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WHY MANUFACTURING WILL NOT MOVE FROM CHINA TO INDIA

For Chinese manufacturing to move here, manufacturing here has to become as easy and convenient as it is in China. Other countries like Indonesia, Philipines, Vietnam etc are quite competitive too and are gunning for the business. What they can’t make up for in infrastructure, they do with policy.

We fail on both counts.

Indonesia has already won the battle over Southeast Asian countries as the main destination for the relocation of US factories. President Joko Widodo made a very fast movement to seize almost all US companies from China. Huge incentives including freeing up land for 5 years and holding direct talks with the President of the United States and all heads of US companies is one of the ways taken to succeed in seizing US multinational companies.

Trump decided to relocate around 27 US factories from China to Indonesia. The conflict between USA and China has greatly benefited Indonesia.

MEANWHILE, OUR BUGBEARS

• Our transport infrastructure sucks.

The Chinese have 5700 bullet trains crisscrossing their country. They’re busy building another 1000 more. That means not only can they access cost-effective rural workforce, they can also quickly create ancillary industrial zones. We have Zero Bullet Trains.

• They’re the second biggest aviation market in the world with over 500 operational airports.
• The Chinese don’t have a customs desk. It’s all electronic.
  Our ports take a week to clear a container. Avg.
• Our internet bandwidth leaves much to be desired. They’re already moving to the next level with a single app interface for all public services including hailing cabs and paying money online. We struggle with payment failures, cancelled transactions and app libraries.
• Our income tax rates are some of the highest in the world. China has income tax slabs as low as 2%.
• Our share in world exports is a little above 2%.
  Our total GDP = China’s total exports.
  China’s agri GDP almost = our total GDP
• On top of all these are the various policy slippery slopes AND bureaucracy.

SOLUTION

1. Make agriculture & manufacturing possible in India for Indian manufacturers first. A foreigner will come invest here only when an Indian is happy doing business here.
2. Yet, Those foreign businesses which could move here are the ones who have a market here.
3. Some sectors which could entice foreign investments are where we have surplus or capabilities and yet import such as coal, edible oils, pulses, jewellery, electronics and defence goods. Our GDP is 225 lakh crores. Our import bill is in excess of 10% of our GDP.

Coal import bill 50,000 crores
Edible oil import bill 45.000 crores
Pulses import bill 11,000 crores
Crude Oil import bill 500,000 crores
Gold & Jewellery import 242,000 crores
Electronics imports 400,000 crores
Defence equipment imports 300,000 crores
Education forex bill 500,00 crores.
Organic Chemicals, Iron & Steel 200,000 crores

That’s almost 21,480,000 Crs of a market which CAN be retained back in India!

On top of this, if the exchange rate shifts by a rupee to the dollar the import bill goes up by 2800 crores per Rupee fall.
Our currency doesn’t appreciate much against the dollar due to inflation.

4. Address the Food leak!

The FCI leakages are to the tune of 46%. All the free grains that the sarkar announces. Approximately half don’t reach the intended beneficiary’s. There are several instances such as this. Bharat Sarkar is very profligate.

The centres subsidy bill for food and fertiliser alone is 220,000 crores. People still go hungry.

Time to privatise agriculture & allow for contract farming, Warehousing & cold storages, food processing. Invite Amazon & Walmart to fix these problems as the Indian state is an exercise in failures.

5. Privatise all PSU’s or allow for Free market competition.
6. Bring the Japanese banks to bear on building infrastructure. Don’t ever forget, how we picked up 28000 crores to build the first MRT, Delhi metro and how we are cascading that to all cities now.
7. A 100 bullet trains and a 1000 airports should provide for a good beginning. That’s what is required or is the need of the hour to generate demand.

The broad thrust of reforms that we have seen in the past 5 days have been very welcome.

Can this nation bite the bullet & go all the way?