India failed to create positive impression among businesses moving away from China, says House panel report

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Source: The post is based on the article “India failed to create positive impression among businesses moving away from China, says House panel report” published in The Hindu on 25th March 2023

What is the News?

A Parliamentary Panel on Commerce in its report has said that India has not been able to create a positive impression among businesses moving away from China.

What are the key highlights from the Parliamentary Panel on Commerce report?

China plus one strategy: India has not been able to take advantage of the “China Plus One Strategy,” through which multinationals shifted manufacturing and production away from China.

– Instead other southeast Asian countries such as Vietnam, Thailand, Cambodia, and Malaysia has emerged as viable alternatives to the manufacturing bases shifting away from China. 

– Factors such as cheap labour, lower corporate Income Tax, proactiveness in signing Free Trade Agreements (FTAs), conducive business environment, etc, are providing an additional advantage to these countries along with their geographical positioning advantage.

India’s API import dependence on China: India’s competitive position in the pharmaceutical sector is undermined by its high import dependence on bulk drugs or Active Pharmaceutical Ingredients (APIs) especially from China.

– In Financial Year 2022-23, the value of total import of APIs stood at ₹27,209 crore, out of which imports from China stood at ₹18,973 crore, nearly 70% of the total share. 

– The import increased despite the border row with China since mid-2020 when 20 Indian soldiers were killed in violent clashes with the Chinese soldiers in Ladakh’s Galwan Valley.

What are the steps taken by India to attract companies moving away from China?

The government has taken certain steps such as Production Linked Incentives (PLI) Schemes to make India a more attractive location for companies looking to diversify their supply chains away from China.

More than 3,500 provisions have been decriminalized by Ministries and States and the Jan Vishwas Bill which amends 42 Central Acts has been introduced to enhance trust-based governance.

India has also signed 13 Free Trade Agreements (FTAs) and six Preferential Trade Agreements (PTAs).FTA negotiations with the U.K, Canada and the European Union will be concluded in the “upcoming year.”

What are the recommendations given by the Parliamentary Panel?

The committee recommended rationalization of direct taxes and indirect taxes must be done in sync with international norms and laws to increase the competitiveness of domestic industries in the global markets. 

It also asked the government to pursue Free or Preferential Trade Agreements with countries that seek to invest in India under the ‘China Plus One Strategy’.

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