In Modi’s quest to woo foreign companies into India from China, these products may be flag bearers

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May 8, 2020 2:20 PM

In consumer goods, the textile and clothing sector; food products; and crop and animal production have the highest comparative advantage in India.

clothing, food product, BHEL, cos comin out of china, exports, investmentAlthough India has a comparative advantage in textiles and animal goods, it is not competitive in food products. (Bloomberg image)

As Prime Minister Narendra Modi urges states to make efforts to attract foreign companies willing to shift base from China, the country can focus on one sector which has a comparative advantage over China. Amid capital, consumer, and intermediate goods and raw materials, the bigger opportunity right now is in the consumer goods sector, SBI research said in the recent Ecowrap report. In the consumer goods, the textile and clothing sectors; food products; and crop and animal production have the highest scope. However, although India has a comparative advantage in textiles and animal goods, it is not competitive in food products, the report said. Thus, the government can give a direct push to this sector, so that the small and medium-sized firms involved in food product manufacture get benefitted, the report added.

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State governments along with the PSU companies are on a constant watch on how to tap the opportunity to attract the global firms coming out of China. Recently, Yogi Adityanath-led UP government held a video conference with giant US-based companies and offered the roadmap and perks they can offer. On the other hand, PSU manufacturing giant BHEL also offered the global companies to partner with it and use its manufacturing facilities and work in harmony.

However, India has a long way to go to replace China in becoming an exporter to the world. Even amid the US-China trade war and increasing protectionism in the last two years, China has gained market share from 2018 and currently holds 13.2 per cent share in world merchandise exports and is still the world’s biggest goods exporter. To bring this in perspective, India holds a mere 1.7 per cent share in world merchandise exports.

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In the last two years, Vietnam has expanded the most with its electrical machinery, furniture, clothing, footwear and leather industries, while India gained in organic chemicals and iron & steel. Meanwhile, in apparels, Vietnam, Cambodia, and Bangladesh gained a much larger share than India. India also lost in leather exports to Cambodia and Indonesia that were diverted from China.

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