To survive the global pandemic, multinational corporations (MNCs) have had to find newer ways of conducting business for survival and growth. Rising protectionist policies, regulatory scrutiny, the likelihood of abrupt disruptions like COVID-19 and restrictions on foreign investments are directly impacting their supply chain strategies. From diversification to reshoring and from regionalisation to risk mitigation, policies have been tweaked and processes overhauled.

Now, more than ever, CXOs are making tactical and operational changes to navigate through this highly uncertain, fast-changing global environment and meet the needs of a vastly evolved business landscape. In this process, they are seeking expert advice to limit and manage disruption, mitigate risk, and build resilience and agility.

KPMG in India has been closely monitoring the shifting investment trends and supporting clients in their supply chain diversification strategies. Through focussed efforts, we are helping clients identify key risk areas complicating strategic transformation to attain business continuity and resilience. Our efforts are channelised to help clients get forward looking perspectives on areas related to:

  • Identifying new supply bases in alternative jurisdictions
  • Shortlisting the right set of partners for sourcing/manufacturing
  • Navigating complex tax and regulatory procedures across jurisdictions
  • Devising risk mitigation strategies to reduce transition-related disruptions
  • Building a supplier development roadmap for operating in a new jurisdiction
  • Advising on investment in technology and processes to become future ready.

Global production networks are complex, sophisticated, inter-dependent and deeply entrenched, making reconfiguration a challenging task. Aside from the immediate goal of restarting operations, businesses now have to contend with assessing the risk exposure, supply alternatives, tax considerations and channel complexities. Matters, such as governance and regulatory adherence, use of digital technology and analytics, implementation priorities and roadmaps - all need detailed study and domain knowledge. We are here to help as your advisor. At KPMG in India, we use our significant subject matter expertise and multidisciplinary advisory services to demystify the complex implications of a decision to rebalance supply chains.

Neeraj Bansal
Partner and COO–India Global
National Leader–Supply Chain Realignment, KPMG in India

India advantage

India, much like other emerging economies, is exploring ways to build its investment attractiveness and to make it a viable contender for global manufacturing/sourcing. The government's investment-driven policy measures along with corporate tax cuts, investment in infrastructure under the National Infrastructure Pipeline (NIP) and business-friendly changes to labour laws are likely to further underpin India’s attractiveness as a global manufacturing hub.

Notable government reforms *

  • Launched the Atmanirbhar Abhiyan scheme, estimated at USD265 Bn
  • Introduced the Product linked incentive (PLI) with an outlay of USD27 Bn for 13 sectors
  • Set up a USD1.4 Tn National Infrastructure Pipeline (NIP) for infrastructure development
  • Launched the Export Promotion Capital Goods (EPCG) scheme for duty-free import of capital goods
  • India, Japan, and Australia launched the Supply Chain Resilience Initiative (SCRI) to build resilient supply chains in the Indo-Pacific region
  • Launched the PM Gati Shakti National Master Plan, powered by clean energy and driven by seven engines, namely roads, railways, airports, ports, mass transport, waterways, and logistics infrastructure.

What makes India a favourable manufacturing destination?

What makes India a favourable manufacturing destination?

Sectors of strategic importance - An overview

Sectors of emerging importance in India

Industry snapshot1

  • One of the largest consumer electronics markets in the Asia-Pacific region
  • The electronics industry is expected to reach USD540 Bn by FY25
  • Electronics System Design and Manufacturing (ESDM) expected to generate USD220 Bn in economic value by 2025

Growth drivers

  • Demand for electronics hardware to reach USD400 Bn by FY25*
  • 100 per cent FDI allowed under the automatic route

Recent government initiatives

  • PLI outlay for large scale manufacturing: USD5.7 Bn2
  • Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS)
  • Modified Electronics Manufacturing Clusters scheme (EMC 2.0)

Industry snapshot

  • Sixth largest exporter of textiles and apparel*
  • Exports in the industry is expected to reach USD300 Bn by FY25*

Growth drivers

  • 100 per cent FDI allowed under automatic route
  • 10 upcoming mega textile parks for promoting exports under National Textile policy*

