Can India Inc extricate itself from China?
CHINA AND India are not on the friendliest of terms. In 2020 their soldiers clashed along their disputed border in the deadliest confrontation between the two since 1967—then clashed again in 2021 and 2022. That has made trade between the Asian giants a tense affair. Tense but, especially for India, still indispensable. Indian consumers rely on cheap Chinese goods, and Indian companies rely on cheap Chinese inputs, particularly in industries of the future. Whereas India sells China the products of the old economy—crustaceans, cotton, granite, diamonds, petrol—China sends India memory chips, integrated circuits and pharmaceutical ingredients. As a result, trade is becoming ever more lopsided. Of the $117bn in goods that flowed between the two countries in 2022, 87% came from China (see chart).
A convoluted licensing regime gives Indian authorities more ways to stymie Chinese business. In April 2020 India declared that investments from countries sharing a border with it must receive special approvals. No specific neighbour was named but the target was clearly China. Since then India has approved less than a quarter of the 435 applications for foreign direct investment from the country. According to Business Today, a local outlet, only three received the thumbs-up in India’s last fiscal year, which ended in March. Last month reports surfaced that a proposed joint venture between BYD and Megha Engineering, an Indian industrial firm, to build electric vehicles and batteries failed to win approval over security reasons.
Luxshare, a big Chinese manufacturer of devices for, among others, Apple, has yet to open a factory in Tamil Nadu, despite signing an agreement with the state in 2021. The reason for the delay is believed to be an unspoken blanket ban from the central government in Delhi on new facilities owned by Chinese companies. In early August the often slow-moving Indian parliament whisked through a new law easing…
2023-08-14 14:34:01
Post from www.economist.com
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