Last week was “Make in India” week. Whether or not “Make in India” will one day replace “Made in China” has become a hot topic of discussion. Based on the discussion it seems majority of the views negative. A considerable amount of people feel ‘make in India’ is a “hopeless pursuit”. But in truth, the talk about replacing “made in China” is not misplaced. Considering the difference in development level, even if India’s manufacturing industry does develop to a certain degree, competition between India and China will be in different industries due to structural dislocation. However, if considered objectively, “make in India” will inevitably become an emerging force in the global markets. The idea behind “make in India” purely relies on the export of large amount of commodities to the other large BRICS markets.
India has a strong competitive advantage for developing manufacturing industry due to a relatively advanced technology, huge domestic market and supply of abundant labour force. Deloitte Global manufacturing Index shows that the competitive strength of India’s manufacturing industry ranks at no. 4 in the world manufacturing competitiveness. By 2018 it is expected to be second only to China. Although this index is controversial, seen from the point of view of changing global industrial division ‘Make in India’ has a lot of space to grow.
In a few low to mid-range industries, ‘Make in India’ has a comparatively strong cost advantage. The share of Indian textile market in America and Europe is beginning to increase. During ‘Make in India’ week, Indian businesses launched a 250 rupee smart phone. Despite the hype, it is troubling for the manufacturing industries in other countries. In Myanmar, Bangladesh and other neighboring countries, India’s cheap smartphone is already beginning to occupy the “market of poor people”. The cost of producing drugs in India is only 1/10 of what it is in other countries. Although the protection of Intellectual Property Rights (IPR) is poor, for now it appears that India has a strong advantage in the industry.
India’s potential competitive strength in the high technology sphere cannot be overlooked either. For example, the technology that India has accumulated in national defense sphere can spill over in the manufacturing industry sphere and act as a competitive advantage. In the post financial crisis era, the trend of intelligent manufacturing has contributed to India having a competitive advantage in its own field of information technology. In the automobile industry, due to the early introduction of international automobile manufacturers, India could use its international exposure to advance intelligent designs. For example, with effective control over car manufacturing costs, Tata motors produced the world’s cheapest car Nano which was priced at only $2000. India’s exploration of Nano material and other new technology spheres also cannot be overlooked. These competitive advantages combined with domestic and international markets will give rise to huge manufacturing capacity at some point in time.
‘Make in India’ has the distinct characteristic of the “late-development advantage”, which mean it can achieve “leapfrog development” by using its base of abundant natural resources aided by the advance international technology. This is particularly true in the industry of new technologies, where in some privately owned companies possess more flexibility in the main part of India’s innovative economic development. In addition, since India is a western style democracy, developed countries from Europe and America have even more relaxed policies in the export of high tech material to India.
At present, the momentum of international capital investment in India’s manufacturing industry is increasing. Panasonic, Samsung, LG and other companies are establishing factories in India. China’s manufacturing industry has also increased their investment in India, for example, the Foxconn Technology group has begun setting up factories in India. In the next five years, the investment will reach $5 billion. In addition to this, India is also increasingly strengthening investment promotions within China.
‘Make in India’ is acting as a significant development trend in the global economy. Compared to the “pale” backdrop of the other BRICS countries, India and China will become leaders among the emerging economies. Compared to the software and outsourcing service industry, the development of mid to low range manufacturing industry can absorb population from the agricultural sector. Urbanization in India will grow faster in the background of development of manufacturing industry. Given the huge demand for a large population and the economic scale, the development of manufacturing industry and urbanization will contribute to changing the current feeble structure of global commodity demand.
Since the Indian government lacks the strong economic mobilization, unlike the Chinese government, the success of ‘Make in India’ will ultimately depend upon market forces. Unlike ‘Made in China’, ‘Make in India’ is still weak. In the future, China will definitely be affected by ‘Make in India’ in a few mid to low range and special industries in the global markets. but this is also a type of displacement competition. One aspect to consider is that China’s high end manufacturing industry is growing rapidly and on the other hand, its “made in China” brand has already gained recognition in the international markets. Under the same technological conditions, India can no doubt gain a larger share in international markets by making a greater investment.
The author is a research assistant, World Economy, Shanghai Institute of International Studies