India Targets US Firms Exiting China to Reshape Global Supply Chains

With trade tensions rising between the US and China, India is positioning itself as a competitive manufacturing alternative across key sectors.

1. Offering multi-year duty exemptions for more than 100 components needed in electronics production.

2. Targeting a significant increase in capacity for semiconductors and display manufacturing.

3. Trying to use land records to ensure that companies that promise to invest in India get smooth title guarantees.

4. Making a big push to get companies to use local suppliers.

India Eyes Opportunity Amid US-China Trade Rift

Amid the intensifying trade disputes between the U.S. and China, India is hurrying to attract American manufacturers looking for new production bases. With many industries, from electronics to pharmaceuticals, toys, and chemicals, under the spotlight, the Indian government is setting about to make the country a strategic alternative manufacturing hub.

The country's strategy is clear: take advantage of the changing supply chains while our main competitors, like Vietnam, haven't yet solidified their own leads. Fine-tuning discussions in recent months between industry representatives and policymakers have zeroed in on the need for initiatives that set us up for success in virtual trade negotiations with India scheduled for next month, with the promise of in-person meetings soon thereafter.

Electronics Sector Sensing a Breakthrough

Emerging as a high-potential area, the electronics industry in particular has a critical window to ramp up domestic production and investments. U.S. tariffs on Chinese electronics remain in force, which makes duty-free access into the U.S. for smartphones and other electronics made in India a major plus for our industry. Electronics can be an even bigger powerhouse if we make more of them in India.

Yet, the execution of that plan demands precision. Right now, much of the electronics supply chain is heading to Vietnam, which is now the largest exporter of Samsung devices to the US. The reality is that unless India provides clearer vision and sustained support to its aims, there's a very real chance that Vietnam could end up with a much bigger slice of the electronics manufacturing pie.

Government’s Strategic Push Gathers Momentum

To close the gap, India has adopted a multi-pronged approach. The lead agency is the Department for Promotion of Industry and Internal Trade (DPIIT). It is expected that ministries associated with sectors of manufacturing will join soon. PLI schemes have been central to this push and have attracted interest in a few sectors, notably smartphones, IT hardware, and electronic components.

The government has identified 10 to 12 strategic sectors, including pharmaceuticals, chemicals, automobiles, air conditioners, and toys, where India has a comparative advantage. Officials have also indicated that proposals involving joint ventures and technology transfers will receive preference, as they contribute to ecosystem development.

Industry Seeks Support on Ground Realities

Although the roadmap holds promise, the operational issues stakeholders from industry have flagged are quite numerous. The high level of taxation, slow customs processes, and persistent bottlenecks in infrastructure continue to make large-scale investment seem too risky to too many would-be investors. Industry chambers are in active dialogue with the government to resolve these and other hurdles.

If executed with an inclination toward agility, accompanied by a fair dose of forethought, the strategy that India has set could yield something very different. It could unlock a new phase of growth, manufacturing-led growth, as they say, that could reshape India’s position in the global trade landscape.