HariPrasad-1
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By: Vipul Dave
Date : 23.04.2021
Recently, a Chinese economic think tank has warned that Indian economy possess a major challenge to China. Looking to the recent developments , what Chinese think tank has said needs an analysis. There has been lots of changes in recent time which has changed the age old perceptions. This narrative should be analyzed with past and contemporary events and development. The narrative whether India can substitute China as factory of the world is analyzed here.
The background of Economic rise of China:
If the Chinese unprecedented growth in last two decades is analysed, it is governed by cheap labour and large scale production driven by cost advantage with reverse engineering.
The predecessors of Xinping were not as autocratic as Xinping and they created a very conducive environment for investment from across the world. That lead to an unprecedented growth in manufacturing sector of China. As a result, the investment across the world was attracted to take advantage highly cost effective infrastructure of China. The cheap and hardworking Chinese people made it very attractive for investors by making those business cost effective and earn a big profit. China, in a very short period of time became the darling of whole world for investment.
Changing Scenario:
Because of improving in economic conditions of average Chinese, the cheap labour cost advantage for china started becoming dull. Because of one Child policy for a long time, the demography of China changed. It became a country with an average population of 40+ years. Simultaneously, many countries like India, Bangladesh, Indonesia, Vietnam emerged as the low labour cost destination for mass production. India is of course leading them because of not only cheap labour but because of manpower for each work such as production, Research and development, management skills, fluent English speaking etc. Most important of all is a very young and highly educated demography of an average age of 25 years. There was a time when China used to enjoy almost a monopoly in manufacturing with almost no substitute or competitors. Because of Change in scenario, China no more remained the natural choice for the investors.
Change in political scenario:
The aggressive policies of Xi to project himself as a strong leader in front of Chinese people lead him to create unnecessary dispute with many countries. These disputes were perceived to be totally unnecessary and hegemonic in nature by most of the countries of the world. This has shaken the confidence of investors in China who has started feeling insecure because of the dominating and unfair policies of China. This lead many companies to rethink on their investment in China. Consistent aggression towards Japan made Japanese Investors rethink on their investment in China and ultimately Japanese government created a fund for Japanese investment to exit China. Apple also decided to move to India. This changing scenario lead to 200 factories of various Mobile manufacturing companies starting their operation in India and India became the second largest manufacturer of Mobiles in India. While on one hand China demonstrated a very aggressive and hegemonic policy on strategic and economic front, India well come investment with open arms with very friendly policies. India, in last few years jumped very high in ease of doing business ranking. Corruption was checked and bureaucratic hurdles were removed.
The Covid factor and victory of perception battle for India:
By the second half of 2019, a fatal infectious viral pandemic emerged from Chinese soil. Millions of people have died worldwide due to that Virus emerged from Chinese soil. News emerged that the virus was developed in Wuhan lab and it was targeted to spread pandemic across the world. Situation became very serious and the only way out was perceived to be the vaccination on large scale. It was too difficult to manufacture vaccine in such a short span on a very large scale. India displayed an unbelievable speed in development and production of vaccines. Many poor countries which had no hopes to get vaccine from any first world county got the vaccine from India. WHO chairman said that Indian vaccine facility is the biggest asset world had that day to fight against Chinese virus. The vaccine developed by China was found to be ineffective and inferior with several side effects. On the other hand, Indian made vaccine was sought by many developed nations like even Canada. To push their vaccine for purchase, China gave his fat friend Pakistan free vaccine and pursue the small countries like Nepal to purchase her vaccine. Inspite of lots of efforts, China could not sale her vaccine. On the other hand, India very smartly used her vaccine power to practice diplomacy to change the impression and win the friends. China was conclusively defeated in Covid diplomacy by India. This lead to grass root perception change in the impression of India. India won the perception battle decisively. Today, world see India as a country contributing to world order and betterment of the world opposed to china which is seen as a hegemonic power contributing to disorder and ruining of peace and development. Many countries held China directly responsible for the pandemic and sued China for a hefty compassion. This event lead to wide perception gap between the two countries. India emerged as a conclusive winner in Perception battle.
