June 13, 2023
Chair of U.S.-India Policy Studies, CSIS, Managing Director, India & South Asia, McLarty Associates
Amid a competitive business landscape, India is undergoing many changes that have uniquely positioned it to become a global manufacturing hub. Commercial ties with the United States can help strengthen this position, and positively impact the world’s supply chain while benefiting India and the U.S. alike.
During the Chamber of Commerce’s 48th annual India Ideas Summit, leaders from both countries discussed India’s rise as a global manufacturing hub and how U.S.-India partnerships with corporations such as Walmart can help accelerate that growth and improve the supply chain for all.
India Is Seeing Rapid Growth Through the Easing of Regulatory Practices
India has experienced rapid export growth in recent years, as it continues to strengthen and improve upon its manufacturing sectors. Himani Pande, DPIIT Joint Secretary, attributes these changes to two pillars: continuous reform and ease of doing business.
According to Pande, India’s continuous reform is in part due to an “increasingly liberalized regime in FDI (Foreign Direct Investment).”
“If you look at the data for last year, almost 98% of our FDI came through the automatic route,” Pande said. “It didn't require any government approvals, it just came right into the country… Last year's FDI is almost 82% of the total FDI that we were receiving in 2014. That's a big jump that we are seeing, almost 62% of the total FDI, which came in the past few years, has come within this time set.”
Conducting business has gotten easier as well, thanks to a reduction in compliance burdens that businesses must follow.
“Almost 39,000 regulatory practices have been revised, reformed, removed, and increasing decriminalization… has taken place across various sectors,” Pande said. “Laws have been reformed; laws have been junked also.”
Suppliers in India Are Expanding
India’s manufacturing industry is refining its processes and finding new ways to improve, benefiting other industries across the globe. Guru Bandekar, the Global Vice President of Supply Chain Management for Carrier, believes that India is changing in three areas:
- Policy. In recent years, improvements such as PLI schemes and other newly-available programs have changed the landscape and are opening doors for new opportunities.
- Process. Although policies are available for various industries, accessing said policies has posed some challenges. Bandekar believes the “knowledge and simplicity of [the] process is something that can be improved on.”
- Production systems. Still in its early stages, the supplier ecosystem is continuing to grow; however, not all industries are seeing an abundance of available suppliers yet to fulfill their needs.
Speaking about the supplier ecosystem’s availability in India, Bandekar sees much room for improvement — particularly in the industrial sector.
“While [suppliers] may be available for somebody like the auto industry or a white good industry, for an industrial company like us, those suppliers are hard to come by and mostly because the tier two/tier three supply raw material and the input is not that easily available in India,” Bandekar said. “We have a lot of suppliers in India where we have to bring in products [and] export the products from Southeast Asia into India to be able to then transform that before we export out of India.”
Ultimately, Bandekar believes the goal is to “at least triple or more our sourcing from India.”
The U.S. Can Help to Improve India’s Manufacturing Role
Though Walmart isn’t a manufacturer, it still plays a major player in the manufacturing industry, as it not only purchases goods but helps to build the ecosystem that manufactures them.
According to Paul Dyck, the Vice President of Global Public Policy and Government Affairs at Walmart, to hit the company’s goal of sourcing $10 million worth of goods annually from India by 2027, the corporation had to rethink its infrastructure which couldn’t support the goal on its own. Now, it’s investing heavily in the supply chain through supplier development programs and investments in small farmers by the Walmart Foundation.
“Whether it's existing suppliers that we already work with or helping develop new suppliers in big categories, it's small suppliers, it's MSMEs (Micro, Small and Medium Enterprises),... we can't ask an MSME in India, even with the best product,... to access a global supply chain,” said Dyck. “We've got to help with that.”
In the future, Dyck sees a big opportunity in the toy sector, where Walmart will be able to “bring different partners together to help create a much bigger sector of export for India.”
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