US Businesses Increasingly Investing in India for Sourcing and Manufacturing in 2020
US investment in India is increasing with electronics, IT, agritech, and pharmaceuticals big areas of interest for US investors.
Op/Ed by Chris Devonshire-Ellis
American businesses are increasingly looking at India as an alternative to China for the sourcing and export manufacturing of products destined to be resold onto the US market. Our firm, Dezan Shira & Associates, has been operational in India since 2007, and assists foreign investors in the Indian market.
We’ve seen this trend within our firm, which despite the difficulties caused by the COVID-19 outbreak, is having a record year in revenues from American clients. Part of this is spillover from 2019, but it remains true that in the face of continuing unpredictability in US relations with China, India is taking up part of the China alternative mix.
The head of our North America desk, Dustin Daugherty, spoke last week at the Utah International Trade Center about the potential for American investment in this field, and he comments:
“We covered the framing of India as a supply chain solution to over-exposure of US businesses to China. Particular focus was on the five-year jump in India of ease of doing business, and the steady lowering of tax rates, unification of incentive schemes, easing of SEZ restrictions, and so on. We also discussed the US-India political situation and the independent judiciary as positives for India. COVID specific benefits for FDI were mentioned as well.”
“From the manufacturing side, electronics, pharma, textiles, and some agritech and medical devices were discussed. IT opportunities, such as software development outsourcing and then obviously BPO were featured, with particular emphasis on Tier 2 and 3 cities for IT.”
“We also went into some detail about the opportunities presented for mobile, apps, and e-commerce presented by the recent US bans on Chinese apps. US SMEs should take advantage of the startup ecosystem fostered in Tier 1 Indian cities to develop replacement solutions for the Indian market, while the big MNC players can look to partnerships with Jio (owned by Reliance) and other JV opportunities.”
Dustin also mentioned that “US firms have been long engaged in India but also lagged behind opportunities because of a general preference for China. Recent troubles with China and the recognition of a need for diversification should push US firms closer to serious considerations in India. We are grateful to the WTC Utah for their regional assistance in bringing this message home.”
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