Rise of India:
India for a long time been considered as a potential economic giant but various factors did not allow India to rise according to the potential it has. India for a long time had followed a socialistic policy highly influenced by communist Russian model which hindered India’s progress. Ultimately the economy was opened in nineties, and India started getting its fruits in few years. Economic growth improved economy started doing well. However, in spite of opening of economy, the old rigid bureaucratic setup created lots of hurdle in smooth flow of foreign and domestic investment. This coupled with corruption at high level made the scenario even worse and India couldn’t become the most attractive investment destination. With the arrival of nationalistic Narendra Modi government in power, the things started changing from scratch. Highest level corruption was eliminated and many bureaucratic hurdles were removed. India jumped to a very high position in couple of years in ease of doing business. Investment was well come with opened arms. Direct tax rate was bought at par with rest of the world. Many red taps were removed. Rapidly improving infrastructure and improvement in energy and electricity sector lead the change. After a period of almost 2 decades, Indian FDI surpassed the FDI of China.
Ladakh conflict and policy change in of India:
In the mid of 2020, Chinese forces transgressed into the territory considered to be a buffer Zone for years. This lead to a face off into the forces of India and China. India Mirror deployed its forces in a very quick time and denied China any advantage of holding disputed land to gain bargaining advantage. To knock off the advantage China had on the southern part of Pangong TSO, India moved its forces on Buffer Zone of Southern bank of Pangong TSO and neutralized the Chinese negotiation advantage. China which refused to go back to pre-April position earlier ultimately agreed to go back to original position. This gave a big Jolt to the China’s Impression as a big hegemonic power who can dictate the terms on neighbours. China after a long stand-off withdrew without achieving anything for which they had transgressed into disputed territory. A clear message went to the world that India has arose. China can no more dominate the India. A new world power has arose in the world which can look into the eyes of China and stand firm against any wrong doing of China and force them correct their action. This was an another moral victory of India after India won the perception battle against China in dealing with Covid. World saw this battle with a lots of Interest. The QUAD , a group made to deal with hegemonic design of China gathered momentum. France has requested to include her into Quad group. So provocation of China forced India to go outright against China with no confusion. The diplomacy of Narendra Modi is fully capable of Making QUAD into a formidable alliance to deal with China on every front.
On economic front, India has practiced a lot more defensive policy particularly against China by keeping border disputes aside. India never let the border disputes come in the way of business relations. Chinese companies used to enjoy all the benefits and advantage which companies from any other nation enjoyed.
The border conflict with China leads India to remove Chinese companies from many Indian contracts. The Chinese MNC Huawei was barred from participating in telecom contracts and 5G terming it a danger for National Security. Even, lots of Chinese applications such as Tik Talk were banned in India. China lost at least one fourth of the market of various Chinese applications. This was an unprecedented response.
Rise of Nationalism and Response to China’s provocation by Indian Corporates:
At the time of Ladakh conflict, when people were discussing to boycott Chinese goods, one Chinese leader said that they too wanted to boycott Indian goods but there was no Chinese goods in the market. Responding to that remarks, Anand Mahindra, the Mahindra group chairman said that Indian Industries accepts the challenge and we shall make India a factory of the world. Some time ago, Reliance chairman Mukesh Ambani declared that Reliance has developed 5G Technology right from scratch and they have not used even a smallest of part in their entire machinery which is made in China. There was a little production of Sanitizer in the country when Corona Broke out last years. Within a very short time, India emerged as a country producing a big quantity of sanitizer. Same was the case with Mask and other PPEs and Ventilators. Recently, there was a scarcity of Oxygen. Reliance started supplying train loads of oxygen and announced that they will build a mammoth 1000 ton per day oxygen plant. When Britishers stopped Tata to entered into a hotel, He responded by building landmark Hotel Taj. Similarly, Indian Industries have accepted the challenge. India has responded very aggressively to Chinese challenge.
