As India increased scrutiny on Chinese imports, companies like Apple, Dell, Foxconn that import a majority of their equipment from China and assemble in India are not happy.
Many Chinese, American, South Korean and Japanese companies, which perform part of their manufacturing operations in India, import a majority of the parts required for manufacturing from China. With Chinese imports struck at Chennai Port amid the border standoff between both countries, the operations of companies like Foxconn stay halted.
Foxconn’s plants in Tamil Nadu and Andhra Pradesh only assemble the parts in India while most of the parts are manufactured in China. Assembling in India helps companies like Apple, Xiaomi- for whom Foxconn performs the assembling task- to escape from import duty and tighter government scrutiny.
It has been less than a month after India started 100 per cent physical scrutiny of Chinese goods which led to the delay of Chinese imports and plants of many companies are already out of work. “Foxconn was in a very bad state … lots of workers stayed at the dormitory because there was no work,” said an official, as per a report by Reuters.
The halt in the import of Chinese equipment has exposed the foreign companies which are fooling the government in the name of Make in India.
Actually, most of these companies use equipment manufactured in China and do a low productivity assembling job in India.
This phenomenon is not limited to electronics manufacturing, but the auto industry, and many other industries. MG Motor, owned by China’s SAIC, is also facing problems since the scrutiny on Chinese imports increased.
The Modi government needs to be more vigilant on the import of Chinese goods and should not give tax sops to companies like Apple unless they relocate their whole operation in India. The government, so far, has been lenient on import of Chinese goods by the companies which assemble in India. One of the reasons behind this was that the companies had convinced the government to move operations in India, to which the Indian government trusted and agreed.
But, after Coronavirus, it is a completely different world. Now the companies are forced to leave China as parent countries are leaving no other options for them. Therefore, the government can negotiate from a position of strength and ask the companies to move all the manufacturing operations in India if they want tax sops.
India still has 50 billion dollars trade deficit with China, and most of the Chinese products are imported by the companies which assemble the products in India and then sell it with “Made in India” logo in order to enjoy tax sops and regulatory benefits.
In order to bridge the 50 billion dollars trade deficit, the government must ask companies like Foxconn, MG Motor and Dell to stop importing parts from Chinese companies for manufacturing goods for Indian markets. Otherwise, just assembling in India is of little benefit for India and its people; and it also weakens the resolve to boycott Chinese manufactured goods.