Washington D.C.: The economies of India and China have grown rapidly over the past couple of decades, and it is widely accepted that these two emerging giants will transform the global economy in numerous ways over the coming decades. India’s population is younger than China’s and is exhibiting a rising rate of personal savings. China’s main challenge is to rebalance its growth strategy, moving toward one that relies more on domestic demand and less on exports. China and its handling of the virus has impacted the economics of globalisation, fuelled anger in world capitals, and flamed anti-Chinese campaigns. Dependent on made-in-China goods and raw materials, nations the world over are today rethinking trade ties with the country. India not only cancelled orders for ‘faulty’ rapid test kits, it revised FDI policy to curb ‘opportunistic takeovers or acquisitions’ of Indian companies, aimed at China. Not surprising, given how Indian brands like Paytm, Ola, BigBasket, Byju’s and others heavily rely on billions of dollars from Chinese venture capitalists.
China has been a growing influence on other developing economies through trade, investment and ideas. Practically every household—from electronic device, household product or consumer durables—consumes China-manufactured products. Be its investor-friendly policies or efficient manufacturing base, the nation began to reform its economy in 1978, and GDP growth has averaged almost 10% a year. The Indian government held high-level meetings to set in motion a strategy to wean away manufacturing from China and fast-tracking efforts by tapping into palpable global anger against the Far East nation amid the Covid-19 outbreak, officials familiar with the matter said. Countries such as Japan are already looking to diversify their manufacturing and supply chains to newer destinations…the government is working to address disabilities across sectors, including for pharmaceuticals and automobiles, to try and establish India as an alternate to China for manufacturing for local and global markets across sectors,” one of the officials privy to the matter, told ET. The idea is to spur employment, revenue and earn forex by making India an export hub.
The government is aware that almost all countries, including the US, have received a “massive jolt” with the outbreak of Covid-19 and realise they need to diversify risk in their production lines.
“India is at a very sweet spot and the Indian government wants to ‘tap’ into this potential,” another official said. India had kick started such efforts, but has so far been focused on electronics manufacturing. Major brands have set up their manufacturing facilities and some companies have sub-contracted manufacturing to electronics manufacturing services (EMS) companies operating from India. Technology giant Apple plans to produce up to $40 billion worth of smartphones in India and move almost a fifth of its production capacity from China to reap benefits of the new production-linked incentives (PLI) scheme, which offers a 4-6% incentive for local production. Similarly, mobile player Lava International will shift its production and design centre for the export market from China to India within six months. In fact, threatened by the interest in India, US President Trump has threatened to slap taxes on companies like Apple keen on shifting manufacturing to India. As the world eyes agri produce from China with caution, this is where India can score. As part of the Atmanirbhar scheme, a slew of incentives for the agriculture sector and allied activities have been announced which will help in building cold chains and post-harvest management infrastructure. The Centre will establish a legal framework that will enable farmers to engage with processors, aggregators, large retailers, and exporters in a fair manner. A Rs. 10,000-crore scheme will help formalise micro food enterprises (MFEs). Funds have been allocated for dairy processing, herbal cultivation, and beekeepers.
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