Recent government initiatives

  • PLI outlay for man-made fibre (MMF) and technical textile: USD1.45 Bn
  • National Technical textile mission at an outlay of USD194 Mn*  proposed for a period of FY21-FY24

Industry snapshot3

  • Consumer electronics industry is expected to reach USD21 Bn by FY25
  • Air conditioners market to increase to 16.5 Mn units by FY25 from 6.5 Mn in FY19
  • Refrigerator market to increase to 27.5 Mn units by FY25 from 14.5 Mn in FY19
  • LED market to increase to USD8.2 Bn by FY24 from USD3.6 Bn in FY19

Growth drivers

  • 100 per cent FDI allowed under automatic route

Recent government initiatives

  • PLI outlay for white goods: USD0.85 Bn
  • Duty drawback scheme
  • Export Promotion Capital Goods scheme

Industry snapshot*

  • World's largest producer, consumer and exporter of spices
  • World's second largest producer of food grains, fruits, and vegetables
  • Industry’s output expected to reach USD535 Bn by FY26

Growth drivers

  • 100 per cent FDI permitted under the automatic route
  • By 2030, Indian annual household consumption to treble, making India 5th largest consumer market

Recent government initiatives4

  • PLI outlay for food products: USD1.5 Bn
  • The government has sanctioned 41  food parks funded under the Mega Food Parks Scheme, 22, operational, 17 under implementation and two approved (as of November 2021)

Industry snapshot*

  • Fourth largest market for medical devices in Asia
  • The current market size of the medical devices industry in India is estimated to be USD11 Bn    
  • The sector is likely to grow to USD50 Bn industry by 2024

Growth drivers

  • 100 per cent FDI is allowed under the automatic route for both brownfield and greenfield setups

Recent government initiatives

  • PLI outlay for medical devices at USD452 Mn5
  • Four medical devices parks in India are under-development

Industry snapshot*

  • Indian Toys industry is estimated to be USD1.5 Bn with a potential to reach USD2-3 Bn by 2024
  • The sector is expected to grow at 10 to 15 per cent against the global average of five per cent

Growth drivers

  • 100 per cent FDI allowed under automatic route

Recent government initiatives*

  • GOI hiked the import duty on toys from 20 per cent to 60 per cent to support local MSMEs and promote domestic manufacturing
  • The National Education Policy (NEP) 2020 places special emphasis on including toys as part of the academic curriculum
  • The Uttar Pradesh Government has allotted 100 acres of land for a toy city

KPMG In India’s Supply Chain offerings:

We understand the complexities of today’s volatile and high-risk business environment. Our team of experienced professionals work across geographies and sectors to support organisations with comprehensive offerings and a value-driven approach specifically revolving around the following areas:

  • Assessment of market opportunity
  • Business planning
  • Developing supplier ecosystem
  • Mergers and acquisitions, joint ventures, PE, etc. opportunity identification
  • Devising sales channel strategy
  • Factory and office location identification
  • Central and state incentives
  • Conceptualising and easing regulatory compliance
  • Tax and regulatory registrations for new entities
  • Tax efficient holding jurisdiction analysis
  • Post-deal services
  • Smart manufacturing framework
  • Cost optimisation/revenue enhancement
  • Logistics and warehousing operating model
  • Tax compliance, trade and regulatory advisory

Opinions from our experts

KPMG in India contacts

Sources:

Invest India accessed on January 25, 2022
1. Invest India and Make in India accessed on January 25, 2022
2. Report on Production Linked Incentive Scheme for Large Scale Mobile and Component Manufacturing by Ministry of Electronics & Information Technology, Government of India, September 2021
3. Invest India report Inside India Production Linked Incentives Schemes: White Goods
4. Production Linked Incentive Scheme for Food Processing Industry accessed on February 3, 2022
5. Nine PLI schemes have been approved by the cabinet so far, Ministry of Commerce & Industry, 07 APR 2021

Guidance note to readers: We have relied on secondary sources which are considered reliable but have not independently verified the data. KPMG shall not be liable and/ or responsible for any reliance placed on the content of the website.