Recent change in Economic policies of India with a big vision:
Post covid, India has changed its economic policy from its roots. New policy stress a lot on Swadeshi (Indigenization). A lots of importance is given to make in India. In defence sectors, whole lots of things are put in negative list i.e they cannot be imported. An Incentive scheme is launched in many sectors to attract investment. A Whole lots of things are made in India now. In last one month, more than a dozens of Electric scooters are launched with lithium Iron battery starting from as low as Rs 25000 i.e 350 USD. Ola’s world’s biggest electric scooter manufacturing plant’s work has begun. A big investment has come in electronic sector which was ignored for a long time. India is all set to manufacture over Rs 2.5 Lakh Crore of PCB only. Apple and many other manufacturers of Mobile handset are shifting their factory to India. There is an explosion in new start-ups in India. Small start-ups of India has made wonders by producing semi cryogenic engine for rocket with 3D printing in Just 3 days. Recently, India’s road ministry made a world record of building of building a 4 lane RCC road of 2.5 km in single day and a 25 km Bitumen road of 25 km in single day. There has been an unprecedented scale of Research in various batteries. Solar and wind power plants are coming in big scale. In Dholera smart city (A green field smart city) a 5000 MW solar power plant is planned and Airbus is coming with its biggest plant to manufacture whole set of aircraft production. A fully conducive environment is set to make India an another factory of the world. India is all set to manufacture a pencil cell to big aircrafts with great quality in very cost effective way.
Conclusion:
There is a frequently asked question whether India can substitute China as a factory of the world? Looking to the development of last couple of years, India has logged a very strong claim to be a manufacturing hub of the world. China’s hegemonic , unfriendly and untrustworthy policies and actions have made many enemies. Whatever China had earned with the help of their hard working people in last two decades is being lost very fast. On the other hand, India has displayed a great capability to responding to any exigency. The modern India is not the India of typical Hindu growth rate. Modern India is a country of nationalist young people with an average age of 25 years with full of dreams and capability to turn those dreams into reality. Recent Goldman sachs report shows India a second largest economy after China in 2050 with 15% of world’s GDP. However, I can foresee India surpassing China before 2040. India has shown a lots of promise in the leadership of Prime minister Modi in last few years. Young India has big dreams and Indian highly educated Indian youth has the capability to turn those dreams into reality.
Date : 23.04.2021
Recently, a Chinese economic think tank has warned that Indian economy possess a major challenge to China. Looking to the recent developments , what Chinese think tank has said needs an analysis. There has been lots of changes in recent time which has changed the age old perceptions. This narrative should be analyzed with past and contemporary events and development. The narrative whether India can substitute China as factory of the world is analyzed here.
The background of Economic rise of China:
If the Chinese unprecedented growth in last two decades is analysed, it is governed by cheap labour and large scale production driven by cost advantage with reverse engineering.
The predecessors of Xinping were not as autocratic as Xinping and they created a very conducive environment for investment from across the world. That lead to an unprecedented growth in manufacturing sector of China. As a result, the investment across the world was attracted to take advantage highly cost effective infrastructure of China. The cheap and hardworking Chinese people made it very attractive for investors by making those business cost effective and earn a big profit. China, in a very short period of time became the darling of whole world for investment.
Changing Scenario:
Because of improving in economic conditions of average Chinese, the cheap labour cost advantage for china started becoming dull. Because of one Child policy for a long time, the demography of China changed. It became a country with an average population of 40+ years. Simultaneously, many countries like India, Bangladesh, Indonesia, Vietnam emerged as the low labour cost destination for mass production. India is of course leading them because of not only cheap labour but because of manpower for each work such as production, Research and development, management skills, fluent English speaking etc. Most important of all is a very young and highly educated demography of an average age of 25 years. There was a time when China used to enjoy almost a monopoly in manufacturing with almost no substitute or competitors. Because of Change in scenario, China no more remained the natural choice for the investors.
