US-China Trade War Could be Good for Indian Manufacturing

You would have thought the 27% tariff imposed on Indian goods imported into the US would have been a concern for Indian manufacturing. However in a surprising turn of events it could be the spark India has been looking for. Under the Modi regime increasing Indian manufacturing has been a goal for at least 10 years now. The subcontinent has been trying to position itself to compete with south east Asian countries particularly China.

Challenges for Indian Manufacturing

While India got a 90 day reprieve on the tariffs it’s rival China was hit with 145% tariffs. If this was to continue the prospect of manufacturing goods in China for the US market will not be feasible. Mr Modi has long championed the phrase “Make in India” and taken many steps to incentivise foreign investment into the sector in India. These measures have included  26 billion dollars of subsidies for this purpose. Previously the Modi government aimed to create 100 million new manufacturing jobs by 2022.

While there have been successes such as Taiwanese company Foxconn’s relocation of Iphone production to India.India still faces a lot of challenges if it wants to compete with China. Manufacturing as a percent of Indian industry actually slipped by 2% from 15 to 13 % in the last decade. While public infrastructure has improved India is still lacking the skilled workforce required to compete in the manufacturing industry. Many factory owners report issues in filling skilled positions.

In addition Indian factories rely on importing raw materials from other countries which drives up the overall cost and hinders its ability to compete. The justice system has also been sighted as a challenge for Indian manufacturing. Anil Bhardwaj, the secretary general of a trade organisation for manufacturing businesses, highlighted the need for a well-functioning justice system. “India’s courts are slow and their rulings arbitrary, he said, putting small businesses like his colleagues’ at the mercy of larger firms that can afford better lawyers and political influence.“That’s why people really fear the big companies in India,” Whether India can overcome these challenges and capitalise on this opportunity is uncertain.

Sources

The New York Times – Trump’s Trade War With China Could Be Good for India. But Is It Ready?

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