Learn About India's Impact on the Global Economy From the Indian Lock-down

2020-03-26 00:58


The Indian government announced on Sunday that in order to prevent the spread of COVID 19, it has ordered all commercial facilities except hospitals, government offices and supermarkets to be temporarily closed in the 75 districts where confirmed cases were diagnosed , including Chennai, Mumbai and Kanchipuram.

Soon after the news came out, major big factories also announced that they would cooperate with the Indian government's instructions to stop production in local factories by the end of this month.The impact of this lock-down on big MNCs is also a symbol of how India's crucial role in the world economy.

First of all, the implications of the outbreak are enormous. Almost all large multinational companies have a team or outsourcing organization in India nowadays.Customer service, technical support, IT help desk, hr help desk and telemarketing are usually located in India. According to a market study of technology and IT workers, it showed about 11% of the world's technical professionals (more than 4M) work in India.

  • The IT industry

India's IT industry supports many of the world's digital business needs: software products, IT services, engineering and r&d services, ITES/BPO (IT-enabled services/BPO), hardware, and e-commerce. Among that, IT and technology outsourcing is a $177 billion business, growing 6.2% a year and employing more than 4 million people in India.

Besides, India's leading IT companies, such as TCS, Cognizant, Infosys, Genpact, Wipro and Tech Mahindra, have expanded far beyond outsourcing services.They are now offering leading development technology in block-chain, artificial intelligence, analysis and design.

The Indian government strongly supports digital skills training programs and has a highly dynamic workforce. Also India's talent pool of highly qualified technical graduates is the largest in the world with often at between a third or a fifth cost of the United States.Today, India is the second fastest digitized economy among the 17 leading economies in the world with its large amount of digital talent and is the place of origin and export for Internet talents.

  • Semiconductor

The frictions between China and the United States in recent years have brought many favorable opportunities to many countries in southeast Asia, one of the beneficiary is India. As a populous country with a population similar to China's, India has been promoting for years to develop its own integrated circuit industry.

India is known as one of the biggest electronic market in the global scope. In the past, the government policy was inclined to develop software industry, and in 1997 India signed the information technology agreement (ITA) which hindered the development of the hardware industry. However, as the demand has been rising hugely on the electronic market, since 2012, the government restarted the emphasis on supporting on semiconductor industry. Since 2012, the Indian government has introduced some incentive programs and national policies aimed at promoting the development of semiconductor and electronics manufacturing industry, as well as the chip strategy.

In the past two decades, many semiconductor companies in the world, such as ARM, Qualcomm, Intel, Cadence and Texas Instruments had all established the infrastructure for design and software development in India. Many international companies such as Intel, IBM, Microsoft, Google, etc. had set up R&D base in Bangalore, which has always been called as "India silicon valley". India's electronics industry is mainly distributed on two major cities, New Delhi in the north and Bangalore in the South, and these two places also attracted many semiconductor manufacturers to come to invest. Among them, including Infineon and the previous Freescale.

According to DeitY ( Department of Electronics and Information Technology), nearly 2,000 chips are designed in India each year, and more than 20,000 engineers work on all aspects of chip design and validation. By 2025, the value of the Indian semiconductor components market is expected to reach $32.35 billion, with a combined annual growth rate of 10.1% between 2018 and 2025, according to the Indian institute of electronics and semiconductors (IESA). In terms of VLSI and chip design capabilities in the semiconductor industry, Indian Institute of Technology, Bangalore and the center of excellence for nano-electronics in Mumbai are also very outstanding.

  • Pharmaceuticals

Although India is now known for generics drugs, but the ability of Indian companies to register with the FDA and certificates permission in other countries is an important factor for many multinational pharmacy companies acquiring Indian companies to expand into more international and emerging markets.

In 2011, the Indian pharmaceutical market ranked 13th in the world, rose to 11th in 2016, and is expected to rise to 9th in 2021.The Indian pharmaceutical market has been growing rapidly for many years, with a compound growth rate of 12.89% from 2015 to 2020, and the market size is expected to reach us $55 billion by 2020. According to the Indian ministry of commerce and industry, the Indian pharmaceutical industry contributes 10 percent (by volume) and 2.49 percent (by value) of global pharmaceutical production.

Since 1970, Indian pharmaceutical products have been mainly exported to emerging markets, bulk drugs to US and Europe, and pharmaceutical products to developing countries. In 2005, the patent law of WTO was amended, and from 2005 to 2006, Indian pharmaceutical companies began to conduct cross-border mergers and acquisitions in Europe, North America and Latin America. Since 2012, more and more companies has been developing and producing complex generic drugs, biosimilars and special products. Leading Indian pharmaceutical manufacturing companies include Mylan pharmaceutical, Natco, Cipla, Glenmark Pharmaceuticals, Abbott India, Reddy's Laboratories, Lupin, Aurobindo Pharma, Cadila Healthcare, Sun Pharma, etc.

India's breakneck economic growth cannot be ignored, and as a result of this epidemic outbreak, many companies around the world have learned from the crisis and will try to reduce their reliance on a single country's supply chain in the future. Against this backdrop, India, with its highly motivated, qualified and cost effective labor and talent base, may become the world's main new supply chain base.