India expressed its intent to become a founding member of the China-led Asian Infrastructure Investment Bank (AIIB) as early as July 2014, hoping that it might become an effective channel to obtain financing for infrastructure projects and the country’s manufacturing sector.
The country’s prime minister, Narendra Modi, sees manufacturing as an important part of India’s economy, and he initiated a “Make in India Campaign” in September 2014 to promote products manufactured in the country. The government has been aggressively promoting investing in India since then.
Amitabh Kant, deputy minister of commerce and industry, pitched his country’s investment environment in Shanghai on April 3, saying that the Modi administration’s efforts will give Chinese investors better returns on their investments in India than in Europe or the United States.
India’s consul general in Shanghai, Naveen Srivastava, said that after Chinese president Xi Jinping’s visit to India last year, there was a new round of Chinese investment fever in the country. Modi will also visit China next month to promote investment.
China-India trade totaled US$70 billion in 2014, or 70 times that of a decade ago. It hopes bilateral trade can hit US$100 billion this year.
But much of that trade was tilted in China’s favor, with India running a US$50 billion trade deficit last year. Getting Chinese enterprises to go to India to manufacture goods there could effectively address the trade deficit.
India’s manufacturing sector is its Achilles heel, Shanghai’s China Business News reported. For years, India’s IT and outsourcing services have enjoyed fame in the world, but its manufacturing sector has lagged behind.
Although India’s GDP rose 4.9% from 2012 to 2013, manufacturing output grew only 1.1% over that time. GDP growth slowed to 4.5% in 2014, and the output of the manufacturing sector fell 0.2%.
Yet India, with its large number of young people, stable political system and robust demand, has the right stuff to become a manufacturing giant.
The Modi administration reaffirmed its determination early this year to develop India into a manufacturing giant on par with China through his “Make in India Campaign.”
Srivastava said the Modi government wants the ratio of manufacturing as a percentage of GDP to increase in the coming years and has set the industrial output target at US$500 billion by 2020.
He also cited the advantages of investing in India, including its middle class population of 23 million, cheap labor costs (half of China’s), and its excellent location for exporting goods to South Asian and gulf markets.
Kant said India was ready to reap a demographic dividend, with 7.2% of the nation’s population under 22 years old and young people moving to urban areas at an unprecedented rate of 30 people per minute on average.
To deal with the massive urbanization, however, India needs to make greater efforts to develop its manufacturing sector, Kant said.
One of the pillars of the “Make in India Campaign” is the development of industrial and economic corridors that connect newly built smart cities via newly built railways. It could be the most ambitious infrastructure project since independence in 1947.
The Modi administration has planned four industrial corridors, linking Delhi and Mumbai, Chennai and Bangalore, Mumbai and Bangalore, and Amritsar, Delhi and Kolkata, and one East Coast Economic Corridor linking Kolkata and Chennai.
The Delhi-Mumbai Industrial Corridor has already obtained US$90 billion in financing and technical support from the Japanese government.
