Pivot or Perish: India should focus on improving local manufacturing in next few years

Malyaban Ghosh: India should try to localize most of the goods that are presently imported from China in the next few years but the Centre should balance emotion with the economy while devising ways to counter China immediately, said executives at Mint’s Pivot and Perish webinar on Thursday.

The prevailing border standoff between two countries, which claimed the lives of 20 Indian soldiers has resulted in significant deterioration in bilateral relations. India, as a retaliation is also mulling an increase in tariffs on Chinese imports. Consignments from China are also being inspected at the ports across the country.

According to Naushad Forbes, co-chairman, Forbes Marshall, India should see this current aggression from China correctly as an act of great aggression and something that needs to pushed back very forcefully on the military side.

“We should keep in mind the numbers and it suggests that China is our largest trading partner and we export goods worth $15 billion per year. Our imports from China are around $75 billion and most of it is manufactured goods. These days we see delays taking place of consignments coming into the country and see extra inspections. This may make us feel good but will it achieve anything substantive?” added Forbes.

“Can we diversify our sourcing away from China,? Yes, we should but can we do it over night? No, we cannot. Chinese manufacturers will discover that we are moving away from them is when they don’t see orders. We don’t need to announce it or seen to be doing it visibly. Otherwise that may end up hurting ourselves.”

Automobile manufacturers in India are dependent on China for the import of certain critical electronic and engine related parts since there is no option of souring them locally. With the advent of the new stringent Bharat Stage 6 emission norms and connected features in vehicles, manufacturers had to be dependent on imports since some of the parts like catalytic convertors, fuel injection systems and other electronic parts based on semi conductors which are not manufactured in India and the ones available in China are also cost competitive.

According to Deepak Jain, president, Automotive Component Manufacturers Association of India (ACMA), there needs to be a balance between the emotions and the economy, when it comes to retaliating against China.

“As component manufacturers, we are a very integrated supply chain and we have almost $ 4.75 billion worth of exports coming directly from China, which accounts for almost one fourth of the total imports. These are components in which India currently does not have manufacturing capability and probably because of scale we have gone to China for sourcing. Hence there should be no knee jerk reactions to China,” added Jain.