To be a manufacturing powerhouse, India’s ambition is not conclusive: only after addressing its grievance with its rival it can start portraying itself as an enticing option for international businesses that want to relocate from China, for instance.
India and China relations deteriorated after the 2020 border skirmish and have made it nearly impossible to even transfer capital, technology or talent when there is so much demand for electric vehicles, semiconductors and AI. During this period, the Modi administration imposed rigid controls on any Chinese investments leading to the costs of potential investments by firms like BYD and Great Wall Motor to be completely wasted and added new layers constraints to Indian companies with Chinese partners.
Looking at the present situation, however, Indian authorities say however that some of the these controls have to be eased since industries have not been able to ramp up manufacturing despite a number of incentives, in the form of financial support to promote domestic production to such industries. “It is understood that it is completely impossible to work in any of the major supply chains which are high technology one — especially the solar cells, EVs etc without being part of the Chinese supply chains,” Sushant Singh of Yale University agrees.
Acknowledging the need
There are even companies’ companies who have placed restrictions on the Chinese imports that continue to yet need procurement for these certain inputs from the north.
Joining the thrive for the country’s largest steel company Jindal Steel & Power and holding a post in the legislature Narvan Jindal supported any proposals considering taxes on Chinese steel but admitted the benefits of free trade.
“In India, a lot of steel making companies seek equipment and technology imports from Jindal Steel Limited,” said Mr. Jindal. India imports a number of hardwares, machineries and other technical equipment from the Peoples Republic of China which is ranked top most steel producer in the world.
That seems to be changing. After four years of weathering the restrictions on direct investments in Chinese companies and issuing visas to Chinese citizens, Modi’s administration is eager to turn its back on China and gain fresh breath on his dreams to make India a manufacturing hub.
According to an official privy to government deliberations, the government is looking to cut back on the restrictions that were imposed in 2020 on investment from countries which share land borders with India as there is a need to boost the levels of investment in the country.
New Delhi has recently further decided that investments from firms up to 10% Chinese shareholding will also not be subject to government approval in a bid to foster international companies with Chinese supply chain links in investing into India.
In order to quell some of the security concerns, the government is also looking to deploy a post investment monitoring template, which will be able to be operationalized incorporating crime and fraud investigation units and the banking supervisory authority.
This shift would lead to increase of Chinese investments, which according to analysts, are crucial for India to become a part of the global supply chains on high-tech products like solar cells, EVs and battery making. According to the second official, with direct knowledge of the matter, the easing of the measures is still being pushed by Mr. Modi’s office with various sticking points between government ministries being worked out.
After the intervention of industry trade associations, India has already relaxed its policies regarding the issuances of visas to Chinese citizens and will also be fast tracking visa requests to Chinese engineers for industries that will be subsidised to produce locally.
According to another government official, it has probably approved about 2000 short term visas foreign professionals in China that had made the most applications between November last year and July this year.
“In the process of acquiring visas, there is rationality. On the ground it has not converted yet but the mindset shift has happened,” said Pankaj Mohindroo himself the head of the Indian Cellular and Electronics Association .
“This week the External Affairs Minister S. Jaishankar said the country is not ‘closing her doors to business from China’ but rather stressed on the point of which sectors or on which terms … or … what terms are made with regard to doing business with China in which they declined to be more specific.”
To the e-mailed requests, the Prime Ministers’ office, finance, trade and foreign ministries did not reply for a comment.
Inevitable
To attract Apple, after the 2020 face off with China, the Indian leadership fast-tracked jvs approvals involving the Chinese suppliers of the American behemoth and local companies.
This resulted in the phone maker relocating 14% of its global iPhone manufacturing base to India in the fiscal year 2023/24. In the same year upside from the mobile exports in India increased by 42% hitting a record figure of 15.6 billion dollars.
Still, even with such a change of heart sceptics believe that India’s factories are not large enough with respect to the investment, or the productivity of its Chinese rivals, or both.
Chief Economic Adviser V. Anantha Nageswaran has been clear that there was no escaping this – India joining the global value chain with respect to China.
“Imports or partially through Chinese investments, India has to make such a choice” Mr. Nageswaran said in July.
The exodus of foreign investors and their funds from India has equally led to a rethinking of the fence.
Regardless of changes in government policy, the Indian market for Chinese products had proven to be very elastic even with the recent restrictions.
Since the values post a massive 56 percent increase of good imports from 2020 border clash, without considering the trade with china it has increased the trade deficit with the nation of 85 billion US dollars. In for most of the industrial goods imports, China remains a major supplier and last year it topped the list for Indian goods.
We also prefer the uniform flow of investment and technology from the Chinese into our country. Without, however, treading on the issues of national security, added mr. Mohindroo.
