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Anti-China Sentiment, Covid-19 an Opportunity for India to Emerge as Global Manufacturing Hub

File photo of Prime Minister Narendra Modi and Chinese President Xi Jinping (AP Photo/Manish Swarup)

File photo of Prime Minister Narendra Modi and Chinese President Xi Jinping (AP Photo/Manish Swarup)

The impact of the COVID-19 pandemic on the globalisation process has forced many nations to re-think trade ties with China.

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.

The impact of the COVID-19 pandemic on the globalisation process has forced many nations to re-think trade ties with China. This is evident by the rejection of ‘faulty’ rapid test kits order supplied by China to many countries including India. There are many Indian brands such as Big Basket, Paytm, Ola, and Byju’s which are heavily dependent on China finance. Despite increased dependency of India on Chinese products India can succeed in its current plans of replacing Chinese products in India and in world market if it plays its cards well.

Anti-China sentiments owing to clash in Galwan prompted angry street protests in various parts of India and Indian government announced a boycott of the Chinese firms, ban on 59 mobile applications. The entire situation further impacted the volume of bilateral trade between both countries which had already contracted by 15 percent since 2018.

Global Anti-China Sentiments: An Opportunity

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.

Most of the consumer durables or household products that are used in India are manufactured in China or their components are imported from there. 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. Downward slide of China can be a huge opportunity for India through the investment in the food processing sector that would allow the trade to move out of China.

This shall all be possible due to post-COVID growing anti-China sentiments. This could be good for India as experts feel that easing of constraints on the supply side and the revival on the demand side will help the global economy to recover. 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 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’.

Opportunities in Electronics Segment and Agriculture Sector

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 India 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. Further, various manufacturing facilities have been sub-contracted to electronic companies in India. For instance, the firms like Apple are thinking of producing smartphones worth $40 billion in India by shifting from China as this will provide them benefits related to the scheme of the new ‘production-linked incentives (PLI)’.

The proposed scheme of ‘Atmanirbhar Bharat’ will further drive the agriculture sector due to incentives in building the cold chains and the post-harvest management infrastructure. The setting up of the legal framework will facilitate the engagement of the farmers with the processors and large retailers. In terms of the export of agricultural products India has been a key exporter of products such as rice, meat, milk products, tea, honey, and other organic products. The export of 21 such agricultural products by taking advantage of trade restriction of the Chinese goods will be another opportunity for India. The recent amendment of the ‘Essential Commodities Act’ will help the farmers due to improved realisation of prices for the agricultural products.

Replacing Chinese Items, Becoming Global Manufacturing Hub in Post-COVID World

The liberalisation reforms have enabled India to become a dominant market in terms of computers, drugs, telephones, solar energy, organic chemicals, and electric vehicles. The aspect in which India lags is its capacity to manufacture which has contributed it to become an importer of various goods.

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.

However, companies like Suzuki are investing in lithium-ion batteries worth Rs 5,000 crore. Although China enjoys a monopoly in the lithium-ion batteries, India should not worry about its supply from China as it will not stop its supply. 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 Chem for the investment plans in India in terms of the lithium-ion batteries.

Nationalism not only comprises of protecting its geographical integrity and civilisational heritage but also includes enhancing India's economic status in the world. PM’s emphasis on self-reliance at all levels through Atma Nirbhar Bharat Economic Framework shall act as a facilitating catalyst. Self-Reliance does not mean going into an internal shell. It means, 'think global but act local'.

first published:July 04, 2020, 13:41 IST