A shopping mall in India where retail landscape is evolving rapidly, and is currently estimated at about US$600 billion with an average annual growth of 12 per cent, says HKTDC.
Hong Kong-based manufacturers might consider relocating their China-based factories to India as production from the mainland has become uncompetitive, according to an industry body.
The call came from Hong Kong Trade Development Council’s (HKTDC) Research Department which said the sustained rise in production costs on the mainland has blunted the competitive edge of many Hong Kong companies with labour-intensive factories located on the mainland, prompting them to seek alternative production bases elsewhere.
Following its recent fact-finding trip to India, HKTDC Research believes that some Hong Kong companies might consider relocating their production bases there.
“Take garment manufacturing as an example. The Indian garment manufacturing industry has been expanding exports in recent years, with many major exporters successfully building up business contacts with international buyers,” said Dickson Ho, Principal Economist (Asian and Emerging Markets) at HKTDC.
“With advantages in raw materials and prospects for vertical integration, India is a strong production base and a location worth considering for factories with labour-intensive manufacturing, such as garment-making,” he stressed.
Ho pointed out that, as a production base, India also enjoys many other advantages, including relatively low taxes under free trade agreements within and beyond the region, labour costs that are lower than those on the mainland, growing labour productivity (which recorded a growth rate of 3.8% in 2014), and the presence of many major seaports, which help contribute to India’s strong logistics performance compared with other production bases in South Asia.
Ho added that the Indian government has recently implemented a number of business-friendly policies to encourage foreign direct investment (FDI) in a wider range of industries and streamline the government approval process.
Specific investment incentives are provided for selected industries, for example the electronics sector, and tax incentives are available to exporters, he said.
India’s laws and regulations are often lamented for being overly complex, therefore Ho advised Hong Kong companies that they can initially consider relocating factories to industrial parks with more favourable conditions.
Gujarat in western India, for example, provides a relatively stable electricity supply and well-established transportation system connecting industrial areas with ports. Some industrial estates even offer plug-and-play services for smaller manufacturers, he said.
Ho also indicated that with the world’s second-largest population, India’s retail landscape is evolving rapidly, and is currently estimated at about US$600 billion with an average annual growth of 12 per cent.
With the surge of middle-class consumption, the retail sector is projected to keep expanding. He believes that Hong Kong companies should look into the opportunities for exploring the Indian domestic market. fii-news.com
