Pocast Transcript :
Hi I am Arjun Parthasarathy speaking and this podcast is on “#MakeinAmerica – Where does that leave #MakeinIndia ? ”
US companies will think many time before creating production capabilities abroad as the Trump administration is keen on the companies produce goods and services in America. US companies and even global companies could get the kind of sops that countries like Mexico, China and India are offering to set up production plants in their respective countries.
Ford just announced that it scrapped a plan to set up a plant in Mexico and instead is setting up the plant in the US. Apple is demanding so much of sops from the Indian government to set up production here that it is becoming impossible for the government to give the sops. Apple’s manufacturer Foxconn will have to justify setting up a manufacturing facility here rather than in the US.
Globalisation in the 1990’s saw a large shift of manufacturing from the developed countries to emerging countries, as cost arbitrage was huge. The globalisation resulted in a large number of jobs shifting from developed economies to emerging economies. However 20 years of globalisation has resulted in a whole generation of the workforce in developed economies disgruntled and unhappy leading to political upheaving such as Brexit and Trump victory.
The political shift is resulting in Trump going all out to get US companies to invest in the US rather than abroad. This could spread to the Eurozone where unemployment rate is high at close to 10% and youth unemployment too is high, going over 20% for many countries.
PM Modi is keen on creating jobs in India through his #MakeinIndia campaign. The government is ready to extend sops for companies investing in India and these sops will lower production costs for global manufacturers. However with the new political shift in the developed world, the #MakeinIndia campaign could come unstuck.
The government would have to rethink its strategy on #MakeinIndia. Extending sops plus giving a huge market to global companies is not such a good idea unless the benefits to the country are huge. Domestic companies are also placed at a disadvantage when sops are given to global manufacturers. Competition becomes uneven and Indian entrepreneurs will be reluctant to establish their entrepreneurial skills.
India is a big market and is eyed by all global companies looking to expand into fast growing markets. The government should use this as its primary selling point and get companies to invest in India. US companies can then successfully argue that by investing in India they gain a big market rather than save on costs, which will help create jobs both in the US and in India.
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