India poised for more important role in global value chains, finance minister says

The challenges to the economy are more external as countries are going through recession, the minister said.

India is poised for a more important role in global value chains, Finance Minister Nirmala Sitharaman said in Washington DC overnight.

“Given the shocks suffered from supply chain disruptions, multinational corporations have become prudent and are diversifying. India is poised for a more important role in the global value chains,” Sitharaman said in an interaction at the Peterson Institute for International Economics, according to her official Twitter account.

“India is attractive because of its skilled youth and large domestic market,” she said.

Under the production-linked incentive schemes, India has been offering incentives on annual incremental sales to boost local manufacturing in a host of sectors ranging from automobiles, white goods and pharmaceuticals to solar photovoltaic modules. The programme is part of New Delhi’s broader goal to help reduce imports and boost exports of manufactured products to secure a foothold in the global supply chain that is undergoing a shift from China following the Covid-19 pandemic.

The government has also stepped up its infrastructure spending in recent years with an aim to crowd in private investments. It is unrealistic to think every manufacturing activity is going to get out of China but the recent supply chain shock justifies more than one location for companies, the finance minister said.

“However, much we would think that supply chains will need to be moved out of China, it may not be the case,” she said.

India's growth is sustainable as it attempts to grow its manufacturing sector and not import products that it manufactures, the finance minister added, according to her official Twitter handle.

The PLI schemes have helped increase India's mobile manufacturing capacity, which was almost nil in 2014 and today, it is the second largest manufacturer of smartphones. PLI schemes for 13 sunrise sectors are bringing global value chains into India, according to Sitharaman.

She spoke for the Global South when she said that funds to fight climate change have been long committed but not disbursed.

India has come up with ambitious nationally determined goals on climate change and decarbonisation and has fulfilled some of its COP 21 nationally determined contributions largely from its own funds, the according to the minister.

“Per capita emission is what is hurting all of us,” she said. “There should be an element of justice. We have to look at the stock and flow of emissions from the first Industrial Revolution.”

She also expressed concern over green policies. Any non-green steel export from India, for example, will be burdened with higher taxes in some countries but money won't flow into India to make the steel greener... There are worries about how green issues will be spoken about, Sitharaman said.