India, Vietnam benefit from China+1 strategy

New Delhi: As the multi-national companies (MNCs) recognise the importance of diversifying supply chains, India and Vietnam are the key beneficiaries as global firms are looking for supply chain alternatives outside of China, a new report by global investment bank Nomura has stressed.

According to the global brokerage, India with its robust manufacturing policies and Vietnam are set to benefit as companies look for supply chain alternatives to China.

A key factor for India being a natural choice to set up global supply chains is a conducive manufacturing environment provided by the government, be it electronics, automobiles, semiconductors or defense and drug sectors.

According to Nomura’s estimate, this trend is likely to raise India’s exports from $431 billion in 2023 to $835 billion by 2030 at a compound annual growth rate (CAGR) of 10 per cent.

“Equity opportunities are several across countries and sectors, but we are most excited about India. Investors need to be patient in the short term, but we expect a larger impact on fundamentals and more opportunities over time,” the note read.

According to the latest United Nations (UN) report, India has become a hot investment destination for Western corporate giants. Tech giant Apple and its suppliers aim to manufacture more than 50 million iPhones in India annually within the next two to three years. Foxconn is also expanding manufacturing by setting up more plants in India.

US-based Micron Technology is building a semiconductor plant in Sanand, Gujarat for Rs22,500 crore. In March, Prime Minister Narendra Modi laid the foundation stone for semiconductor plants worth over Rs1.25 lakh crore. According to the Nomura note, the shift in supply chains away from China has set in motion “what economist Kaname Akamatsu called the ‘wild-geese-flying pattern’ of economic growth, whereby production shifts from the lead goose (advanced nation) to the next flock of geese (developing nations)”.