The China+1 window is finite. Grab it urgently
India must address challenges such as developing manufacturing capabilities, enhancing skills training, and improving the ease of doing business
Speaking at an event last month, Prime Minister (PM) Narendra Modi emphatically stated that India will be the world’s third largest economy in the coming years. The World Bank, International Monetary Fund, Asian Development Bank, and the Reserve Bank of India have all weighed in on the country’s bright prospects; and SBI Ecowrap has stated India will overtake Germany and Japan to take a place on the podium by 2027.
A large, unified domestic market with an increasing investment appetite, favourable demographics as the rest of the world ages, and reforms borne out of conviction, have come together to bolster the economy in an otherwise gloomy global environment. However, growth is never a straight line. Indeed, while India is unlikely to escape short-term challenges due to a slowdown in the large consuming economies of the West, the building blocks being put in place will ensure we get to the target.
A major factor which must also be considered is China+1, a push by governments and companies alike to de-risk global supply chains from being overly reliant on one geography. This is especially so given the simmering tensions between the United States (US) and China which has led to certain restrictive trade measures and countermeasures. Even if there is a narrow path where tensions do not significantly escalate or spill over into unintentional conflict, there is sufficient forewarning of such a scenario which is leading major global corporations to reconsider their business plans.
However, it is not preordained that India will benefit from geopolitics; it merely gives us an opportunity that must be seized. It is in this context that one should view the plethora of reforms and policy initiatives undertaken by the central government to make India an attractive destination for investments, especially relating to the manufacturing sector that must play a major role in a $5 trillion economy.
Production linked incentive (PLI) schemes with an outlay of ₹1.97 trillion have been announced for 14 sectors, with more under consideration, where India is import dependent or otherwise needs to build capabilities. Perhaps the most important is semiconductors, which are used widely but are also prone to trade sanctions with a reliance on critical minerals as well as cutting-edge technology. However, PLI is a one-off measure intended to create manufacturing champions and cannot be a panacea for all that needs to change in the manufacturing ecosystem.
The PM Gati Shakti-National Master Plan, the National Logistics Policy, and the National Single Window System to facilitate and support investors, are important policy initiatives that make it easier to do business in India and add to its allure as a preeminent investment destination.
India’s large pool of labour must also be given the right skills which back up our manufacturing – and, indeed, service sector – ambitions. This is especially important as Artificial Intelligence and Machine Learning (AI/ML) are likely to disrupt jobs which are low-skill and repetitive in nature. The Skill India Mission launched in 2015 and the National Education Policy (NEP) 2020 address the imperatives in this regard, and the industry must also come forward to contribute towards achieving desired outcomes.
Finally, there must be a continual push to address pain points which hinder the ease of doing business. The Jan Vishwas (Amendment of Provisions) Bill 2023, which was recently passed in Parliament to decriminalise minor, technical or procedural defaults, is a good start, and more such instances must be identified where penal consequences are not commensurate with the offence.
During his visit to India last month, World Bank President Ajay Banga said India did not have an unlimited window to tap into the China+1 opportunity; in his assessment, India has 3-5 years to attract global supply chains. Those decisions are being taken now even as we speak and history rarely affords a second chance, let alone a third. Therefore, it is imperative that all stakeholders – the central and state governments, regulators, lending institutions, and the private sector – are aligned to achieve India’s growth ambitions.
The world has undergone much change since the first industrial revolution. Today, as Industry 4.0 fundamentally shifts how global production and supply chains operate, the PM recently made a distinct connection between an industrial revolution and the aspirations of the people by linking the fourth industrial revolution to Indian aspirations. Modi was spot on when he said, “Yahi samay hai, sahi samay hai” (This is the right time). Indeed, this is India’s moment.
Subhrakant Panda is president, FICCI and Managing Director, IMFA. The views expressed are personal
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