Five areas Narendra Modi should focus on to make India the next China – BRICS Information Sharing & Exchanging Platform

NEW DELHI: India and China, two emerging economies of the Asian world, have been keenly watched across the globe for their high economic growth potential. While India’s economic boom has largely been driven by growth in the services sector, China on the other hand boasts of a robust manufacturing base that has helped its economy scale new highs.

Comparisons between the two are inevitable and over the years many industry experts and economists feel that India needs to propel its manufacturing sector in order to achieve a sustainably high growth rate. Even as India is looking to push its manufacturing sector, growth in the Chinese economy is dwindling and global investors are looking for an ‘alternate China’ to park their money in.

Ravi Venkatesan, Former chairman of Microsoft India feels, “For twenty years, China has been a growth engine for many global companies; these companies are now eagerly looking for the next China. No other country is better positioned for this than India. Relatively modest changes in the business climate can unleash a tidal wave of investment and prosperity.”

Pankaj Murarka, Head of Equity at Axis AMC says, “With Chinese economic growth dipping, it’s high time for India to usher a new set of reforms to unleash its untapped potential to claim its rightful place in the world. And for India to truly realize its potential we need a decisive break from the ‘business and politics as usual’ of the past. We need a new growth model.”

With the Narendra Modi government taking charge at the centre with the promise to provide the necessary impetus to the manufacturing sector, we take a look at five areas in which India should work, in order to be the ‘next China’.

1) Manufacturing: China’s economic growth has been backed by a very strong manufacturing sector base. While India has missed that bus, it is not yet too late to ensure that the country is able to ride the next-generation wave of global manufacturing growth.

In a recent column in ET, Baba Kalyani, CMD of Bharat Forge said that government has to focus on implementing the national manufacturing policy. “It needs to prioritize indigenization of key sectors like defence, power and railways. If we do not latch on to this next revolution now, we will never be able to catch up,” he says.

Echoing the same sentiment, Murarka of Axis AMC wrote in ET, “Today India is on the right side of the demographic curve and will be largest supplier of labour to the world over the next decade. India needs to put 30,000 people to work on an everyday basis for the next 20 years. And this can only be achieved by reviving India’s manufacturing and transforming into a global manufacturing hub.”

The need for revitalisation of the manufacturing sector has also been highlighted by Ravi Venkatesan “This will require many policy changes including possibly preference for locally manufactured goods in government procurement or local content requirements,” Venkatesan has said in a column in ET. “In such matters, India will need to thoughtfully and courageously maintain a fine balance between being compliant with its obligations to WTO on one hand and doing what is in her self-interest on the other,” he adds.

According to India Electronics and Semiconductor Association (IESA), manufacturing could create 28 million new jobs in the next 10 years and save foreign exchange, as demand for electronics hardware gadgets is set to expand from $55 billion in 2014 to $400 billion by 2020.

Anwar Shirpurwala, Executive Director, MAIT, the apex body of the hardware sector: says: “The market is there. Talent is also available. With a new government expectations are running high and things should change for the better.” But simply having a new government won’t kick-start manufacturing and take it to a scale that China or Taiwan offer. Having missed opportunities in the past, experts say the best option is to steer clear of products currently in the market like desktop computers and laptops and look at products of the future like Google Glass. Or even hone expertise in new manufacturing techniques like 3D printing.

In the immediate term, to catch up with the missed opportunities IESA believes foreign collaborations is the way out. Says MN Vidyashankar, president, IESA: “Auto manufacturing took off due to joint ventures with foreign carmakers. We need similar ventures in hightech manufacturing.” Already, Japan and Taiwan are scouting for collaborations.

According to IESA 45 Taiwan-based companies are looking at setting up base in India. There’s a Japanese City being planned by Japanese companies and is likely to come up in either Pune, or Karnataka or Gujarat. The city will be a hub for Japanese companies keen on tapping the Indian market for electronics and computers.