China’s loss India’s gain?

The recent outbreak of coronavirus in China could present an opportunity for India as an alternative supply-chain market, particularly for electronics manufacturing and auto components sector.

Hyderabad: Is the world’s reluctance to trade with China after the COVID-19 aftermath has turned favorable to India? Will China’s undisputed dominance over the international trade and supply come to an end?

Experts and common citizens alike are pondering these questions. The argument that India will benefit from China’s debacle in responding to the pandemic, is gaining strength. In fact, the world woke up to unseen circumstances amid the US-China trade war in July 2019.

At that time, US IT giants like HP and Dell among others, had shifted their manufacturing units from China. Japanese companies such as Seiko, Sony and many companies based on reliable supply chains; have chosen Southeast Asian countries as alternatives to China. There were reports that at least 1,000 companies have contacted India when Wuhan emerged as the coronavirus epicenter. The US is making strategic moves to curb China’s dominance in world trade.

Japan has announced JPY 25,000 crore package for companies that are shifting their manufacturing units from mainland China. Some Korean companies are keen on starting operations in India. Of the 56 firms that took the exit door from China, 26 moved to Vietnam, 11 to Taiwan, 8 to Thailand and 3 to India, according to the Nomura report. A Moody’s report explains the extent to which India will be able to capitalize on these changing equations.

Moody’s outlook predicts that East and Southeast Asian countries are going to benefit immensely from the changing dynamics. The report states that China can no longer remain as an unparalleled superpower in manufacturing.

The Moody’s study also underlined the factors that prevent India from grabbing this unexpected opportunity. High domestic production costs are a hindrance to external investors. Statistics show that capital investment, electricity tariffs and taxes are high in India.

Experts have been saying for years that bureaucratic sluggishness and delays in moving files at every step of the system are hindering India’s progress. The government cannot afford to be oblivious to these shortcomings.

Union Minister Ravi Shankar Prasad has called on the states to strengthen the electronic manufacturing industry in the light of backlash against China. If India has to be transformed into an electronic hub, the Center must allocate funds for the establishment of manufacturing clusters in every state.

Key policy decisions that reinvigorate domestic manufacturing sectors must be actively enforced. Additionally, the government must incorporate different industries into the supply chain and reform land, labor and tax regulations. In order to seize the occasion that China’s void has left, India must concentrate on developing its basic infrastructure. All these combined efforts are what will make us a 5 trillion-dollar economy by 2024.