Is ‘Make In India’ working? India to get leftovers as China rises to next level in manufacturing

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Updated: April 6, 2018 12:05:58 PM

On one hand, Asia is well positioned to benefit as it is home to the world’s largest electronics manufacturing cluster, on the other hand, what India will get is some of the leftover manufacturing and assembly work from China as it will moving up the electronics value chain.

India's Make In India will be about leftovers from ChinaWhat India will get is some of the leftover manufacturing and assembly work from China. (Image: Reuters)

A new manufacturing wave is rising; and again, it would be China that is going to ride it even as India has been pushing its ‘Make In India’ plan. With technological advancements such as Artificial Intelligence and Internet of Things gaining prominence, the new wave of technological innovation is going to create diverse demands and, once again, China will be a major beneficiary challenging the existing upstream producers like Singapore, South Korea, and Taiwan.

On one hand, Asia is well positioned to benefit as it is home to the world’s largest electronics manufacturing cluster, on the other hand, what India will get is some of the leftover manufacturing and assembly work from China as it will moving up the electronics value chain.

The pictorial chart below explains the position of India, China and other Asian countries in the ITC goods exports

China to ride electronics wave; India no where close(Graph: DBS)

An estimate by Singapore-based DBS group shows that Beijing’s push for ‘Made in China 2025’ and more expenditure on Research and Development is bringing results. China is now home to many successful self-branded companies, including Huawei, Oppo, and Xiaomi whose combined shares in the global market have well exceeded that of Apple’s and Samsung’s.

While Narendra Modi’s ‘Make In India’ launched in 2014 seems to be struggling to take off. The potential that DBS group sees in India is that of lower-end manufacturing and assembly work transferred from China as its share in global ICT goods exports is almost negligible.

“There are good reasons to expect China to continue to climb up the value ladder and embrace the new tech wave in the next decade… The government has allocated more public funds to support technological R&D,” Ma Tieying, Economist, DBS said.

China’s R&D expenditures have risen significantly in the past decades, from an equivalent of 0.9% of GDP in 2000 to 2.1% in 2015. The pace of increase is the second-fastest in Asia, just after South Korea. Under the 13th Five-Year Plan, the Chinese government aims to lift the R&D expenditure-to-GDP ratio further to 2.5% by 2020.

On ‘Make In India’, other analysts have expressed doubts, saying that India may not be able to capitalise even on the vacuum created by China’s shift to high-end manufacturing sectors. A report by Crisil has pointed out that China is exiting the low value-added (textiles, apparel, footwear, toys, etc.) manufacturing space as wages are rising, erasing the low-cost advantage it once enjoyed, but India has not been able to capture that space

Crisil recently said India’s manufacturing exports competitiveness has been hindered by a variety of factors, such as rigidity in labour laws, challenges associated with land acquisition, inadequate physical infrastructure, and poorly skilled manpower despite an improvement in the Ease of Doing Business ranking.

Story first published on April 5 at 1.30 pm on www.financialexpress.com

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