India is considering offering financial incentives to lure companies that could move from China due to the ongoing trade conflict with the United States.
An unnamed source told Bloomberg that financial incentives such as preferential tax rates and tax holidays are among the measures being considered. According to an Indian Trade Ministry document seen by the media, industries identified for incentives include electronics, consumer appliances, electric vehicles, footwear, and toys.
The attempts are part of the ministry’s larger plan to cut reliance on imports, while boosting exports. It is expected to help grow India’s manufacturing base and facilitate Prime Minister Narendra Modi’s flagship ‘Make in India’ initiative. The program aims to boost the country’s manufacturing to 25 percent of the economy by 2020.
China is India’s largest commercial partner, and the new plan could help New Delhi narrow its huge trade deficit with the world’s second largest economy.
A report provided by the department overseeing FDI policies in India showed that investments by Chinese companies could diversify in various sectors of the Indian market. These are smartphones and components manufacturing, consumer appliances, electric vehicles and parts, as well as daily use items, 95 percent of which are already imported from China.
The Indian government has also identified more than 150 items where exporters could increase business with China. They include prepared or preserved potatoes, synthetic staple fibers of polyesters and t-shirts, hydraulic power engines, and superchargers for motors.
The idea of attracting foreign companies by providing financial incentives has been successfully carried out by countries like Vietnam and Malaysia. They have offered preferential tax rates and tax holidays to global businesses trying to sidestep tariffs.
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