Step Up Manufacturing to Meet Chinese Challenge

Context: There is a wide demand to boycott chinese goods due to the present tensions in Indo-China relations. But India needs to address the challenges underlying the manufacturing process before it takes such measures.

Challenges for India in stepping up manufacturing:

• Chinese imports are necessary: Imports play a key role in strengthening the supply chain.

• E.g. Alloy wheels for motorcycles are imported from China. 

• Raising tariffs: on Chinese imports hurt the Indian consumer.

• E.g.  Electric vehicles, run on batteries(imported from China) which account for 50% of the costs. 

• Issues in labour laws: Recent decision by several Indian states to ease protection to workers results in low worker productivity.
• Competition from Vietnam:

• Indian exports of footwear, garments, marine products, and furniture are becoming costly as compared to Vietnam.

• Attractive tariff treatment by Vietnam for global manufacturers to set up supply chains.

• Unique strengths of China:

• Extensive supply chains: Goods manufactured there get inputs from other Chinese manufacturers. 
• Domestic market: China has a domestic market that is attractive to manufacturers across the world. 
• High productivity of Chinese workers.
• Infrastructure: China has an enviable infrastructure. India is way behind in both infrastructures and in electricity charges.
• Research and development effort in the manufacturing process by attracting young engineers.

Conclusion: Instead of reacting to emotive impulses of present circumstances, India needs to enable an economic policy determined by economic considerations to boost the manufacturing sector.