Editorial of the Day (9th Sep) : Indian Manufacturing and China’s Role

Context: The Indian government has taken various initiatives to transform India into a global manufacturing hub.

What are the recent initiatives to transform India into a Global Manufacturing Hub?

• Initiatives such as the ‘Make in India’ project, launched in 2014, and the Production Linked Incentive (PLI) scheme aim to attract both domestic and foreign capital.
• The 2024-25 Union Budget has allocated ₹6,125 crore for large-scale electronics manufacturing under the PLI scheme, up from ₹4,499 crore in the previous budget.
• The research and development sector, especially in electronics and IT, also saw increased funding of ₹1,148 crore, compared to ₹600 crore in 2023-24.

Chinese Presence in the ‘Make in India’ Initiative

• Chinese smartphone companies, operating in India for a decade, have been significant beneficiaries of the ‘Make in India’ project, dominating the market.
• As of 2023, four out of the top five smartphone brands in India were Chinese, holding over 50% of the market.
• India’s large base of Android users (70% market share) and the appeal of Chinese applications have driven this success.

Impact of Bilateral Tensions and Indianization Efforts

• Relations between Indian and Chinese companies faced challenges after the 2020 Galwan Valley incident, resulting in a push for “vocal for local” products.
• Increased scrutiny of Chinese companies for tax-related issues and calls for Indianizing their operations led to measures such as:
  • Involving Indian equity partners.
  • Appointing Indian executives to leadership roles.
  • Partnering with Indian contract manufacturers.
  • Focusing on exporting products made in India.
• This mirrors China’s strategy of nurturing indigenous manufacturers.

Indianization in Action

• Chinese companies have started to comply with Indian government directives, hiring local distributors, segregating brand operations, and teaming up with domestic manufacturers to qualify for PLI benefits.
• Their adaptability reflects a long-term commitment to the Indian market, despite challenges.

Challenges and Ground Realities

India’s push to develop a full-fledged smartphone manufacturing ecosystem faces several obstacles:

• Lack of developed ancillary industries.
• Inadequate technological clusters for knowledge-sharing.
• Deficiencies in infrastructure, including power, water supply, and workforce conditions.
• China’s reluctance to share technology without clear terms on equity participation also hampers progress.
• The Indian government, recognizing the need for skilled Chinese technicians, has recently eased visa norms.
• The 2024 Economic Survey suggested to endorse Foreign Direct Investment (FDI) from China rather than focusing solely on the China Plus One strategy.
  • This indicates that balancing home-grown manufacturing and continued Chinese involvement is essential for India’s manufacturing ambitions.

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