International Firms Shifting Base From China to India: Wharton Model Reveals More
As many organisations plan to leave China, India needs to invest resources into right policies, legal systems and infrastructure to benefit from this mass migration.
A paper published by IIM Indore titled, ‘FDI Value Proposition Framework: Six intercessions to pull in MNCs to India’ reveals what India has to do when organisations are venturing to Vietnam and Taiwan.
When organisations started leaving China, Indian policymakers were happy about welcoming them to the country. However, in 2019, when 56 companies exited China, only 3 reached India; others went to Vietnam (26), Thailand (11), and Taiwan (8).
In April 2020, out of 1000 firms attempting to leave China, 300 made plans to put resources in India. In that case, Foreign Direct Investment (FDI) ensures employability, economic development through foreign exchange trade and enhancing innovations to uplift a country.
Expenses of creation in India is half compared to China, even though China has higher FDI than India. Even though Vietnam is one-fourth compared to the size of India, yet 46% of firms are leaving China to enter Vietnam and not India.
There are models to gauge market size and operational costs, however, organisations look beyond these while choosing to cross borders.
Wharton Model puts 6 columns along with 20 sub-factors in push-pull strategy, all explaining ways to effectively draw FDIs towards India.
The 6 columns are devoted to administration, infrastructure, government approach, legal system and its usage, business biological system, interest points and economy.
India made positive strides in distributing larger shares of lands and applied strategies to secure them. At present the Indian government needs to develop an organized strategy to draw more FDIs, curtailing government approach, legal systems and lessening them on war-balance.
This will aid in creating an effective and positive approach to attract more FDI and raise the GDP from 1.5% to 2%.