Easynomics: Why companies leaving China will not come to India (2024)

FAQs

Easynomics: Why companies leaving China will not come to India? ›

Companies are reluctant to invest in India for a wide variety of reasons. This includes tax terrorism, frequent change in regulations and sometimes with retrospective effect, poor physical infrastructure, very high turnaround time at Indian ports, poor labour productivity, inspector raj, etc.

However, the list of obstacles they face in India is equally long: "regulatory flip-flops, high tariff barriers, red tape, perplexing land policies, infrastructure issues and others tied to the ease of doing business," according to the Indian daily newspaper Deccan Herald.

While India also has a large consumer market, it has faced challenges in terms of infrastructure development and market fragmentation. Political stability and predictability: China has maintained a relatively stable political environment for several decades, providing a sense of predictability for businesses.

It was pointed out in a report done by the European Union Chamber of Commerce for China that the security controls, the government's protection of Chinese rivals, and the lack of progress on promised reforms are leading companies to feel uneasy. Slowing economic growth and rising costs are also impacting businesses.

The global firms are moving their manufacturing operations to India as there is no other country in the world outside China that can match the scale that India has, said the Deloitte-South Asia CEO. Some Japanese, US, and European companies are moving manufacturing operations into India.

India's status as the fastest-growing major economy is undermined by inconsistent policies, hindering foreign investment flow, according to economists Raghuram Rajan and Surjit Bhalla. Despite recent attraction to global investors, policy uncertainty, high taxes, and erratic tariff changes deter sustained investment.

The Chinese companies are not a threat to the Indian firms in the global markets, Mike, one of the rare Chinese IT executives who worked with the top Indian company Infosys for years, told PTI here ahead of his book launch.

Second, banning imports could result in consumers ending up either with poor quality products or paying for more expensive products. While banning imports may initially seem advantageous, it can lead to complacency, inefficiency and a disincentive to spend on research and development.

If high growth rates can be sustained, India is expected to overtake the US and become the world's second-largest economy by 2075. Can India sustain a high growth rate? There are two contrasting views on this, optimistic and pessimistic, and both views are well-grounded and backed by hard facts.

Why are US companies pulling out of China? ›

Boards and companies are reevaluating their risks and reviewing mitigation strategies. This trend is being driven by a number of factors, including rising labor costs in China, the ongoing trade war between the United States and China, and concerns about China's political and economic stability.

“China is becoming more challenging for foreign investors. What businesses need above all else is clarity and predictability, yet across many sectors companies report that China's legal and regulatory environment is becoming less transparent and more uncertain,” Sean Stein, chairman of AmCham Shanghai, said.

Nicholas Burns: China is the second largest economy in the world. It's a big market. So, a few American companies have left, but most have stayed. Some American companies are moving at least some of their operations to Singapore, Vietnam, Mexico.

A year since the withdrawal of Covid restrictions in China, the country has seen increased iron ore buying from India. Nearly 92 per cent of Indian iron ore exports, or 40.40 million tonne (mt) for the 11 month period (April – February) of FY24, went to China.

Ans. As per Gateway House's study “Chinese Investments in India,” the overall worth of Chinese investment funds in Indian startups between 2015 and 2020 is estimated to be around $4 billion. In reality, 18 of the 30 Indian unicorns or startups are substantially supported by Chinese funding as of March 2020.

License requirements for importing goods from China to India

If you are importing goods for further manufacturing or trading purpose, then you need to apply for Import Export Code (IEC). You will be penalized if you try to import goods from China without this code. Obtaining this code is pretty simple.

In India, for example, MNCs have exited due to arbitrary tax regime, accumulated losses, over capacity, land acquisition issues and lack of expected growth due to market anomalies.

Lack of Skilled and Efficient Personnel. The country has a shortage of experienced technical and efficient personnel needed for industrial development.

Complex regulatory environment: India's regulatory environment is often cited as one of the most complex in the world. Starting a business in India requires complying with numerous rules and regulations at the national, state, and local levels, which can be a time-consuming and challenging process.

A significant tailwind to job creation at the bottom of the pyramid helped by the government's focus on infrastructure development and rural employment is one of the main causes for labour shortage, experts said.