India is Chasing an Elusive China Dream

Context: India in order to attract investment out of China, need to develop competitive edge over issues that are derailing its ease of doing competitiveness ranking.

China’s Competitive Advantage as Factory of the world:

• Dense supply chains and second-largest economy of world.
• Large domestic market (that dwarfs India’s, middle income wages) and highly productive workers.
• Stricter labour protection and better social security provisioning.
• First-World infrastructure such as six-lane highways and efficient ports that offer rapid customs clearance. 
• Replacing  labour-intensive products and with manufacturing  products .
• Dominates the manufacturing and assembly of lower-value components for smartphones.
• Chinese factories can afford large population size of workers (Foxconn townships in Zhengzhou more than 200,000 workers).
• China’s growth is less intertwined with global supply chains.
• China + 1 as a sourcing strategy had limited success in diversifying investment away from China.

India’s Disadvantage

• Inflexible Land and labour laws. 
• Issues in electricity costs and logistics. 
• Weak Infrastructure, ease of business and tariff regimes 
• Increased tariffs and absence of free trade agreements.
• Opting out of Regional Comprehensive Economic Partnership (RCEP).
• Protectionist stance through Make in India programme and being vocal about local initiatives.
• Manufacturing export model doesn’t work for India due to factories lack of scale, erratic administering of rules and regulations, and poor logistics and infrastructure.

Way Forward

• India should concentrate on developing stronger trade and commercial relationships within its neighbourhood in South Asia while also engaging more with the nations of South-East Asia.