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OpINION NOVEMBER 20, 2020 | The Indian Eye 38

Can india Be tHe next

GlOBal manufaCturinG HuB?

The pandemic presents new opportunities for India to rethink its industrial strategy,

especially policies concerning the growth of its manufacturing sector

KOGila BalaKrisHnan of doing business and luring FDI
into the country. In fact, since the
he COVID-19 pandemic outbreak of the COVID-19 pan-
has revealed the inherent demic, it has announced several
Tweaknesses in the exist- measures and offered various in-
ing global supply chain and the centives to attract global invest-
over-reliance on China’s man- ment. According to the latest
ufacturing industry. Countries UN report on world investment,
such as Japan and the United the FDI inflow in China, despite
States (US) have announced being the second largest recipi-
their decision to “on-shore”, or ent of FDI after the US, saw only
pivot, their supply chain out of a marginal increase of 2.1 per
China. Meanwhile, Prime Minis- cent in 2019. On the other hand,
ter Narendra Modi has called on the FDI inflow in India rose by
the Indians to seize the chance almost 20 per cent in 2019. The
presented by the disruption to COVID-19 supply chain dis-
global supply lines. The Atman- ruptions and lessons learnt may
irbhar Bharat Abhiyan (Self-Re- further work to the advantage of
liant India Movement) launched India in terms of making it an al-
by Prime Minister Modi in May ternative FDI destination.
2020 is aimed at merging the In September 2014, Prime
global with the local, generating Minister Modi launched the
manufacturing investment, and 28.8 per cent share. stood at $49 billion. India liber- “Make in India” initiative to
becoming the new global nerve However, India’s policy on alised its economy just over a de- renew focus on 25 key sectors
centre of multinational supply foreign direct investment (FDI) cade after China in 1991, but the ranging from automobiles to
chains in the post-COVID world. and ease of doing business has move was more cautious than information technology and
However, despite long-term improved tremendously since that of China’s, accompanied by business process management
aspirations to become a high-val- 2015. According to the World sectoral caps. It was only in June (BPM). The initiative is built
ue manufacturing hub, India re- Bank’s Ease of Doing Business 2017 that India abolished the on four pillars: policy initiatives
mains lagging in this area. The Ranking 2020, India jumped 79 Foreign Investment Promotion and new processes, robust infra-
pandemic presents new oppor- positions from 142 in 2014 to 63 Board (FIPB), an inter-minis- structure, focus sectors, and a
tunities for India to rethink its in 2019. At the same time, Chi- terial board that granted prior new mindset approach. In May
national industrial strategy, es- na had climbed up from position governmental approval in man- 2017, the Ministry of Defence’s
pecially policies concerning the 90 in 2014 to 31 in 2019.9 India datory sectors. Defence Acquisition Council
growth of its manufacturing sec- would have to capture a place India is also dependent on approved the “Strategic Part-
tor. This leads to the question: among the top 50 in the rank- China for specific critical com- nership” model which enables
can India position itself to take ing to become a global player in ponents. The cell phone industry, private companies to tie up with
advantage of the opportunity manufacturing. for instance, imports approxi- foreign players in manufacturing
that avails to be the next global mately 75 per cent of its compo- high-tech defence equipment
manufacturing hub? india’s manufacturing lag nents from China, with only 12 such as submarines, fighter jets,
According to the United Na- There are several reasons per cent being manufactured helicopters, and armoured vehi-
tions Industrial Development why India lags in the manufac- domestically. The chemical used cles in India.
Organisation (UNIDO), in 2019, turing sector. China has outper- to make cathodes and battery The series of policy reforms
India ranked 42 out of 152 coun- formed India, especially in areas cells for electric vehicles, printed and notable improvements in the
tries, with manufacturing val- critical to boosting manufactur- circuit boards, camera modules, business regulatory framework
ue added (MVA constant 2015 ing output such as starting new and semiconductors are all im- has had a tremendous impact on
US$) totalling $430.25 billion, or businesses, access to electricity, ported from China. the development of India’s abili-
equal to 15.5 per cent of its gross registering property, and perfor- ty to attract FDI and trade in the
domestic product (GDP). At the mance in enforcing contracts. india’s manufacturing manufacturing sector. In fact,
same time, China ranked second Pre-COVID, in 2019, Chi- Policy initiatives the World Bank’s Doing Busi-
with MVA (constant 2015 US$) na’s FDI inflow stood at US$ 140 The Indian Government is ness 2020 report ranked India
of $4105.87 billion or equal to billion, whereas that of India’s committed to improving the ease Continued at next page... >>

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