Industrial & warehousing sector on the cusp of change in India

V Nagarajan

COVID-19 had a domino effect on economies all over the world. The overreliance on a single supply source has led countries to revisit their supply chains. Moreover, with a view for supply chain diversification, several markets, including India, are emerging as a catapult location for establishing new production lines. The crisis has translated into opportunities and created significant shifts in India’s industrial and warehousing sector.

India is emerging as an auxiliary to shear the current single-source dependence, thereby providing an apt opportunity for manufacturing units to serve export-oriented markets, while availing the advantages of its geographic location and domestic market with a large consumption base, says experts at the JLL and CII Realty and Infrastructure Conclave.

Additionally, in the past two years, to foster the growth and bridge the gaps in the manufacturing ecosystem, there have been increased efforts by the Government of India through reduction of corporate tax rate for new manufacturing units and announcing an outlay of $26.9 billion under the Production Linked Incentive (PLI) Scheme. India has positioned itself as the most competitive tax structure with the lowest rate with a base tax rate of 15 per cent (effective tax rate of 17.16 per cent) among MITI-V countries (Malaysia, Indonesia, Thailand, India, and Vietnam).

These initiatives have resulted in India attracting the highest manufacturing investment projects among MITI-V countries, as 64 projects and investments totalling $16.63 billion during January 2020 - July 2021 poured in from around the world, with significant interests from China, France, Germany, Japan, Netherlands, South Korea, Taiwan, UK and the USA.

Atmanirbhar Bharat has been fueling manufacturing from domestic companies as well. As a result, domestic Indian companies have also displayed confidence in the evolving manufacturing sectors contributing more than $60 billion of significant investments in the past 18 months.

The paradigm shift in consumer behaviour from offline to online shopping has led to increased activity in e-commerce and 3PL/Logistics. Coupled with the rise in e-commerce and 3PL/Logistics, the reviving growth of the manufacturing industry has also provided an impetus to demand for quality warehousing space Technology entails a formula to neutralise the challenges and amplify any system’s efficiency, including logistics and warehousing operations. Manufacturers are employing technology in their supply chains. With the advent of modern technology and continuous evolving sophisticated tools, the terms’ ‘logistics’ and ‘warehouse’ are being rediscovered and redefined.

The logistics industry is now undergoing a robust metamorphosis than at any previous time in the history. Global supply chains, urbanisation, e-commerce, technology, sustainability etc. are some of the factors pushing logistics to expand its boundaries to reinvent operational efficiencies.

The industrial and warehousing sector in India offers many opportunities for developers, occupiers and investors.

The shift in consumer behaviour from offline to online shopping paved the way for a sharper focus on new warehousing space by e-commerce players and 3PL Players. Also, the policies and initiatives by the Government of India have provided a throttle to the manufacturing sector, which in turn boosts demand for warehousing space.

Furthermore, advanced technologies are employed in every leg of the sector, increasing efficiency and paving new ways of doing business. For developers and occupiers, sustainability measures offer long-term economic benefits, while for investors, it is a silver lined opportunity that is gaining momentum.

I am planning to return to India for expanding business operations. Can I retain my foreign assets including immovable property outside India after my return? Kindly clarify. Ashish Singhvi, Sharjah.

As per section 6(4) of FEMA, a person resident in India may hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India, if it was acquired when he was resident outside India or was inherited. You can utilise these asset abroad freely.

I have residential and commercial properties invested jointly with my wife. We intend selling two of them and reinvest the proceeds entirely in a larger house. Can we avoid long-term capital gains tax as we are investing the entire sale proceeds? Adam Krapish, Dubai.

Yes. You can avail the deduction option available under Section 54 if each of you reinvests the capital gains amount accruing to the sale of immovable properties to buy a larger unit.