India sourcing: From hurdle to ambition

Source: This post is created based on the article “India sourcing: From hurdle to ambition”, Business Standard on 1st June 2023.

Syllabus Topic: GS Paper 3 – Changes to industrial policies

Context: global brands are now finding it lucrative to produce in India. The article focusses on the factors that are contributing to this success.

Over the last decade, brands like Walmart, Amazon, Apple, and Ikea have increased sourcing of goods from India and have even set ambitious export targets.

What are the contributing factors?

In the past, industries were finding it challenging to comply with strict sourcing rules that mandated 30% sourcing of Indian products for any company with more than 51% FDI, from 1st day. The rules have been updated, now companies need to comply with this norm within five years of setting up a single-brand retail business, instead of from day one of the earlier rules.

The ‘Make in India’ campaign, along with the production-linked incentive scheme, has strengthened the sourcing movement.

The conditions for FDI in single-brand retail were changed to include manufacturing as part of the 30 per cent mandatory sourcing.

What are the examples of success of government effort?

Walmart CEO Doug McMillon expressed the company’s goal to meet $10 billion worth of exports annually from India by 2027, up from about $3 billion currently.

Amazon is also increasing its sourcing from India through a scheme called Amazon Global Selling in India.

What are the remaining challenges in attracting companies to India?

India must address the challenges associated with supply chain logistics and wide infrastructure gaps.

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