The future of Indian business in China?
India’s economic fortunes in China have shifted since the global financial crisis of 2008, but its fortunes in terms of business are also shifting.
The Indian economy is not growing fast enough to support the country’s burgeoning middle class, so its leaders have taken steps to address the problem by setting up a new, much larger manufacturing sector.
India is one of the world’s fastest-growing manufacturing nations, and it is expanding its manufacturing capacity by over 100 per cent over the past decade.
This means that, unlike its neighbour China, India is now a major global player in the field of manufacturing.
But the key challenge is that the economy is still very much dependent on manufacturing.
The country is facing the challenge of making money in the global market and it needs to do so in a manner that is sustainable.
The Indian manufacturing sector is one area that the Chinese are trying to catch up on.
The Chinese government has announced a range of new initiatives to increase manufacturing capacity.
One of them is the creation of a new “new manufacturing infrastructure” in China, called the “China Manufacturing Belt”.
The Belt is a series of roads, ports and railways that will connect manufacturing centres in China to the rest of the country.
In return, China will give India access to its vast, vast, resource-rich mineral and coal deposits.
The Belt, the central government hopes, will make India’s manufacturing sector more competitive in the world market.
But is the Belt really the solution to India’s industrial woes?
India’s manufacturing exports in 2016 stood at $6.9 trillion, the highest on record, according to data from the US-based Commerce Department.
China is by far India’s biggest export market, accounting for 25 per cent of its trade.
It accounts for nearly half of India’s imports, accounting also for nearly two-thirds of India, and over 20 per cent for its exports.
India imports nearly 30 per cent, with the US and China accounting for over half the imports.
India’s economic growth has been sluggish over the last decade, and the country is still reeling from the global economic crisis that followed the 2008 global financial collapse.
In 2015, China’s exports to India grew by just 4 per cent and its imports grew by 19 per cent.
These data show that the manufacturing sector has become a huge, and growing, part of the Indian economy.
This is good news for India, but it is a problem for China.
Its manufacturing exports are not growing, and its manufacturing imports are not increasing fast enough.
In the first three quarters of 2017, the Chinese government’s manufacturing output fell by 7.3 per cent from the same period in 2016.
India’s growth in the manufacturing segment is expected to slow this year, and, while growth in India’s trade with China is still slowing, it is not expected to be much slower than in 2016, according the International Monetary Fund.
What is the role of China in India?
China is a massive economy.
Its GDP is $15.5 trillion, and India’s GDP is about $12.5 billion.
The two countries have a trade surplus of $8.3 trillion.
Both countries also have a bilateral trade surplus with the United States of more than $30 billion.
But these two countries are not the only ones to have problems with the Indian manufacturing economy.
China’s manufacturing is a major driver of India.
According to the International Council of Manufacturing, a trade organization, India’s overall manufacturing activity accounted for nearly 30-40 per cent the countrys exports in the third quarter of 2016.
This figure includes all manufacturing, as well as services.
The ICCM estimates that India’s domestic manufacturing sector accounted for 40 per cent or more of Indias gross domestic product in the first quarter of 2017.
India has a long way to go to become a global manufacturing power.
But, if the Chinese economy can be helped to expand at a rapid pace, it will be a game changer in India and the world.
Sources: Business Standard, The Times Of India, WSJ, CNN, Bloomberg