, presenting a risk for companies planning to move.

“There are opportunities for India to try to gain a place in global supply chains, but this will require serious investments in infrastructure and governance,” said Paul Staniland, an associate professor at the University of Chicago who writes about India’s politics and foreign policy. “India faces tough competition from elsewhere in South and Southeast Asia.”

Officials have told companies that India is more economical in terms of securing land and affordable skilled labor than if they moved back to the U.S. or Japan, even if overall costs are still higher than China. They have also offered an assurance that India will consider specific requests on changes to labor laws, which have proved a major stumbling block for companies, and said the government is considering a request from e-commerce companies to postpone a tax on digital transactions introduced in this year’s budget.

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Tax, Labor Laws

India’s trade ministry has sought detailed feedback from U.S. companies on changes needed to make the country’s tax and labor laws more favorable to companies, said one of the officials. Modi’s federal government is working with states to ensure long term solutions, the official added, including developing land banks to ensure a quick start for units.

India expects to win over U.S. companies involved in healthcare products and devices, and is in talks with Medtronic Plc and Abbott Laboratories on relocating their units to the country, an official said. Medtronic spokesman Ben Petok and Abbott spokeswoman Darcy Ross didn’t immediately respond to emails seeking comment.