Opinion

See How Narendra Modi’s India is Challenging China’s Manufacturing Muscle

India has become the number one FDI destination in the world beating China. With this increased investment come new factories that create jobs and raise the standard of living of the people rapidly. This investment, however, has meant China’s manufacturing muscle being challenged by India.

The recently implemented GST will be a massive boost to FDI as it has eliminated the complex tax structure in the country. There are and obviously will be teething troubles, but the benefits are many and massive. This reform has further made foreign companies confident of a bright future in India.

Let’s see how GST will massively boost manufacturing in India –

A 10 percent duty was imposed on the import of smartphones and some other electronic products under the GST. This will encourage global smartphone manufacturers to accelerate plans to set up plants in India.

It is being said that Foxconn plans to invest $5 billion in building new factories in the country. To expand its production capacity, Samsung recently decided it would invest another $609 million. Its output is expected to reach 10 million smartphones and 2 lakh refrigerators by 2018.

Chinese mobile manufacturing companies are tapping into the Indian market with constantly increasing investment. OPPO, Vivo, Lenovo and Xiaomi have already set up plants in India. Just around the time Narendra Modi came to power, China’s mobile phone industry including brands, original equipment manufacturers, part suppliers, packaging suppliers and materials suppliers, started to enter the Indian market.

Midea Group which is a Chinese home appliances manufacturer also announced that it would invest $124 million to set up a factory in Pune. This factory will be operational by the end of 2018 and will generate 500 jobs.

Other than burgeoning electronic production in the country, the auto industry is also looking at India eagerly. Tesla CEO Elon Musk is having talks with the Indian government to seek temporary relief from import duties ahead of establishing a local factory.

In June, Chinese automaker SAIC Motor Corp announced plans to become the first Chinese auto company to build a manufacturing facility in India. In 2015, China’s Huawei Technologies Co invested $170 million to set up a R&D centre in India.

The influx of such massive investment is crucial for India’s development. China’s rise to economic superstardom was primarily due to foreign investment. No developing nation has enough funds for all its developing needs, and hence FDI is absolutely crucial for their development.

India suffered from lack of capital for the manufacturing sector. Now, under the ‘Make in India’ program, this dearth of capital is being compensated in great measure. Skilled workforce was a massive problem as well, which is now being corrected with the ‘Skill India’ program.

The place where India finds itself today is where China was two decades ago. China is clearly flustered with this sudden rise of India’s economic clout in the last few years. But this attitude of the Chinese won’t help. It has to remain calm because even China has immense long-term interests in India.


Vinayak Jain

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