India can be the Next Global Factory : Global Trade Experts

WASHINGTON: Karl Mehta, Chairman of Quad Investment Network (QUIN) along with Alex Trueman, the Network’s Special Advisor is reportedly inWashingtonDCformeetingtheBiden administration officials following the recent Quad Summit in Japan, ahead of the official State visit of the Indian Prime Minister Narendra Modi to the UnitedStates.

Karl Mehta, Chairman of the Network has opined that India has an opportunity to emerge as the second big manufacturing base next to China. He said,India,duetoitstalentbasecanplay a leading role in the technological areas identifiedascriticalbytheQuadnations.

The Quin, officially launched on May 20, 2023 is a network of investors and executives across Quad countries, that seeks to foster co-investment in critical technologies.

According to Mehta, Quad Investment Network has identified nine technological areas which are very critical, both from a supply chain perspective, as well as from establishing or maintaining the Quad leadership in those technologies. These areas include semiconductors, clean energy and critical minerals, quantum technologies, mobility like 5G or 6G, cyber security, health tech, biotech, defence tech, and space tech. Accordingtohim,inthesetechnologies, India is a technology powerhouse. The United States, Japan and Australia are very advanced in their technology & India is a collaborator in these technologies. According to him, India has a huge opportunity to play a role in every one of these nine technology areasidentifiedbytheNetwork.

Steps to reach the potential by the ManufacturingSector

Raisingproductivity

To become globally competitive, India’smanufacturingvaluechainsmust raise productivity of their workers closer to global standards. The report points out, while other developing economies such as China have managed to catch up with the advanced economies in capital productivity, India’s capital is only about two-thirds as productive as China’s. Increase in productivity through policy reforms creating better infrastructure and logistics would help Indian manufacturing become more productive, helping them to offer more value-added goods with higher product quality, better packaging, and stronger brands.

According to the report, Policy reforms could also help other opportunities for Indian manufacturers to boost their productivity by offering more value-added goods with higher product quality, better packaging, and stronger brands, ensuring them to command higher prices with better returns, in turn helping them to attract more capital, enabling them to reinvest theircapitalsurpluses,ratherthanseek outsideinvestment.

Securingknow-howandtechnology

According to the report, while India’s established manufacturing value chains possess the technology and know-how they need to compete with overseas competitors, the lessdeveloped value chains do not.

The report suggests that the manufacturers themselves must source technology through acquisitions and alliances. The government can also help create a stable framework of timebound and conditional localisation incentives to attract global companies to set up operations in India, either independentlyorwithalocalpartner.

AccessingCapital

The availability of capital, according to the report will be the single-biggest booster to increasing India’s manufacturing GDP. However, while financial reforms would help stable, cash-generating manufacturers attract low-cost domestic capital from longterm savings pools, such as pension funds and insurance, these savings pools alone cannot meet the requirement of the Indian manufacturing companies. They therefore will also have to tap other sources,accordingtothereport.

Epilogue

India, according to Karl Mehta of QUIN as also the McKinsey Global Institute report, has an opportunity to raise its manufacturing competitivenessandbecomeasupplier, notonlytoitslargeconsumingclass,but also to the global markets, emerging as a second big manufacturing base, next to China. Focussing on eliminating roadblocks in the chosen value chains therefore holds great promise for bringing together the manufacturers, raising productivity, securing superior know-how, and generating higher returns on capital, with the government support.