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Indian Prime Minister Narendra Modi set out his ambition for India becoming the world's factory in four critical sectors. The unstated message: This is the right time to position India as an alternative to China.
Assuring Indian industry that his government will provide all assistance to help make India the world's factory, Prime Minister Narendra Modi said the world is looking for a trusted and reliable partner; and industry must leverage the trust the world reposes in India to ensure that manufactured-in-India products are associated with trust, quality and competitiveness. He was addressing a summit meeting of the Confederation of Indian Industry, a leading industry lobby group.
Citing the success story of the personal protective equipment (PPE) sector, which didn't exist in India three months ago but which now produces 300,000 PPE suits a day, making the country the second largest maker of such suits in the world, the Prime Minister urged Indian industry to do the same in industries such as air-conditioners, mobile phones, furniture and leather goods.
The government is working on creating the right environment and providing the right incentives to encourage both domestic and foreign companies to manufacture more of these items in India both to reduce imports and increase exports - once the lockdown imposed in the wake of the Covid-19 pandemic is lifted. Currently, India imports about 30 per cent of all air-conditioners sold in the country. Further, it imports 85-100 per cent of the components for the remainder that is assembled locally. Then, despite having the world's second largest leather industry, the country has a minuscule 3.5 per cent share of the global trade in leather goods.
The government has drawn up a definite plan to incentivise rapid ramp-up of these sectors in the country. To begin with, it is considering an increase in import duties to discourage imports from China and Thailand and encourage companies to relocate their manufacturing facilities to India. This is straight out of the Chinese and ASEAN playbook. China has traditionally protected its domestic industry behind relatively high tariff walls even as it exports goods to every part of the world.
China has had great success by following the cluster approach for various industries. This entails encouraging the setting up of groups of similar and related firms in a defined geographical area, usually near ports to facilitate easy linkages with global chains. They share common markets, technologies, worker skill needs, and which are often linked by buyer-seller relationships. The Modi government plans to follow this approach while encouraging the growth of a dozen sectors in the country of which he mentioned mobile phones, air-conditioners, furniture and leather goods. “You move two steps and the government will support you by taking four steps forward. I can assure you that I stand with you. Trust me, getting growth back is not so difficult,” Modi told the virtual meeting of India's top business leaders, including the heads of many Western, Japanese and South Korean multinational companies.