Hong Kong-based companies are increasingly eyeing relocation of their production or diversification out of mainland China due to rising production costs. And India could well become their go-to destination. States they are particularly interested in are Gujarat, Maharashtra, Andhra Pradesh, Tamil Nadu and Karnataka. These states have developed industrial parks for private investors to set up their production plants. Infrastructure and amenities such as ports, connecting roads, electricity, water supply, sewage-treatment facilities and communication networks are provided.

Also all five states have made efforts in tax reforms to streamline registration and payment of Value Added Tax and Central Sales Tax through online services. India provides for low cost manufacturing versus other Asian economies such as Vietnam, Bangladesh, Indonesia, Sri Lanka and mainland China. Currently India’s labor costs are lower than those in China and almost all of the countries in Southeast Asia, with the exception of Myanmar. India’s wages are a third of the wages in mainland China and roughly half the wages in Indonesia.

India has a huge buyers’ market and the country has potential in low value added product manufacturing like apparel, shoes, clothing and textiles. Another key consideration for factory relocation is the import tariffs levied on manufactured products originating from India and whether this country has entered into preferential trade deals that lower import tariffs. India has been an active player in Asia. US import tariff rates for Indian yarn-related products range between zero and 2.7 per cent.