Make China’s loss, India’s gain

Context: Reassessment by the global supply chain over-dependency on China, has created opportunities for India and other developing nations in the region if they enact business enabling policies.

Opportunity for India to become a global investment destination

• A shift in the destination of foreign investment: While Foreign Direct Investments (FDIs) to China declined due to pandemic, there has been a shift to other regions:
• FDI to the Association for Southeast Asian Nations(ASEAN) countries exceeded China's for the last three years.
• FDI to India surged from $4 billion in 2000 to $47 billion in 2008. (1/3rd of China per year)
• Impact of the pandemic on China: China is shifting back toward State planning and Communist Party of China (CPC) interference in private business decision-making, leading foreign investors to look for alternatives. 
• India's trusted relationship with the United States (US) makes it a natural choice for electronics supply.

Challenges to India as Global Manufacturing Hub:

• Poor Ease of Doing Business: Bureaucratic complexities (shifting of tax regimes) and politics have stymied the prospective investors.
• For, E.g. Despite consolidation at the national level of labour laws, states laws are still fragmented and are confusing the job creators.
• Flattening FDI: Over the past decade, annual FDI inflows have stalled. 

• Competition from emerging economies: FDI redistribution will be uneven, awarding the winners of a competition among emerging nations of ASEAN and India.

Way Ahead:

• Right Combination of reforms: including the underway labour reforms, to become hi-tech global manufacturing hub while 
• Improving business conditions would compel investors to shift their plants to India. For E.g. Recently Apple's assembler Foxconn announced an investment of $1 billion in India.