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Coronavirus: Can India replace China as world’s factory?

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India feels China’s weakened global position could be a “blessing in disguise”

With Covid-19 infecting millions across the world, China is facing an unprecedented global backlash that could destabilise its reign as the world’s factory of choice.

Its neighbour India has sensed an opportunity and is keen to make inroads to a space it hopes China will vacate sooner rather than later.

China’s weakened global position is a “blessing in disguise” for India to attract more investment, transport minister Nitin Gadkari said in a recent interview. The northern state of Uttar Pradesh, which has a population the size of Brazil, is already forming an economic task force to attract firms keen to ditch China.

India is also readying a pool of land twice the size of Luxembourg to offer companies that want to move manufacturing out of China, and has reached out to 1,000 American multinationals, Bloomberg reported.

“This outreach has been an ongoing process,” Deepak Bagla, chief executive of Invest India, the government’s national investment promotion agency told the BBC. “Covid will only accelerate the process of de-risking from China for many of these companies.”

The US-India Business Council (USIBC), a powerful lobby group that works to enhance investment flows between India and the US, also said that India has significantly stepped up its pitch.

“We are seeing India prioritise efforts to attract supply chains, both at central and state government level,” Nisha Biswal, President of USIBC and the former assistant secretary of state for south and central Asian affairs in the US Department of State, told the BBC.

“Companies that already have some manufacturing in India may be earlier movers in reducing output in plants in China and scaling up in production in India.”

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Indian government agencies are trying to woo multinationals from the US

But things are still at an evaluation stage and decisions are unlikely to be made in a hurry, she added.

In an environment where global balance sheets are fractured, relocating entire supply chains is easier said than done.

“Many of these companies are facing severe cash and capital constraints because of the pandemic, and will therefore be very cautious before making quick moves,” independent economist Rupa Subramanya said.

According to Rahul Jacob, a long-time China watcher and former Financial Times bureau chief in Hong Kong, the Indian government putting together land banks is a step in the right direction, but large companies are unlikely to move their operations just because land is made available.

“Production lines and supply chains are far more sticky than most people seem to understand. It is very difficult to pull them apart overnight,” he said.

“China offers integrated infrastructure like large ports and highways, top quality labour and sophisticated logistics, all of which are critical factors to meet strict deadlines that international companies operate on.”

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Can India match China’s integrated infrastructure capabilities?

Another reason India might not be the obvious choice for global multinationals is because it isn’t well integrated with major global supply chains.

Last year Delhi pulled out of a crucial

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