Trade tensions began between the USA & China in January 2018. Then-President Donald Trump started imposing tariffs and other trade barriers on goods being imported mainly from Chinese factories. This action was taken “to address the unlawful & unfair trade practices by China”, said then, Mr. President. As both the parties are the world’s two largest economies, trade war between them has a direct impact on other economies as well. It could be good for some and bad for others.
China has become the world’s factory and accounts for almost 28% of the export globally. Quick approval schemes and easy to do business policies are one the major reasons other than cheap labour cost in China. Foreign investors were setting up their manufacturing plants in China to manufacture at lower costs and gain a good margin on their products.
It was the year 2020 where the world’s factory came down to a halt due to own generated and spread of Covid19 virus across the entire globe. The global demand had a sharp fall which resulted to shut down nearly all the trade operations between international boundaries. Reliability on China was hitting hard for many, as they were completely dependent on Chinese manufacturing plants. The world was opposing China’s denial policy for spreading the virus and started searching for alternatives to China to initiate their operations.
South Asian countries were the best alternate to shift, as these nations have highly dense & skilled population. India was already one of the most favourite destination for BPOs and IT sector for the world. It was then, in October 2020 where many companies started shifting their base from China to India. In the initial phase, India was in talks with Samsung, Apple, Foxconn, Wistron to setup their manufacturing plants in India. Later, the Indian Government came up with the PLI (Production Linked Incentives) for ten most prominent sectors with high potential to grow and generate employment. The scheme mainly targets domestic manufacturing for the Indian market as well as for the global market.
PLI scheme includes subsidies and other benefits for Electronic/Technology products, Pharmaceutical Drugs, Telecom & Networking products, Food products, White Goods (ACs & LED), High efficiency PV Modules, Automobiles & Auto components, Advanced Chemistry Cells (ACC) Battery, Textile products, specialty steel. Current demand for semiconductors and micro-chips is high in the market and factories are lacking to serve the demand. Sudden rise in demand for personal electronic devices like laptops, mobile phones, desktops due to lockdown is affecting the supply chain to meet the demand.
At current point, Samsung, Apple, Foxconn, Wistron, Pegatron had settled with their new manufacturing plants with generating a huge amount of employment for the skilled workforce of India. Soon, India will begin manufacturing drones as they came up with schemes for drone manufacturing in India. Current news updates tells us that, Taiwan’s TSMC (Taiwan Semiconductor Manufacturing Corporation) may be in the final stage to ink a deal with India to setup an estimated $7.5 billion Chip manufacturing plant. This deal can bring relief from the semiconductor shortage which has escalated since last year.
There’s a lot more to happen in the near future as the global supply chain is changing its routes to have an uninterrupted business. India could possibly be the next favourite destination to trade as it has a humongous consumer market as well as potential to manufacture for the world. It’s a time taking process and we must cautiously monitor the changing trends in the global supply chain.