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Day 61 – Q 3. With many global powers getting disillusioned with the Chinese promise, India has a golden window of opportunity to become the global manufacturing hub. Comment. 

  • IASbaba
  • August 19, 2020
  • 0
GS 2, International Relations, TLP-UPSC Mains Answer Writing
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3. With many global powers getting disillusioned with the Chinese promise, India has a golden window of opportunity to become the global manufacturing hub. Comment. 

कई वैश्विक शक्तियों के चीनी वादे से मोहभंग होने के कारण, भारत के पास वैश्विक विनिर्माण केंद्र बनने के अवसर की एक सुनहरी खिड़की है। टिप्पणी करें।

Demand of the question:

It expects candidates to write about how global powers are getting disillusioned with Chinese promise and  put forward both sides views that whether it’s a golden window of opportunity for India to become the global manufacturing hub.

Introduction:

As tensions between India and China over the Indo-Chinese border grow, Indian government has come up with a strategy for self-reliance. Boycotting Chinese products, shifting towards local products is an essential component of that strategy. Replacing Chinese imports with the Indian home brands and gradually replace China as a global manufacturing hub in the post-COVID-19 world.

Body: 

Disillusionment of global powers with China:

  • The whole world is currently reeling from the effects of the recent novel coronavirus pandemic.
  • It is now a well-known fact that the coronavirus pandemic has dealt a big blow to the credibility of China. Due to its hiding of data regarding Coronavirus pandemic.
  • China has been one of the biggest retailers in the world but the situation has changed today due to the visible denial of the shipment entry to the ports of the US.
  • China’s sustained selling position in the global market is due to its lower prices and larger volumes; however, this position is expected to change depending upon the relations of China with the US and other advanced economies in the post-COVID 19 phase.
  • According to the ‘US- India Strategic and Partnership Forum’, around 200 of American firms have thought of shifting their manufacturing from China to India. For instance, US firms like Mastercard may shift its base from China to Uttar Pradesh (India), as UP is claimed to be the hub of ‘90 lakh MSMEs and skilled labor’.

Hence, it opens up a golden window of opportunity for India to become a global manufacturing hub in following ways:

  • Creating alternate source of manufacturing is a difficult challenge but small but systematic steps in that direction can help it to become self-reliant under the proposed ‘Atmanirbhar Bharat’ project. ‘Make in India’ schemes for promoting manufacturing of products in India shall in the short run result the replacement of production of low technology goods from China to India thereby encouraging production of local goods at a much lower price.
  • This could be possible due to the announcement of the comprehensive Rs. 20 lakh crore relief and reboot economy package which would result in huge relief in taxation for small businesses.
  • This will provide an incentive for the domestic manufacturing of products. This package will be particularly helpful for the MSMEs in carrying out their operations because of the collateral-free assistance worth Rs. 3 lack crore that is being provided.
  • There is a huge opportunity for India in the electronic segment including export base. The China smartphone market overtook the US market to become the second-largest smartphone market with the growth of 7 per cent.
  • According to ICEA, the Indian position in terms of electronic exports has remained flat with staying at $5 billion. A new scheme to promote electronic manufacturing, and have a worth of Rs 48,000 crore, will help India utilise the opportunity and make India a desirable alternative to China.
  • Although many global manufacturers are moving out of China, their relocation to India is dependent upon the increased capacity of India in terms of manufacturing. Electric two-wheelers, e-rickshaws run from lithium-ion batteries that are imported from China.
  • India succeeded in convincing Suzuki for establishing a factory of lithium-ion batteries in Gujarat. In a similar manner it needs to convince Hyundai, Panasonic, and LG  for the investment plans in India in terms of the lithium-ion batteries.

However, there are some structural and infrastructural challenges which exist in the way to boost the manufacturing sector in India:

  • While a massive working-age population gives India the chance to become the world’s next growth titan, the country will have to work hard to translate its demographic windfall into much higher standards of living for average Indians. Economic productivity is the key.
  • China has been built on infrastructure, investment and manufacturing; India has barely scratched the surface on all three.
  • Today, India lags far behind China on all three fronts. India invests about 30 percent of its GDP, compared with about 50 percent in China. Manufacturing is about 20 percent of the Indian economy; it is about 30 percent of China’s.
  • China has arguably the best physical infrastructure outside the Western world. India’s looks more like the poor country that it still is.
  • Indian democracy is beyond vibrant, whereas China remains a one party state. For instance, When the Chinese government wants to build a high-speed rail line, they just acquire the land and move and compensate the adversely affected people.
  • However, acquisition of land and building of project with this much of speed is less likely to happen in India.
  • The manufacturing capabilities of South Asian countries also pose a challenge for India to expand its market. e.g. Vietnam:, The biggest factors contributing to the Vietnam’s development is  proximity to China, availability of cheap labour and its business friendly policies.

The government can replicate best practices from the South Asian countries to improve India’s ranking on competitiveness. Incentives for export of electronic goods will also help. There is a need to push through long-pending legislation that aims to address the structural bottlenecks (in 4Ls: Land, Labour, Law, Liquidity) that continue to plague and hinder domestic competitiveness.

Conclusion:

India’s strategy should be to boost manufacturing competitiveness and increase its share in world trade. In this pursuit, there is a need to create an infrastructure that raises the competitiveness of India’s exports. Hence, the coronavirus pandemic and trade war between USA and China has opened up a golden  window of opportunity for India to be  the manufacturing hub of the world.

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