Can India be the new China of the global market?

by Sakshi


Posted on September 17, 2020


Multiple reports by various news agencies claim that there has been unprecedental rise in hostility and anguish in the global community against China in the status quo. Many media outlets have indicated towards the likelihood of an aggressive confrontation or war like situation for China owing to a variety of reasons. Firstly, China has faced backlash in the past few months over its sketchy cover up of coronavirus and the falsified death toll that it tried to feed into the mouths of international organisations like WHO.

The Chinese media is controlled by the Communist Party and the opacity in its coverage of the crisis made it extremely difficult for other countries to quantify the devastating effects. Had they been rendered with the factually accurate numbers depicting the spread, they could have prepared for containment through formulation of adhoc health and administrative bodies at Centre and State level. China’s unapologetic response to the lambasting has further aggravated the fury of those who were struck hard by the spread, especially the US and India. US-China relations are soured beyond repair and the possibility of any sort of constructive engagement through diplomatic channels seems to have hit rock bottom. The USA has often accused China of malpractice whether it’s about data privacy (which led to blacklisting of Huawei’s export and eventual ban from importing hardware into US) or deliberate devaluation of Chinese Yuan to promote exports and make imports costlier. In April 2020, The Trump administration announced to halt the funding of WHO and impugned its functioning believing it to be complicit with China and ineffective at its job.

On the business and commerce front, things aren’t very rosy for China. Charges such as withholding information about the spread of coronavirus has damaged China’s credibility. Adding to this, the impending Presidential election in the USA has acted as a catalyst in vilification of China as an “evil state” to fuel nationalistic fervour in voters, especially in swing states like Florida, Colorado, Nevada, Ohio and Wisconsin. Apart from the USA, countries like Japan and Australia have reduced perks and stimulus for MNCs with overseas manufacturing plants in China after fierce diplomatic exchanges owing to ossified foreign policy and political chicanery by the Communist party. According to a Bloomberg report, Japan has recently proposed to allot an economic stimulus of 220 billion Yen (2 Billion USD) to help its manufacturing firms to shift production out of China and move to other countries. The relief fund constitutes as much as 20 percent of Japan’s annual economic output which paints a fair picture of how fragile the situation is for manufacturers who are dangling between efforts to remain cost effective and yet maximise profit to survive and maintain breakeven. This has compelled multinationals to shift and look out for a new replacement.

Could India be viewed as a prospective replacement?

India has one of the youngest populations in the world reflecting large untapped potential in Indian market and workforce. It enjoys a set of powerful allies like Japan, Israel and apparently Trump’s America too. First week of September witnessed some good tidings as news around collaboration amongst India, Israel and the United States for developing an open ended, secured 5G communication network got confirmation from a top official. The trilateral collaboration has infused vigour in India’s foreign relations with commentators viewing it as a sanguine effort to offset the effects of pandemic and extricate economies that are tail spinning into depression. But the most intricate question that looms around is this, “Is it still enough to entirely replace China?” A simple answer to this would be ‘no’. Even though India enjoys good foreign relations and relatively unexploited or rather unexplored markets, many structural issues jeopardize its scope to position itself as a feasible ‘manufacturing hub’ for industries. The IMF has recently reported that India’s economy is contracting by 4.5 percent this year. According to National Statistical Office (NSO) data, India’s GDP contracted by 23.9% in the first (April-June) quarter of 2020 compared to the same period in 2019. The decline is the sharpest since India started reporting quarterly data in 1996.


Structurally, our education system hasn’t delineated a plan for skill development along with theoretical knowledge. This creates a shortage for ‘skilled’ manual labour which is indispensable for the manufacturing sector. Stiffness and inefficiency in bureaucratic channels slows down and hampers functioning, increasing cost, an outcome MNCs want to avoid at all points in time. Countries like Vietnam and Bangladesh are giving tough competition to India in this regard. But more importantly, these pointers elevate China to take an upper hand over India. According to Investopedia, “One of the reasons companies manufacture their products in China is because of the abundance of lower-wage workers available in the country. China's business ecosystem of networked suppliers, component manufacturers, and distributors has evolved to make it a more efficient and cost-effective place to manufacture products. While Western manufacturers comply with various health, safety, employment, and environmental regulations, Chinese manufacturers generally operate under a much more permissive regulatory environment.” An example of China’s success story is Shenzhen, which thirty years ago, was a small and peaceful town but was later developed into an electronic hub by the government. Does that mean China has become the seemingly ‘all-powerful’, supreme force which can’t be simply replaced? Hostile foreign ties, stagnated diplomacy, non-acceptance of accountability on grounds of coronavirus spread, bad humanitarian records (detention of Uighur Muslims), aggressive expansionist policy in South China Sea and frequent border conflicts have led to global criticism and increased chances of economic isolation for China. Economic success achieved at the cost of humanitarian rights, dignity of labour and democratic values is impossible to emulate by any country without violating its commitment to the citizenry. Hence, it is more pragmatic for India to resolve its structural issues in order to safeguard its interest in a world that’s inching closer towards reducing its dependency on China.


AUTHOR


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Sakshi Rai, SSCBS

She is currently pursuing Bachelors in Management Studies from Shaheed Sukhdev College of Business Studies, University of Delhi. She heads the editing department for The CBS Post, official newsletter of SSCBS. She is also a columnist and has written several opinion pieces covering multiplicity of topics. She enjoys debating and has participated at various tournaments. A hardcore Tharoor fan, she likes to read books on Indian subcontinent and its culture with a special liking towards politics and international relations.