By Wasana Nadeeshani Sellahewa
(Commonwealth) _ Early in the 1990s, production moved from the West to the East on a worldwide scale. India was not prepared to benefit from the change since its economy was just starting to become more liberalized. On the other hand, China’s economy had already been opened up, so it was well prepared to seize this chance.
In less than ten years, it became the global center for manufacturing after doing it in the finest way possible. According to figures from the UN Statistical Division, it represented up to 28.7% (or $4 trillion) of the world’s total industrial output in 2019. With a 3.1% share, India came in fifth place, trailing only the US, Japan, and Germany.
India’s industry improved in efficiency and competitiveness as a result of the changes it accepted in 1991 and the gradual opening up of its economy. The vision of India being a manufacturing powerhouse was revived around the turn of the century as exports of produced products progressively rose. But the actual situation was not favourable.
By that time, China was supplying items at a cost that Indian manufacturers could not possibly match due to its enormous scale, low labor costs, reliable supply chain, and significantly superior infrastructure.
An excellent example would be toys. Toys from China were less expensive when they arrived at their destination than toys made in India, which need more expensive raw materials. A portion of policymakers could never fully get over the reality that India missed the manufactured bus in the 1990s, and the notion of it being the next China stayed a pipe dream.
India’s desire for manufacturing has recently gotten a boost from two breakthroughs, or, to use the phrase “a second life.” The first is that the US and China are no longer “co-operating rivals,” but rather “competing competitors” in their relationship. The disproportionate reliance of American businesses on China for their manufacturing requirements was made clear by this, which also started a trade war. It became vital and real for them that they de-risk. A strategy known as “China+1” was born as a result of this. In an effort to lessen their reliance on China, international businesses are looking for other manufacturing sites.
Globalization as it was a few generations old seems to be extinct. Although there was a recent resolution at the 12th Ministerial, the World Trade Organization is still weak, and now is the time for bilateral trade agreements.
Due to this, Western businesses could not have access to the most affordable products and will be forced to settle with those made in friendly nations that respect nature, human rights, and the dignity of labor. India has a huge industrial opportunity as a result of these developments. Should the country take the risk? The answer is not a clear-cut “yes.”
In the past 30 years, the world economy has undergone significant change. These days, less people are buying produced items per capita, especially in developed nations. Spending on services has increased there. According to experts, as nations become wealthier, customers should expect to spend more money on services than on produced goods.
This is another reason why many businesses change their focus from producing only things to providing services as part of a bundle with the product. India must decide whether to meet the demands of middle-income countries for manufactured goods or to ride the trend and provide services to wealthier countries.
Experts have emphasized again and time again that India should embrace a services-led economic strategy rather than copy China, including former RBI Governor Raghuram Rajan. The causes are comprehensible. For a multitude of reasons, India cannot imitate the China model or its competitiveness. When the eastern neighbor began its manufacturing journey, it built enormous factories (which produced massive economies of scale) along with large ports, airports, and road network (which reduced logistics costs and sped up the evacuation of manufactured goods) without having to worry about issues of land acquisition, public hearings, political, or other opposition.
