China should pay more attention to India’s increasing manufacturing competitiveness

By Hu Weijia Source:Global Times Published: 2017/3/3 0:03:39

There has been a lot of discussion about whether India's higher-than-expected economic growth of 7 percent from October to December 2016 is authentic and reliable. Meanwhile less attention is being paid to bright points in the country's economy. What cannot be overlooked is the increasing competitiveness of the manufacturing sector in India.

Although Narendra Modi's demonetization move put a dent in India's economic momentum, the country's manufacturing sector still grew 8.3 percent in the third quarter of the country's fiscal year. This is a great achievement for India, even if the growth figure may be exaggerated as some analysts suggest.

The rapid growth in India's manufacturing sector is likely to continue. The Nikkei India Manufacturing Purchasing Managers' Index grew to 50.7 in February from 50.4 in January, suggesting an expansion of activity in the sector.

Although India is still in its initial stage of developing export-oriented manufacturing industries, the country has great potential to emerge as a regional hub for labor-intensive industries. One recent analysis showed China's manufacturing hourly wage in 2016 was roughly five times that in India.

Although it is too early to say that India will replace China as a manufacturing giant, as it is not easy to form a complete industry chain from screw to commercial airliner in a short time, increased competitiveness from Indian-made products should be closely watched. Official data showing India's January exports to China soared 42 percent year-on-year was overlooked by most Chinese analysts, but it will be a very dangerous venture if China adopts an arrogant attitude toward India's increasing competitiveness. Scholars should make a careful analysis about the soaring growth to find out whether this is merely a flash in the pan or a result of subtle changes in competition in the manufacturing sector.

On the whole, rapid economic expansion in India is a good thing for China as China's consumer market matures, but Chinese manufacturers will inevitably face increased competition from Indian firms at the same time. As labor costs climb in China, Vietnam has become an emerging manufacturing nation, but China doesn't need to panic. However, manufacturing development in a large country like India means more pressure on China. The increasing competitiveness from India's manufacturing sector is a issue of strategic importance and deserves more attention.

The author is a reporter with the Global Times.


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