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Mutating global supply chains: opportunities for India

The scale and spread of globalisation has suffered setbacks owing to the surge of economic nationalism and rising geopolitical tensions. These trends have been compounded by the sudden onset of COVID-19, bringing into play health and travel-related risks as some of the prime determinants in global supply chain reconfiguration. Comparative benefits of global manufacturing nodes are now being challenged by compulsions to reduce excessive exposure to one geography. Investors and enterprises are rethinking current supply-chain models in the quest for safer harbours to disaggregate geographical concentration as well as diffuse geopolitical risk. Supply chain configurations and selection of manufacturing locations by organisations will now be determined by:

  • Long-term geopolitical stability
  • Openness to inward investment
  • Supportive policies, taxation and regulations
  • Availability of land and logistics infrastructure, and
  • Access to skilled workforce and technology.

These future configurations might also depend upon the nature of industry, source of investment, and supply-chain maturity. Any disruption presents India with an array of possibilities to attract inward investments.

However, for India to continue making substantive inroads towards becoming a lucrative destination in global supply chain reconfiguration, it is critical that the government maintains pace and scalability of reforms while strengthening infrastructure growth. Its regulatory and investment policy will need to integrate the progressive changes in land, incentives and infrastructure, with the foreign investment norms and tax regime. Besides, India will need to follow a more aggressive approach in reaching out to global companies to increase their business presence in the country. 

Arun Kumar's message
Neeraj Bansal message

India replacement opportunity

What makes the country attractive to foreign investors?

Robust growth
Robust growth

Among fastest growing economies and aspires to be USD5 tn economy by 2025 [1]

‘Atmanirbhar Bharat Abhiyan’
‘Atmanirbhar Bharat Abhiyan’

A new model aimed towards industrial development

Competitive tax regime
Competitive tax regime

Steep reduction in corporate tax rate for new manufacturing companies

Ease in debt norms
Ease in debt norms

Foreign debt norms (ECB) liberalised and now permitted in most sectors/activities

Introduction of GST (One Nation One Tax)
Introduction of GST (One Nation One Tax)

Simplified tax regime (GST) to increase efficiency and productivity while lowering manufacturing cost

Liberal Foreign Direct Investment policy
Liberal Foreign Direct Investment policy

India ranks among the top three Greenfield FDI destinations. 100 per cent FDI allowed under automatic route in several sectors

Well aligned international network
Well aligned international network

Extensive network of double taxation avoidance agreements and progressive alignment with international best practices

Network of trade : Free Trade Agreements
Network of trade : Free Trade Agreements

With ASEAN, Japan, S. Korea, Singapore, SAFTA (RCEP under negotiation)

Focus on infrastructure improvement
Focus on infrastructure improvement

Investments of USD1.4 tn planned by the government till 2024 [2]

Government planned promotion of manufacturing
Government planned promotion of manufacturing

Incentives and schemes for new manufacturing units

Strengthened regulatory systems
Strengthened regulatory systems

Multiple regulatory reforms introduced to align with global best practices

Globally aligned transfer pricing regime
Globally aligned transfer pricing regime

Introduction of advance pricing arrangements, safe harbour rules to curb litigation

Sectors of strategic importance - An overview

What can KPMG in India do for you?

Our breadth of services spread through government, tax and advisory solutions

We understand the complexities of today’s volatile and high-risk business environment. Our experts have put together specialised programmes to help clients throughout the business lifecycle from setting up base in India to assisting in business operations. Our professionals are experienced to help clients overcome barriers and increase supply chain resilience while leveraging the India opportunity through a value-driven approach.

Our specialised offerings in the space are focused around helping organisations reduce cost, build resilience, enable reconfiguration and overhaul wherever needed.

Our professionals are experienced to help your organisation overcome barriers and increase supply chain resilience while leveraging the India opportunity.
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China reset and its impact on global trade dynamics and business

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Sources:

  1. Report of the Working Group on USD5 tn Indian Economy, Department for Promotion of Industry and Internal Trade, January 2019
  2. Fourth tranche of stimulus package announced by the Finance Minister on 16 May 2020

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.