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Singapore Turns to India for Manufacturing: Opportunities and Incentives

Singapore is renowned for its favorable business environment, supported by a range of factors such as its attractive tax system, an extensive network of tax treaties, availability of skilled manpower, stable geopolitical climate, excellent infrastructure, and global connectivity. Given the significant Indian diaspora in Singapore, it is unsurprising that many Indian firms have established a presence there. Currently, approximately 9,000 Indian companies are registered in the city-state, including prominent organizations such as Tata Group, Mahindra & Mahindra, Reliance Industries, AdGroup, Infosys, and Wipro. The trading relationship between India and Singapore is also robust, with bilateral trade amounting to USD 30.11 billion for the fiscal year 2021-22. Singapore ranks as India’s 6th largest trading partner, contributing 2.9% to India’s overall trade, while India ranks as Singapore’s 12th largest trading partner, representing 2.3% of Singapore’s overall trade.

Foreign Direct Investment

In FY2021-22, India received FDI inflows of USD 18.41 billion from Singapore, while FDI equity inflows from Singapore amounted to USD 15.87 billion. Singapore is currently the second-largest investor in India, having invested USD 140.99 billion in the country between April 2000 and September 2022. The top sectors attracting FDI equity inflows from Singapore are services, software and hardware, trading, telecommunications, and drugs and pharmaceuticals. Additionally, manufacturing is becoming an increasingly attractive sector for investment.

Ease of doing business

India has been focusing on attracting manufacturers since the launch of the “Make in India” campaign in 2014. The government has made it easier for foreign companies to operate in the country, resulting in India jumping from 130th to 63rd place in the World Bank’s Ease of Doing Business Index between 2016 and 2019. India aims to increase the manufacturing sector’s contribution to GDP from 16% to 25% by 2025.

Manufacturing in India

Recent years have seen companies such as Apple, Samsung, Kia, Boeing, Siemens, and Toshiba relocate a significant amount of their manufacturing to India, largely due to COVID-related supply chain disruptions and geopolitical tensions. It seems that Singaporean companies, which used to mainly produce their goods in nearby Southeast Asian nations and China, are now adopting the same strategy. A number of these firms, including contract manufacturers who provide support and supplies to large multinational corporations (some of whom have already migrated to India), have chosen to relocate their activities to India.

To take advantage of favorable manufacturing regulations and the Indian economy’s positive outlook, Enterprise Singapore (EnterpriseSG) has supported Singaporean companies in establishing themselves in India. EnterpriseSG is a statutory board within Singapore’s Ministry of Trade and Industry, and its focus is on strengthening small and medium enterprises and encouraging their innovation, improvement, and international growth.

In 2022, more than 40% of Singaporean firms that partnered with EnterpriseSG to expand into India were involved in manufacturing, making it one of the top three industries represented, alongside information and communications and professional services. One company that has benefited from the increase in multinational corporations migrating to India is Singapore’s The Hub Engineering, which owns the subsidiary Reliable Hub’s Engineering India.

Reliable Hub’s Engineering is a company that produces and distributes equipment for retail and food services. They supply numerous big brands, including Mr DIY, Skechers and Miniso. Their turnover has increased almost five-fold, from USD1.8 million in 2018 to USD8.8 million in 2022.

100% FDI

In the past, many foreign companies needed a local partner to enter India due to a cap on foreign ownership. However, currently, 100% FDI is allowed for firms in most types of manufacturing. The government imposes high customs duties on imported components, encouraging manufacturers based in India to find local suppliers and reduce costs. EnterpriseSG has partnered with Indian agencies such as the Confederation of Indian Industry (CII) to help Singapore firms seize opportunities to expand in India. They also partnered with CII to bring 19 Indian corporates to Singapore for the Industrial Transformation Asia-Pacific event last October. Singapore manufacturers are particularly interested in Tamil Nadu, India’s most industrialized state, which is home to fast-growing manufacturing clusters with approximately 39,000 registered factories.

Do you have a question about this article or about doing business in India? Please get in touch with us here or email us at [email protected].

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