It is just five months since China’s Wuhan was found to be the epicentre of the Coronavirus (COVID-19) pandemic that has spread across the globe. Amidst dissatisfaction and suspicion among world leaders on the way China dealt with the virus, businesses across the globe could be looking at India as an alternative to buy finished goods.
Indian companies are now seeing interest from across the globe in purchasing goods. These include products like electronic goods, pharmaceutical products, consumer products, home furnishing and automobiles.
This would mean that China, which was known as the world's factory, could be replaced by nations like India.
Also Read: Live updates on the Coronavirus outbreak in India
Experts said that if the infrastructure bottleneck and slow approval process is dealt with efficiency, India could replace China over the next one to three years.
Data from the World Bank showed that in 2018, India had a total goods export of USD 322.29 billion. In comparison, China had a total export of USD 2.49 trillion. Among finished goods, China is considered the world leader in export of smartphones.
Where has the shift begun?
But has the process begun? Yes it has seen progress.
Take Welspun India for example. The textile major had begun getting increased queries and orders from overseas clients for its newly launched floorings business.
"We have started deliverying export orders, and will see more arrangements with clients by the end of March," Welspun India Director & CFO Altaf Jiwani, had told Moneycontrol in an earlier interaction just before the end of FY20.
The company opened a facility in Telangana, in 2019. The unit, which was initially focusing on the domestic markets, makes flooring solutions that include broadloom carpets, carpet tiles, click & lock tiles, and artificial grass.
Has the shift already been done?
When it comes to Welspun India, enquiries from overseas clients had started coming in late last year itself, when these products were part of the $200 billion lists of the first US sanction against Chinese exports.
The floorings market in the US is worth $3.2 billion, and 80 percent of it was supplied by China.
Apart from the US, another big market for Welspun India is the Middle-East region. Welpsun India, which is also the largest home textiles exporter from the country, had also got higher interest for its towels, rugs and bed sheets.
A similar trend is being seen in businesses are wall clocks and home accessories like lamps, boom speakers and decorative fans.
The chief executive of a large fan maker in India said that the company has received requests from markets like Canada, Spain, Brazil and South Africa which were being traditionally catered to by Chinese imports.
“Even though we are charging a 8-10 premium on the decorative fans and lighting, clients are ready to pay. This is a good sign and a possible indication of how India could gain in exports from these segments,” he added.
What about other industries?
The world’s largest clock manufacturer Ajanta-Orpat Group is now getting global requests seeking to buy their products.
In an interaction with Moneycontrol, Nevil Patel, MD, Ajanta-Orpat Group said that the company has now started receiving enquiries from other countries as they are reluctant to buy from China. Ajanta-Orpat exports to 45 countries.
"While we are not being able to service these requests currently, I am sure there is going to be a separate market that opens up for India for countries that are going against buying from China. This depends on when things get to normal. But there will be an export benefit for India," said Patel.
Though there is a rise in interest, industry executives also said that some bit of convincing could be required, for both global partners and vendors in India to follow suit.
“Companies in Europe would need some convincing, maybe with government representative and industry support that India is a good alternative to China. A few global players have some quality concerns as far as goods from India are concerned so that needs to be resolved. And, the government also needs to work swiftly to provide relevant permissions so that goods delivery is on time,” said the managing director of an electronics goods firm.
What about traditional sectors?
As far as traditional sectors like automobiles and pharmaceuticals are concerned, some movement could happen though it will take time.
When asked whether companies and industries will move away from China, Ander Arenaza Alvarez, CEO, Mahindra CIE Automotive said, “Yes, we have seen some movement from in some divisions. For example, in the magnet division, we clearly see this trend. However, I think it is too early to say that in for the rest of the divisions. But you are right that probably this movement from China to India could happen because, in my opinion, the logistic chain, the supply chain in our industry will be reviewed deeply in the next times."
He added that there is an opportunity there that some of the Chinese production can move to India. However, he did not give any indication of the company doing it.
A similar trend could be seen in the pharmaceutical sector where India could see some benefit. However, industry experts pointed that there wouldn’t be an overnight shift.
Experts said that the reliance on Chinese raw materials for pharmaceutical industry isn't going to end soon. India itself imports about $4.5 billion worth of intermediates and active pharmaceutical ingredients (APIs). It makes them formulations/finished dosages, consumes domestically and exports it to other countries. This equates to about 70-80 percent of our requirement. India exported about $20 billion worth of pharmaceutical products.
China is critical in the drug supply chain. For drugs based on fermentation like penicillins, immunosuppresants, certain vitamins, hormones, there is a heavy reliance on China.
"For low volume and high value products - it's feasible to make it locally, and companies are doing it. But for high volume low value products, it's going to take time, as Chinese materials are still compelling on price front," said a top executive of pharmaceutical company who didn't want to be named.
(With inputs from Swaraj Baggonkar, Viswanath Pilla and Prince Mathews Thomas)
Follow our full coverage of the coronavirus pandemic here.
Discover the latest business news, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
