New Delhi [India], January 31 (ANI): It is premature to draw a conclusion that India has not been able to reap benefits from ‘China Plus One’ manufacturing strategy, as it has succeeded in indigenizing manufacturing of mobile phones and air conditioners over the past few years, Chief Economic Adviser Anantha Nageswaran said.
Speaking to ANI, on the day Economic Survey 2024-25 was tabled in the Parliament, Nageswaran pointed to the success of PLI schemes and said India now is able to meet its needs for air conditioners, mobiler phones through domestic production
The ‘China Plus One strategy typically involves companies diversifying their investments to countries other than China.
“China plus one, I think it is too premature to say India has not been able to attract. In fact, India in several areas (succeeded), the Economic Survey talks about how in terms of air conditioners, manufacturing, the PLI has succeeded. India now is able to meet its needs for air conditioners through domestic production,” the CEA explained, when asked that India seemingly is unable to boost manufacturing through the China Plus One strategy.
In the same breath, the same success was also seen in mobile phones production. In 2014-15, mobile phone imports accounted for 78 per cent of the market in value terms, whereas, by 2022-23 this figure had dropped to just 4 per cent.
In terms of volume, only 0.8 per cent of mobile phones were imported in 2022-23. Exports tell a similar story. Mobile phone exports, valued at zero in 2015-16, soared to Rs 88,726 crore in 2022-23.
“So things are indeed happening,” the CEA reaffirmed.
That said, he also argued that such manufacturing base shift doesn’t happen overnight.
“It is one thing to just attract the main product into India. But it also needs the entire supply chain to move to India that will take time as well,” he explained.
“So it is premature to say China plus one, hasn’t worked in India’s favour. That’s not the right argument to make. What the Economic Survey does is, in general, is what companies do every day which is to ensure that they are not dependent on a single source for their inputs and raw materials and the same principle and logic applying with greater force and magnitude, in the case of a sovereign, and that’s all that survey is trying to do here,” Nageswaran further asserted.
Faced with supply chain disruptions, particularly since the COVID-19 pandemic hit in 2020, along with a subsequent flare-up of geopolitical tensions and protectionism by various countries, including European nations and the US, many leading global manufacturing companies have been diversifying their operations across regions.
For companies in such situations, this means exploring emerging global supply chain regions for diversification. India, given its political stability, huge market opportunity, dynamic workforce, and steady rise in income levels is eyed as one of the best places to set up manufacturing bases.
India remains the fastest-growing major economy and is poised to maintain its growth trajectory.
Moving on, the CEA, during the interview with ANI also delved deeper on the need for deregulation in India – both at central and state government level.
Asked is it only central government that needed to deregulate or states must also step up, he said it is much more in the realm of state governments and local governments.
“Of course there are still very many areas within the union government as well that can contribute to the deregulation agenda. You have the Directorate General of Foreign Trade, you have the University Grants Commission in the education sector, and you have the tax administrations, etc., and certification agencies like FSSAI, the Bureau of Indian Standards, all those agencies, are there in the union government space,” he said.
Bulk of the regulations, compliance and inspection procedures and formalities and expectations of small and medium enterprises come predominantly at the state government level, he argued, stressing that states start further deregulation.
He was also asked whether India’s current GDP growth was sufficient to reach Viksit Bharat target by 2047 and does the country need accelerated growth, he said achieving 6.5-7.0 per cent real GDP growth annually is “good enough” to be able to reach and realise aspirations of a developed nation.
At a presser earlier today, CEA Nageswaran painted a stark picture of how Indian corporates are compensating their workers and employees, and called for a more equitable distribution of incomes.
Later in the interview with ANI, he was asked whether he would recommend any policy measure for ensuring fair distribution of profits.
CEA Nageswaran said there is no need to be always looking at policy as the answer to some of the issues.
“Some of these obligations are natural and inherent for the private sector,” he said, apparently meaning that the corporates should proactively share profits equitably with the workforce.
“There is a natural benefit to come for the private sector if you are able to look at the hiring and compensation practices and then that will lead to better demand and better profitability growth as well and they can also invest more. So it doesn’t require a policy latch,” he supplemented.
He backed by arguing stating that the central government had lowered the corporate tax rate to 25 per cent and recapitalized the banks, and as a result banks are now in good balance sheet shape and they are lending.
The government brought in the insolvency and bankruptcy proceedings.
“I think many of the building blocks required for private sector capital formation to take off are in place,” he said, suggesting hiring and compensation practices be possibly re-examined.
“That can turn into a win-win situation for the private sector from the employer’s perspective and from the employee perspective as well, and that will make a big difference to urban consumption flowing back into the private sector in terms of more sales, and leading to greater investment as well.”
Corporate profitability in India soared to a 15-year peak in 2023-24, fuelled by robust growth in financials, energy, and automobiles. Among Nifty 500 companies, the profit-to-GDP ratio surged from 2.1 per cent in 2002-03 to 4.8 per cent in 2023-24, the highest since 2007-08.
However, while profits surged, wages lagged.
Further, asked to respond to an Economic Survey chapter which argued India is uniquely positioned to take advantage of AI, at a time there are apprehensions of job losses, he responded saying Artificial Intelligence as a technology is still at an early stage and there has been no “extensive job losses”.
“I think we have not yet reached a point where there is widespread deployment of AI and we can see its implications,” he said.
“We are not at the point where artificial intelligence deployment has led to extensive job losses. But more importantly, we should not be only thinking in terms of job losses, but also in terms of jobs that may not be created and whether that number would exceed the jobs that will be created with the deployment of technology.”
“We have to make sure that the jobs that will be created will always exceed the jobs that would go uncreated because there is technology now. And how do we therefore deal with the implications for a large country like India, which has to create 8 million jobs a year, according to our estimate, which we put out in the July 2024 economic survey,” he said.
India’s demographic advantage and diverse economic landscape position it uniquely to benefit from AI, the Economic Survey for 2024-25 tabled today afternoon asserted. (ANI)
