COMMENTS / EXPERT ASSESSMENT
India, stricken in poverty and illness, can hardly become global supply center
Published: Aug 30, 2021 10:10 PM
Illustration: Xia Qing/Global Times

Illustration: Xia Qing/Global Times



Since the US imposed higher tariffs on trade with China in 2018, there have been voices claiming it as a great opportunity for India to catch up or even replace China as center of the world's critical supply chains.

With barely progress to be seen, the topic was raised up again in a report by The Hindu, claiming that "India could benefit from US investment that is leaving China."

The US is likely to continue its confrontational policy toward China after it pulls out troops from Afghanistan, "and India could benefit from US investment that is leaving China if the Modi government becomes more transparent in policy-making and 'open for business'", the report said, citing Mukesh Aghi, leader of the Washington-based US India Strategic Partnership Forum.

Indeed, the US-led small Western clique has their strategic agenda to cajole India against China, while India itself has set an ambitious goal of growing into a leading global power. However, profit-driven capital does not care to play along with hollow political slogans, as shown in the past several years.

Being hit hard by the COVID-19 pandemic, India recorded a 7.3 percent GDP contraction in fiscal year 2020-21. Before the resumption of production was completed, India plunged into a second and more severe virus outbreak in March, with total death toll exceeding 430,000 as of Monday. Multiple international institutes have slashed GDP forecasts for India due to the unbated spread of the virus.

Meanwhile, China has proved its economic resilience and its capability to maintain a stable and vibrant market for businesses from both home and overseas. 

A good deal of examples showed that the potential Chinese market cannot be given up by multinational companies in spite of the China-US diplomatic tensions. For instance, the US-based Tesla recorded more than doubled car sales in China last year and company CEO Musk said in March that Chinese market is likely to be the electric vehicle (EV) brand's biggest market over the long term. 

More importantly, with China vowing to promote the "common prosperity" agenda, the series of policies will unleash consumption power across China's massive market.

Given these circumstances, a large scale of capital outflow from China is unlikely. But it is normally to see a proportion of the capital or production capacity flow out from China due to China's ongoing industrial upgrade. Southeast Asian countries, instead of India, are enjoying much more preference from multinationals with their better infrastructure, sounder industrial facilities and closer connection with China's supply chain.

By contrast, India faces a series of problems which need to be addressed before "benefiting from US investment that is leaving China" - including India's unfriendly land regulation and tax system, constant wrestling between New Delhi and Indian local governments, insufficient skilled labor, and poor infrastructure. 

Before these problems are addressed, it is simply meaningless to play up India's role in replacing China's supply line. What the former Australian Prime Minister Tony Abbott once claimed that "India is perfectly placed to substitute for China in global supply chains," has proved to be a joke.

Not only that New Delhi has long adopted a protectionist approach toward foreign investments, its market simply has been overrated as being dubbed as the "next China." Though India has a similar mass of population with China, the country's purchasing power is much lower. India's per capita GDP in terms of purchasing power parity recorded only $6,454 in 2020, while China's has risen to $17,312, according to data from the World Bank. Therefore, there remains a long way for India to catch up with China. 

The author is director of Institute of Bay of Bengal Studies, Institute of China's Overseas Interests, Shenzhen University. bizopinion@globaltimes.com.cn