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Photo: Mint
Photo: Mint

India Inc divided over changing its strategies for sourcing inputs

  • Capital goods and electronics sectors don’t find it viable to diversify input sourcing
  • Automobile and textile machinery sectors plan to change their raw material sourcing strategies, said Ficci survey

NEW DELHI : Indian industry is divided over changing its input sourcing strategies that is at present heavily dependent on China.

Sectors such as automobiles and textile machinery aim to diversify their input sourcing, but capital goods and electronics sectors don’t find it viable to diversify input sourcing, according to the latest quarterly survey of Indian manufacturing by industry lobby group Federation of Indian Chambers of Commerce and Industry (Ficci).

Half of the respondents of the automobile sector and one-third of the respondents in the textile machinery sector indicated that they plan to change their raw material and input sourcing strategies. However, capital goods, cement and ceramics, chemical, fertilizers and pharmaceuticals, leather and footwear and textiles sectors said they do not intend to change their sourcing strategy. Two-thirds of respondents of electronics and electricals said they do not plan to change source of inputs.

In the crucial chemicals, fertilizers and pharmaceuticals sector, which is heavily dependent on China, 78% of respondents indicated that they do not plan to change their raw input sourcing strategies. “The remaining respondents stated that they will try to strengthen in-house manufacturing and some of the key raw material sourcing will be shifted away from one country," the Ficci survey said.

Chinese imports and investments have been facing fresh scrutiny in India after a tense border standoff that left 20 Indian soldiers and an unspecified number of Chinese troops dead. India aims to dismantle trade links with China as part of a policy to cut dependence on the country.

India has banned railway and road projects for Chinese companies and has barred 59 Chinese apps, including TikTok, on national security grounds.

Prime Minister Narendra Modi has said India needs to end its dependence on import of solar panels, which are mostly sourced from China.

The proportion of respondents reporting higher output during June quarter of FY21 has fallen to just 10% as compared to 15% in March quarter of FY20. The future investment outlook looks subdued as only 22% respondents reported plans for capacity additions for the next six months as compared to 28% in previous quarter.

The hiring outlook for the sector is bleak as 85% of the respondents said they are not likely to hire additional workers in the next three months.

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