India is in the ascendancy as an alternative manufacturing location to China, but there remains work to be done to build investor confidence. At a micro level, the same point applies in conjunction with South Africa’s Durban Container Terminal – pier 2 – the fundamental issue is will theory go into practice?
India has been aggressively marketing itself as an Asian alternative to Chinese manufacturing from as far back as 2014 when it launched the “Make in India” campaign, to raise the profile of India as a global manufacturing hub. Similarly, the Atmanirbhar Bharat campaign was launched in 2020, backed by a US$277 billion stimulus package, equivalent to around 10 per cent of India’s GDP. This was partly aimed at providing some relief to the sectors of population worst hit by COVID-19 but is additionally designed to open up new avenues of trade, investment and employment in the economy. The underlying thinking is, improved liberalisation, policy amendments, relaxed regulations, infrastructure investment, skill development etc, will build “a future-ready India.”
The International Monetary Fund’s forecast for India’s GDP growth in 2023 is 6.1%, far outpacing China’s estimated 4.4% rise. Further, India is projected to leapfrog Germany and Japan to become the world’s third-largest economy over the next decade, and achieve the status of a US$10 trillion economy by 2035, according to a recent Centre for Economics and Business Research report.
The potential is there and clearly India is enjoying some success in presenting itself as an alternative to China – assisted by factors such as the concerns of business regarding growing tensions between China and the USA and China’s authoritarianism as witnessed by its severe lockdown policy.
The fact remains, however, that India’s vision of becoming the new “factory of the world” still has to overcome longstanding hurdles. Extensive bureaucracy, red tape, lack of skilled labour and lagging infrastructure are all problems that continue to prevail. They stand in the way of India establishing the sophisticated and seamless supply chains that China now boasts and which, when unimpeded, work exceptionally well.
As the articles ’Can India deliver?’ and ’Port preparations’ document, India’s port infrastructure still faces challenges, although great progress has been made. There is the issue of formatting port capacity to accept the world’s largest vessels but arguably more crucial is putting in place modern road and rail links – a factor that has great influence over the location of manufacturing businesses. Action on this latter front will play a major part in giving industry the confidence to seriously consider relocation to India or to a locate a start-up in the country.
“Building investor confidence” is also a theme that South Africa’s government needs to address in conjunction with finding an investor for Durban Container Container Terminal – Pier 2.
