India's Path to Nutraceutical Supremacy: Embracing the 'China Plus One Strategy’
The recently concluded G20 Summit has catapulted India into a different league altogether, with two key themes coming out of it. First, India has cemented its place as the de-facto leader of the Global South, and second, India can use what is now being called “inclusive diplomacy” to get things done.
This strategic shift is particularly vital in the wake of our desire to make India's emergence as a Nutraceutical Power an imperative and realistic goal. In this context, it becomes essential to have a ‘China plus one' strategy from an economic perspective, an important strategy that India can influentially sell to the world.
The 'China Plus One' Strategy: A Pragmatic Shift
The 'China plus one' strategy has shifted from discussion to action, addressing the imperative of supply chain diversification amid global uncertainties. India, with its vast potential in all sectors, human power, manufacturing, agriculture and technology, emerges as a frontrunner, providing an attractive alternative to reduce dependence on Chinese imports. Building on past successes in IT services and branded generics, India must expand this strategy to other sectors where it holds a competitive edge.
What India Needs to Do to Become a Global Export and Manufacturing Hub, particularly in the Nutraceutical Industry?
The ‘China plus one’ strategy spans various industries, and India’s potential to become a global export and manufacturing hub hinges on key factors:
· Niche Market Focus: India can excel in specialised nutraceutical markets, such as organic and condition-specific products, due to its rich history of Ayurveda and herbal medicine, which will differentiate itself from China’s dominance in the mass market.
· Infrastructure Development: Investment in robust transportation, logistics, and digital connectivity is crucial for efficient goods movement. Precision-oriented, technologically advanced and leveraged processing and manufacturing facilities and farms are essential.
· Trade Policy Reforms: Simplifying trade regulations, reducing bureaucracy, and improving the ease of doing business will attract international investors.
· Innovation and Research: Encouraging sustainability-focused innovation across industries will yield high-value, globally competitive products.
While China has a strong presence due to its skilled workforce and infrastructure, India possesses advantages such as cost-effective labour, abundant resources, and a growing middle class. By addressing these aspects strategically, India can emerge as a viable ‘China plus one’ alternative.
Nutraceuticals: India’s Ready Opportunity
The nutraceutical industry holds a crucial position in India’s ‘China plus one’ strategy, driven by technology adoption and supportive government policies. Recognising the importance, the Indian Government has formed a task force in 2021 to accelerate India’s journey towards becoming a USD 100 billion nutraceutical market by 2030.
India stands out as a global sourcing hub due to its abundant raw materials and innovative farming practices, like the use of climate-resistant hybrid seeds, which further enhance this advantage.
Recent geopolitical changes emphasise the need to diversify raw material sources, offering India a unique opportunity in this ever-evolving landscape.
Government Support and Crucial Policy Changes
A lot of initiatives have been taken by the government and regulators to strengthen the sector and promote the 'China Plus One' strategy. However, to accelerate progress further and ensure long-term success, the Indian government should consider the following initiatives:
1. Distinct HSN Codes: Develop distinct Harmonized System of Nomenclature (HSN) codes that accurately differentiate nutraceutical products, aiding in classification and regulation. Thus enhancing “ease of doing business”.
2. Establishing a separate desk with Nutraceuticals: Establish a desk for Nutraceuticals under a Director level person in Ministry of Food Processing Industries or in Ministry of Health and Family Welfare to support the growth of this sector.
3. Bio-Diversity Act: Re-evaluate the Bio-Diversity Act to eliminate contradictory policies, ensuring that nutraceuticals are not burdened with unreasonable charges.
4. Integrated PLI Scheme: PLI has been a great success in enhancing the country’s manufacturing prowess in sectors like Electronics, Mobiles, Electric Vehicles, and much more. There is a need to implement an integrated Production-Linked Incentive (PLI) scheme tailored to the nutraceutical sector, encouraging value-added product manufacturing and exports.
5. Competitive Taxation Policy: Rationalise GST for nutraceuticals within the 5-10 per cent range (currently 18 per cent) to align with the industry's growth potential.
6. Research & Development (R&D) and clinical trials: The two largest segments within Nutraceuticals, Functional Food & Beverages and Dietary Supplements are gaining R&D traction. Establish a Public-Private Partnership (PPP) model to support R&D, clinical trials and innovation, offering funding support for MSMEs and tax incentives further to augment the investments in R&D and clinical trials.
7. Inclusion in NMPB Scheme: The NMPB, AYUSH, and herbal industry bodies collaborate to promote medicinal plant cultivation. Including nutraceutical companies in this scheme will encourage backward integration, driving medicinal plant cultivation and facilitating clinical research.
Additionally, fostering collaboration with industry stakeholders and regularly assessing the outcomes of these initiatives will be crucial in achieving sustainable growth and resilience in the sector.
Conclusion
As the global geopolitical landscape evolves, India stands at a pivotal juncture with an opportunity to diminish Chinese influence. This offers a chance for India to become a prominent player in the Nutraceutical industry, elevating its current 3.5 per cent global market share. By bolstering manufacturing infrastructure, fostering innovation, and adopting sustainable practices, India can establish itself as a leading global export hub. The Indian Presidency's timing is ideal to propel Indian manufacturing, particularly in Nutraceuticals, onto the world stage.
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