Change in political scenario:
The aggressive policies of Xi to project himself as a strong leader in front of Chinese people lead him to create unnecessary dispute with many countries. These disputes were perceived to be totally unnecessary and hegemonic in nature by most of the countries of the world. This has shaken the confidence of investors in China who has started feeling insecure because of the dominating and unfair policies of China. This lead many companies to rethink on their investment in China. Consistent aggression towards Japan made Japanese Investors rethink on their investment in China and ultimately Japanese government created a fund for Japanese investment to exit China. Apple also decided to move to India. This changing scenario lead to 200 factories of various Mobile manufacturing companies starting their operation in India and India became the second largest manufacturer of Mobiles in India. While on one hand China demonstrated a very aggressive and hegemonic policy on strategic and economic front, India well come investment with open arms with very friendly policies. India, in last few years jumped very high in ease of doing business ranking. Corruption was checked and bureaucratic hurdles were removed.
The Covid factor and victory of perception battle for India:
By the second half of 2019, a fatal infectious viral pandemic emerged from Chinese soil. Millions of people have died worldwide due to that Virus emerged from Chinese soil. News emerged that the virus was developed in Wuhan lab and it was targeted to spread pandemic across the world. Situation became very serious and the only way out was perceived to be the vaccination on large scale. It was too difficult to manufacture vaccine in such a short span on a very large scale. India displayed an unbelievable speed in development and production of vaccines. Many poor countries which had no hopes to get vaccine from any first world county got the vaccine from India. WHO chairman said that Indian vaccine facility is the biggest asset world had that day to fight against Chinese virus. The vaccine developed by China was found to be ineffective and inferior with several side effects. On the other hand, Indian made vaccine was sought by many developed nations like even Canada. To push their vaccine for purchase, China gave his fat friend Pakistan free vaccine and pursue the small countries like Nepal to purchase her vaccine. Inspite of lots of efforts, China could not sale her vaccine. On the other hand, India very smartly used her vaccine power to practice diplomacy to change the impression and win the friends. China was conclusively defeated in Covid diplomacy by India. This lead to grass root perception change in the impression of India. India won the perception battle decisively. Today, world see India as a country contributing to world order and betterment of the world opposed to china which is seen as a hegemonic power contributing to disorder and ruining of peace and development. Many countries held China directly responsible for the pandemic and sued China for a hefty compassion. This event lead to wide perception gap between the two countries. India emerged as a conclusive winner in Perception battle.
Rise of India:
India for a long time been considered as a potential economic giant but various factors did not allow India to rise according to the potential it has. India for a long time had followed a socialistic policy highly influenced by communist Russian model which hindered India’s progress. Ultimately the economy was opened in nineties, and India started getting its fruits in few years. Economic growth improved economy started doing well. However, in spite of opening of economy, the old rigid bureaucratic setup created lots of hurdle in smooth flow of foreign and domestic investment. This coupled with corruption at high level made the scenario even worse and India couldn’t become the most attractive investment destination. With the arrival of nationalistic Narendra Modi government in power, the things started changing from scratch. Highest level corruption was eliminated and many bureaucratic hurdles were removed. India jumped to a very high position in couple of years in ease of doing business. Investment was well come with opened arms. Direct tax rate was bought at par with rest of the world. Many red taps were removed. Rapidly improving infrastructure and improvement in energy and electricity sector lead the change. After a period of almost 2 decades, Indian FDI surpassed the FDI of China.
Ladakh conflict and policy change in of India:
In the mid of 2020, Chinese forces transgressed into the territory considered to be a buffer Zone for years. This lead to a face off into the forces of India and China. India Mirror deployed its forces in a very quick time and denied China any advantage of holding disputed land to gain bargaining advantage. To knock off the advantage China had on the southern part of Pangong TSO, India moved its forces on Buffer Zone of Southern bank of Pangong TSO and neutralized the Chinese negotiation advantage. China which refused to go back to pre-April position earlier ultimately agreed to go back to original position. This gave a big Jolt to the China’s Impression as a big hegemonic power who can dictate the terms on neighbours. China after a long stand-off withdrew without achieving anything for which they had transgressed into disputed territory. A clear message went to the world that India has arose. China can no more dominate the India. A new world power has arose in the world which can look into the eyes of China and stand firm against any wrong doing of China and force them correct their action. This was an another moral victory of India after India won the perception battle against China in dealing with Covid. World saw this battle with a lots of Interest. The QUAD , a group made to deal with hegemonic design of China gathered momentum. France has requested to include her into Quad group. So provocation of China forced India to go outright against China with no confusion. The diplomacy of Narendra Modi is fully capable of Making QUAD into a formidable alliance to deal with China on every front.
