Edit & Opinion

Changes in Global Economy: India must make good!

“Every adversity carries with it the seed of an equal or greater benefit” is a maxim often experienced in life by successful people and the countries. The current pandemic too has quite a few. It is for the smart ones to decipher these. In this piece I am alluding to the economic benefit; a big, populous country with a huge mass of youth can reap. The opportunity is stemming from the World seeking to isolate China, which has been the bedrock of the global supply chain as the manufacturing hub of the world. In my last piece in this column, I had mentioned in some detail how the world was cornering China for unleashing a hell on the world including on its own people.

Australia has since demanded an investigation into the origin of this ‘mysterious virus, COVID-19 to the chagrin of Chinese leadership. Beijing has objected to this proposal on the ground that there is no such tradition of virus-enquiry etc, letting the cat out of the bag. What is more, the Chinese Ambassador in Canberra has issued not-so-veiled economic threats to Australia. In a strong rebuff, Australian leadership has the Chinese to explain the nature and intent of these threats. Donald Trump has held Chinese responsible for the global infection, and has reiterated his resolve to sue the Chinese for compensation.

At home, Nitin Gadkari, a senior Cabinet Minister, in a web interaction with the CEO club of India, has urged, “taking advantage of the global mood against China, Indian entrepreneurs should work hard to attract investment from firms that want to move out of China”. Even Prime Minister Modi exhorted India to ‘rise to the occasion’, and become the global nerve centre of multinational supply chains in the post-COVID world. That is good news. Business as well as the political leadership senses this big opportunity. Nevertheless, can we grab this opportunity with both hands and rebuild our broken economy, and even better, realise the dream of $5trillion economy by 2021 that our Prime Minister promised.

Doubtless, India can achieve the target set by the PM if we use this anti-China global mood. However, we must do a few things urgently to get there, because the facts do not support our optimism. Nomura Group, an Asia-headquartered financial advisory company has reported that, recently, of some 48 companies shifting production out of China, 26 went to Vietnam, 11 to Taiwan, 8 to Thailand, and only 3 to India. This is bad news.

Therefore, New Delhi must do the following to attract investment. First, the government has to show the way, urging companies to attract investment is not good enough. Arguably, business and the civil society in India should rise to the occasion, but both are government-dependent for guidance and patronage. Second, we have a habit of running down FDIs, perhaps because of the bad memories with the first MNC, the East India Company. That is history. In a globalised economy, foreign trade and investment fuel economic growth. We need to build an investment- friendly climate.

As part of that climate, we should facilitate the foreigners to live in a way they want to. A Korean business executive told me once that they crave for their food in India; they have to import things from back home in Korea, as they do not get these here. Third, we must begin to produce things that we import from China, substandard ones. Unless we can manufacture the small, less technology-intensive things, how can we replace China on bigger products? To further the production, universities, polytechnics, IITs, and ITIs should be brought closer to the industry, and they be allowed to participate in the start-ups like Harvard and other universities in the world do. IIT Bombay had to create a SPV to avoid government restrictions on such participation. That is not helping ease of doing business.

Fourth, the FDI clearance should be time-bound, say up to 90 days. The FDI proposal must have a deadline for clearance, to encourage investors to draw their operational plan. If a proposal be rejected, it must be internally recorded why it was done and shown on demand to relevant stakeholders. Fifth, the ‘Make in India’ strategy of the PM should be changed to ‘Make it Global’. This would help companies make global quality products, albeit with help on technology and R&D. In order to make FDI a top economic priority, the government should appoint a Champion for FI (CFI) with a Cabinet rank to oversee this task. This will lend new impetus to the task. The Champion will work as an advisory body to the existing institutions such as DGFT, ITCs etc. This person should be recruited from the Industry or academia with expert knowledge and lobbying skills.

Finally, New Delhi needs to resolve the strategic argument on trade with regard to China; whether to displace China in the supply chain, or engage it in trade, as its main competitor the US is unpredictable. We have covered the first one in the foregoing. The second line of thinking has a few takers, who may confuse and cripple New Delhi’s mission by advancing apolitical arguments. Sample this one, carried in a leading daily. The premise, in fact, a negative one, proposed was, ‘India is notorious for controlling the investors; look at the experience of MNCs like Wal-Mart, Vodafone. Nokia etc, they were taken to the cleaners by Indian government’. Therefore, India can handle any investment. These days, ‘the investor is at greater risk than the investee is’.

This argument completely misses the points about the nature of Chinese investment, and the politics of trade, the interface between foreign policy, security and investment. Chinese investments are all political as many big companies are run or controlled by the Chinese government. It was earlier said about American investment, “American dollar was usually followed by American soldiers”. It applies even more to the Chinese Yuan. Second, China has been openly hostile to India, by luring Pakistan with investment and political support in the UN. Beijing blocked in the UNSC for 10 years declaring Masood Azhar as the global terrorist.

China continues to spice its image as a big economy and the next super power internally by controlling their citizens using strict surveillance and allowing no dissent, and do it externally by funding media campaigns in rich countries, and engaging other countries who have less resources with money and promises. Should India fall for this? America, a super power is finding it hard to shake off China’s economic stranglehold, can India extricate itself once trapped by it. Moreover, when the whole world is gearing up to stay away from the ‘devil’, the advice to walk into the ‘devil’s den’ is preposterous and politically asinine at its best.

Clearly, the strategy therefore, is to eclipse China and not to engage with it. From Gadkari and Modi’s statements, the leadership is on right track, and sooner the rubber meets the road, is better.

….INFA

 

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