Context

• This article analyses the possibility of India attaining the goal of becoming an alternative supply source and investment destination to China. 

India’s strength

• India’s identity as a democratic “un-China” is one of its strengths.
• India’s open and vibrant press, independent judiciary, and other advantages of democratic governance also provide a favourable contrast to China.

Why China scores?

• China continues to offer investors many advantages, such as a manufacturing infrastructure and skill level that allows innovations to move quickly from prototype to product which took decades of strategic planning.

Challenges before India to overtake China

• India’s own planning has been stepped up with the government identifying key sectors; surveying major companies about perceived roadblocks to Indian investments; and increasing Invest India’s outreach. However there are some issues.
  • The Indian government Budget that pledged to create specialised industrial zones is too small and is allocated among too many locations to compete while China’s specialised industrial zones are massive, collocating companies, factories, logistics, and even research and universities. 
  • Policies such as taxes on foreign e-commerce companies and education providers seem constructed to disadvantage foreign investors.

Way forward

Focus on States

• India should start by focusing development in those Indian States that have already demonstrated the ability to produce and export in key sectors. 
• Foreign capital could also greatly increase infrastructure funds beyond government spending alone. 
• India might also usefully build up new industrial centres with an eye to geography, for example linking the southeast of the country to supply chains in Southeast Asia.

Work on the framework

• India has taken a great step to reduce the number of investments needing approval by the Centre, and to increase intra-Ministry coordination on foreign direct investment policies. 
• The same coordination could usefully be extended to the appointment of a high-level official or body in the Prime Minister’s Office to ensure any and all proposed economic policy changes are consistent with the goal of attracting foreign investment.

Conclusion

• India needs to show foreign investors it has the benefits of China with fewer risks as a relocation destination.
• A policy framework that is transparent, predictable, and provides increased consultations with existing and potential foreign company stakeholders before introducing new Indian economic policies, will play a crucial role in determining India’s foreign investment outlook.

Reference:

1. https://www.thehindu.com/todays-paper/tp-opinion/despite-the-messaging-it-is-still-advantage-china/article32482849.ece