CAN INDIA ACT IN TIME TO GAIN FROM THE US-CHINA TRADE WAR?

Almost every trade expert I speak to has been talking about the great opportunity that the continued US-China trade war offers to India to expand its trade with the US. Its true that global manufacturers reeling under the tariffs imposed by the US govt have begun looking to South and Southeast Asia to shift their manufacturing operations. High tariffs are hurting their business and they are now looking out of China. This could clearly be an opportunity for India to step in and fill the supply gap. But can it do so?

China has for years exported a wide range of products to the world_from machinery to electric products, and this bouquet of exports is starkly different from the range of products India exports, predominantly jewellery, pharma products, metals and textiles, among others. To replace China overnight in exporting such manufactured goods is very clearly a tough ask for India. What India could do is find gaps in the supply chain in product categories it already exports in. The real gain, though, lies in India’s ability to draw in manufacturers who may be on a mass exodus plan out of China. Here again, India pales in comparison to China when it comes to business-friendly policies. It’s hardly a secret that a number of global companies foraying into the Indian market have complained of delay in land acquisition, procuring business licenses, and other govt permissions for operational ease and a number of them have gone to the extent of wrapping up their operations.

India, thus, at this stage needs bold government policies that truly ease the process of doing business in India. A Mint edit notes that for global firms to move to India from China would need “a very substantial improvement in the basic factors that drive FDI. These include competitive labor costs, a tax and regulatory environment hospitable to business and easy and hassle-free access to all of the factors of production—land, labor, capital and other inputs such as raw material and intermediate inputs.”

Despite the clamour of economists and trade policy enthusiasts, India’s chances at filling the supply gaps in the global supply chains are difficult, if not impossible.

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