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PM Modi Must Speed-Up If India Wants To Capitalize On Big Firms Exiting China – Experts

India and China celebrated their 70th anniversary of diplomatic ties on May 17. Both nations share an interesting relationship as India and China value each other’s importance but diplomatic differences and historical disputes have mostly kept them apart.

On the 70th anniversary of India-China diplomatic ties, Chinese ambassador China Sun Weidong tweeted – When China was fighting against the epidemic, we received precious support from the Indian people and now when India is facing a difficult time we would like to lend a helping hand and support India to win this battle against Coronavirus.”

Weidong further added that it would be a significant win for the whole world against the pandemic if the two most populous countries in the world can fight the battle against coronavirus. He said that India and China have a shared future and we must build a consensus reached by our two leaders and cooperate closely for win-win results in various fields.

India was the first non-socialist country to establish diplomatic relations with the People’s Republic of China and four years later, in 1954 India’s Prime Minister Jawaharlal Nehru became the first head of government of a non-socialist country who visited China since the founding of the country.

The statement by China’s ambassador came after recent tensions that escalated following repeated LAC violations by China near Sikkim and Ladakh. As EurAsian Times reported, a heated scuffle took place between the Chinese People’s Liberation Army troops and Indian troops along the Line of Actual Control (LAC) in North Sikkim.

India-China Ties During COVID-19 Pandemic

Bitterness for China grows stronger each day, as the world struggles to cope-up with coronavirus pandemic and the impending economic crisis. Coincidently, India finds itself surrounded by an ambient climate to prosper economically out of the global backlash against China.

The increasing hostilities against China over the pandemic have bruised not just its persona but, severely damaged the faith in the supply chains of the country hence, forcing several companies to look for other viable and dependable options.

Why India Can Be The New ‘China’?

By mid-April, the Indian government had strategized high-level meetings to discuss the capitalising on the supply chains moving out of China. “India is at a very sweet spot and the New Delhi wants to ‘tap’ into this potential,” a government official told media.

Recently, it was reported that India is also readying a pool of land twice the size of Luxembourg to offer companies that want to move manufacturing out of China, and has reached out to 1,000 American multinationals.

In an attempt to draw the supply lines of Smartphone giants such as Samsung, Oppo and Vivo, the Indian government had informed about three different schemes with incentives worth ₹48,000 crores in March. According to reports, the Indian officials are in talks with Apple executives to relocate one-fifth of its production from China.

“We are seeing India prioritise efforts to attract supply chains, both at central and state government level,” Nisha Biswal, President of USIBC told the BBC. She continued that “companies that already have some manufacturing in India may be earlier movers in reducing output in plants in China and scaling up in production in India.”

Already having jumped to 63rd position out of 190 other economies in the 2020 Doing Business report by the World Bank, India opens a plethora of opportunities to be explored and exploited.

Before the severe outbreak coronavirus, a report published in February 2020 by UBS, a financial services company based in Switzerland, said that “given India’s competitive advantage in terms of land and labour, exports have always been a big hope historically but it is now seeing a turn as global manufacturers long-settled in China are looking to diversify their manufacturing base. India has the ‘scale advantage’ and key success factors locally are also improving.”

For decades, China has been the ‘factory of the world’, due to its technically advanced manufacturing units, attractive policies for foreign investors and above all, cheap land and labour.

However, industry experts suggest that labour salaries in China are about three times as higher as in India. The entry-level salaries for workers in India usually start between INR 12,000 (US$157) and INR 15,000 (US$196), while in China the salaries as high as three times these prices.

Other than the low cost of labour, India also offers quite fewer costs of operations, modern infrastructure capabilities, special economic zones (SEZs) that attract companies for their duty-free exports and other benefits such as incentives to boost domestic manufacturing, and several business-friendly policies.

“We are hopeful that once COVID-19 is in control, a lot of things will fructify into actual relocation. And India will emerge as an alternate manufacturing destination. Many countries like Japan, US, and South Korea are over-dependent on China and that is now very apparent,” a government official was quoted in a media report.

“The geopolitical moment may look auspicious, but without overhauling its economic policies India will struggle to keep pace with nimbler rivals like Vietnam and Thailand,” writes Sadanand Dhume for the WSJ.

While, Vietnam has already taken up some of China’s textile and clothing manufacturing, India’s immediate neighbour and once a part of it, Bangladesh also projects as a good contender. Rupakjyoti Borah reasons that “India is a democracy and a federal one at that, which means that laws differ from province to province, making things difficult for potential investors.”

He continues that “India has many hurdles to overcome, from reskilling workers and ensuring power supply stability, to adding deep seaports and tax breaks. Critically, given the stiff competition, speed is key if India is to capitalise on the supply chains moving out of China”