The “China plus one” supply chain diversification strategy triggered by the global COVID-19 pandemic is creating opportunities for Indian players.
Moreover, the changing role of Chinese manufacturing in the global export value chain is leading to the creation of growth opportunities for Indian companies.
“China’s strategic shift towards manufacturing high-value goods from low-value goods is evident both in cross-industry sectors such as the shift to footwear capital goods and in intra-industry sectors such such as the shift to synthetic fibers in home textiles or cotton garments, and in the pharmaceutical sector, to formulations from active pharmaceutical ingredients (APIs),” said India Ratings and Research.
“These opportunities along with other factors such as increased self-reliance, increased domestic and global demand would be the main drivers for increased investment requirements in some of these sectors.”
Until recently, China was a global leader in several sectors such as home textiles and cotton garments, but with changing global supply chain dynamics, its production strategy has changed significantly.
“Unlike India or Pakistan, China does not have an adequate supply of cotton yarn, which discourages some of their local giants from investing more in this space. This scarcity, however, has led to increased interest from Chinese manufacturers in synthetic fibers.
“In India, this opportunity could lead to additional demand and therefore additional capital expenditure of up to Rs 120 billion over the next 10 years.”
Similarly, the Chinese majors are gradually moving away from APIs towards formulations.
“This again opens up a huge import substitution opportunity for Indian players. China-related supply chain issues during COVID-19 have also given this sector some impetus, with the government making gestures of support .”
Moreover, India would need to move simultaneously in both directions – APIs and complex drugs – to remain self-sufficient.
Additionally, a new world of opportunity has opened up for the Indian footwear industry and a few South Asian players as Chinese competitors have lost ground and started to focus elsewhere, due to both the low added value and wage pressures.
“India has a very fragmented footwear market, but given the growing global footprint, this can change quite quickly, and a few larger-scale players can gain market share.”
In addition, the China, Plus One strategy is creating some backlog growth for India’s capital goods sector.
(With IANS entries)
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Posted: Saturday, March 19, 2022, 2:56 PM IST