On economic front, India has practiced a lot more defensive policy particularly against China by keeping border disputes aside. India never let the border disputes come in the way of business relations. Chinese companies used to enjoy all the benefits and advantage which companies from any other nation enjoyed.
The border conflict with China leads India to remove Chinese companies from many Indian contracts. The Chinese MNC Huawei was barred from participating in telecom contracts and 5G terming it a danger for National Security. Even, lots of Chinese applications such as Tik Talk were banned in India. China lost at least one fourth of the market of various Chinese applications. This was an unprecedented response.
Rise of Nationalism and Response to China’s provocation by Indian Corporates:
At the time of Ladakh conflict, when people were discussing to boycott Chinese goods, one Chinese leader said that they too wanted to boycott Indian goods but there was no Chinese goods in the market. Responding to that remarks, Anand Mahindra, the Mahindra group chairman said that Indian Industries accepts the challenge and we shall make India a factory of the world. Some time ago, Reliance chairman Mukesh Ambani declared that Reliance has developed 5G Technology right from scratch and they have not used even a smallest of part in their entire machinery which is made in China. There was a little production of Sanitizer in the country when Corona Broke out last years. Within a very short time, India emerged as a country producing a big quantity of sanitizer. Same was the case with Mask and other PPEs and Ventilators. Recently, there was a scarcity of Oxygen. Reliance started supplying train loads of oxygen and announced that they will build a mammoth 1000 ton per day oxygen plant. When Britishers stopped Tata to entered into a hotel, He responded by building landmark Hotel Taj. Similarly, Indian Industries have accepted the challenge. India has responded very aggressively to Chinese challenge.
Recent change in Economic policies of India with a big vision:
Post covid, India has changed its economic policy from its roots. New policy stress a lot on Swadeshi (Indigenization). A lots of importance is given to make in India. In defence sectors, whole lots of things are put in negative list i.e they cannot be imported. An Incentive scheme is launched in many sectors to attract investment. A Whole lots of things are made in India now. In last one month, more than a dozens of Electric scooters are launched with lithium Iron battery starting from as low as Rs 25000 i.e 350 USD. Ola’s world’s biggest electric scooter manufacturing plant’s work has begun. A big investment has come in electronic sector which was ignored for a long time. India is all set to manufacture over Rs 2.5 Lakh Crore of PCB only. Apple and many other manufacturers of Mobile handset are shifting their factory to India. There is an explosion in new start-ups in India. Small start-ups of India has made wonders by producing semi cryogenic engine for rocket with 3D printing in Just 3 days. Recently, India’s road ministry made a world record of building of building a 4 lane RCC road of 2.5 km in single day and a 25 km Bitumen road of 25 km in single day. There has been an unprecedented scale of Research in various batteries. Solar and wind power plants are coming in big scale. In Dholera smart city (A green field smart city) a 5000 MW solar power plant is planned and Airbus is coming with its biggest plant to manufacture whole set of aircraft production. A fully conducive environment is set to make India an another factory of the world. India is all set to manufacture a pencil cell to big aircrafts with great quality in very cost effective way.
Conclusion:
There is a frequently asked question whether India can substitute China as a factory of the world? Looking to the development of last couple of years, India has logged a very strong claim to be a manufacturing hub of the world. China’s hegemonic , unfriendly and untrustworthy policies and actions have made many enemies. Whatever China had earned with the help of their hard working people in last two decades is being lost very fast. On the other hand, India has displayed a great capability to responding to any exigency. The modern India is not the India of typical Hindu growth rate. Modern India is a country of nationalist young people with an average age of 25 years with full of dreams and capability to turn those dreams into reality. Recent Goldman sachs report shows India a second largest economy after China in 2050 with 15% of world’s GDP. However, I can foresee India surpassing China before 2040. India has shown a lots of promise in the leadership of Prime minister Modi in last few years. Young India has big dreams and Indian highly educated Indian youth has the capability to turn those dreams into reality.
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