| By Linyi Zheng |
As per the data provided by Import Yeti, Walmart, which is the largest retailer worldwide, is importing more goods from India to the United States and reducing its reliance on China. During a meeting in May of this year, Indian Prime Minister Narendra Modi described his meeting with Walmart CEO Doug McMillon as “fruitful. “Even though China is still Walmart’s biggest supplier for importing goods, the data reveals that only 60% of Walmart’s shipments came from China during the same period, down from 80% in 2018. The move is aimed at cutting costs and diversifying its supply chain.
Apple Shifting Production from China to India
During an earnings call in February, Apple CEO Tim Cook expressed his excitement about the Indian market and confirmed that it was one of the key areas of focus for Apple. He mentioned Apple was using the experience it gained from expanding in China a few years ago to learn and grow in India. Cook visited India in April this year and held talks with Prime Minister Narendra Modi to expand production and smartphone sales in the country. Apple plans to produce a quarter of its iPhones in India by 2025 and half by 2027.
Post 2020, India has introduced several policies to strengthen its indigenous manufacturing sector.
India has implemented the Production Linked Incentive (PLI) program to further bolster its manufacturing industry. Having already attracted foreign investment through the Phased Manufacturing Programme (PMP), the PLI program aims to provide substantial financial support of Rs. 19.7 trillion (approximately $26 billion) towards the production of 14 crucial industries. These industries include semiconductors, photovoltaics, electronic devices, pharmaceuticals, medical devices, and automobiles, all of which rely heavily on manufacturing capabilities in China.
In a bid to compete with global players such as China and Vietnam in the cell phone production market, India has approved a substantial incentive program worth approximately $10 billion. The program aims to entice major global semiconductor manufacturers to utilize India as a production base and establish the country as a key player in electronic systems design and manufacturing. This move is poised to position India as a leading contender in the global arena.
India Trade Policies Seemingly Target China Investments
In order to enhance its local industrial chain, India has intensified efforts to attract more foreign investments. However, it appears that the country has become less welcoming to Chinese companies. On April 18, 2020, the Department of Promotion of Industry and Internal Trade (DPIIT) revised its foreign investment policy, which now mandates that “any investor from countries bordering India” must invest only under the Indian government’s access route. Given that China is currently the top investor from neighboring countries, this policy is widely perceived as a restriction on China’s investment freedom in India.
Following the implementation of the new FDI policy, there has been a noticeable decline in the number of Chinese companies investing in the region. Instead, only a limited number of capital increase projects have been initiated. Data from China’s Ministry of Commerce shows that non-financial direct investment by Chinese companies in India fell by nearly 70% year-on-year in 2021, to just $63.18 million.
According to India’s Deputy Minister of Science and Technology in early August 2022, Chinese smartphone manufacturers maintain a significant market share in India, but their dominance is not attributable to equitable competition. Indian officials further contend that these brands frequently operate at a loss, despite holding 70% of India’s market share, contributing to market imbalances. Soon after, Bloomberg reported that India is planning to restrict the sale of Chinese smartphones that cost less than 12,000 rupees ($150) in the local market. This move is aimed at supporting India’s domestic cell phone industry.
India Still Needs to Focus on Fixing Internal Systemic Issues
However, the Indian government’s former chief economic adviser, Brown University senior researcher Arvind Subramanian published article “Why India Can’t Replace China” last year in the “Foreign Affairs” magazine and pointed out that India needs to address three major obstacles – the high risk of investment, strong inward policies, and large macroeconomic imbalances – in order to attract multinational enterprises and take advantage of opportunities for industrial transfer, and failure to address these issues could result in missed investment opportunities.
