China's Loss Is Set To Become India's Gain

The impact of the COVID-19 pandemic on the globalization process has forced many nations to re-think trade ties with China

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There is no love lost between India and China, but so far it’s largely been resentment without far-reaching impact. However, with the recent wave of disenchantment with all things Chinese, the time is right to make some decisive moves in the market.

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The Indian government has come up with a strategy for self-reliance. the Centre to it is boycotting Chinese products in favour of locally-manufactured goods. When done well and at scale, Indian home brands can gradually replace China as a global manufacturing hub in the post-COVID world.

The impact of the COVID-19 pandemic on the globalization process has forced many nations to re-think trade ties with China.

Global Anti-China Sentiments: An Opportunity

Creating alternate sources of manufacturing is a difficult challenge, but small yet systematic steps in that direction can help India to become self-reliant under the proposed ‘Atmanirbhar Bharat’ project. ‘Make in India’ schemes for promoting manufacturing of products in India shall in the short term result in the replacement of the production of low-end technology goods from China to India, thereby encouraging production of local goods at a much lower price.

China’s sustained selling position in the global market is due to its lower prices and larger volumes; however, this position is expected to change depending upon the relations of China with the US and other advanced economies in the post-COVID phase. According to the ‘US- India Strategic and Partnership Forum’, around 200 American firms have considered shifting their manufacturing from China to India. For instance, US firms like MasterCard may shift its base from China to Uttar Pradesh (India), as UP aims to be the hub of MSMEs and create 90 lakh jobs.

Opportunities in the Electronics Segment and Agriculture Sector

There is a huge opportunity for India in the electronic segment including the export base. The China smartphone market overtook the US market to become the second-largest smartphone market with a growth of 7 per cent. According to ICEA, the India position in terms of electronic exports has remained flat, staying at $5 billion. A new scheme to promote electronic manufacturing, with incentives worth INR 48,000 crore, will help India utilize the opportunity and become a desirable alternative to China. Further, various manufacturing facilities have been subcontracted to electronic companies in India. For instance, firms like Apple are thinking of producing smartphones worth $40 billion in India by shifting from China as this will provide them benefits related to the new ‘production-linked incentives (PLI)’ scheme.

The proposed scheme of ‘Atmanirbhar Bharat’ will further drive the agriculture sector due to incentives in building cold chains and the post-harvest management infrastructure.

Replacing Chinese Items to Becoming the Global Manufacturing Hub in the Post-COVID World

Liberalisation reforms have enabled India to become a dominant market in terms of computers, drugs, telephones, solar energy, organic chemicals, and electric vehicles.

The PM’s emphasis on self-reliance at all levels through the Atmanirbhar Bharat Economic Framework shall act as a facilitating catalyst. Self-reliance does not mean going into an internal shell. It means, 'think global but act local'.

With anti-China sentiments on the rise in the US and across the globe, the textile sector presents an opportunity to capture the American apparel market.

In the last 2 years China has seen a loss in its market share to the tune of INR 20,000 crore. In the first seven months of this year, US apparel imports dropped by 30 per cent. Of this, the major loss was China’s. China's apparel exports to the US dropped by a massive 49 per cent.

This combination of factors, and the situations post the Covid19 outbreak, could accelerate the trend of decline in Chinese apparel imports by global countries. This trend may create a $10billion opportunity in the US apparel market for other countries including India.

While India’s competitor Vietnam has a free trade agreement with the EU, and Bangladesh has 'zero duty access' to the EU, the case is different with the US. Neither India nor its competitors have free trade agreements with the US as of now. We have a level-playing field there, so it's the right time to step up efforts with US markets as a market diversification strategy.

There is a huge market which is for the taking and it all depends on us how we make the most of it.

Economic borders have never before been as welcoming, and the distance between India and the farthest corners of the globe has never been shorter. The future is in striking distance, and not just for the big players. It’s MSME’s time to shine. The opportunity is ours for the taking