According to various opinion polls, India’s Prime MinisterNarendra Modi is set to form government for third term. At the same time, under Modi’s leadership India heraldsglobal leadership for balancingits influences amongitseconomic partners, who are in a historical rivalry: Japan –China and USA –Russia arethe cases in point.
Japan and USA are the major foreign investorsas well as trade partnersvis-à-vis Russia and China arebig oil suppliers and trade partners respectively.This demonstratesIndia’s pivotal role for balancingbetween rival nations while at the same time gaining economic benefits.
China has been accused of dumping goods in India and damaging its domestic industry.Paradoxically,there is another viewpoint.Imports from China has become boon. They became instrumentalin spurring growth of electronic industry and digitization in India. Chinaexportedcritical components toboost India’selectronic industry. These imports play important role in fueling India’s growth in cutting edge technology base industry.
India dependson 95 percent of its import of semiconductor chips from China. India does not produce electronic chips. A significant portion of India’s electronic gadgets and components come from China. Microchips, screen panels and batteries are the three major categories of electronic supply chain imports from China. They play important role in manufacturing laptops, cell phone and consumer electronics.
The auto component is another sector, where imports from China play a pivotal role. Nearly 87 percent ofmotorcycle components imports were from China in 2019-20, according to DGCI&S.
Pharmaceuticals is another area, where China has predominantstake to develop India’s pharmaceutical industry. It helped to penetrate into US market by supplying cost effective intermediates.
Japan,rival to China, has been a major economic partner of India. It is a major investor in India. Hitherto, China was most lucrative destination for Japanese investors in Asia. After decoupling policy, India emerged 2nd biggest Japanese investment destination, toppling China. Japanese investment in India made a hooping jump by 23 percent, againsta fall by 13.4 percent in 2022.
After COVID 19, Japanese investors were encouraged to shift fromChina to South East Asia and India. Japan has always been bent towards South East Asia for investment after China. Breaking all surprises, India emerged better destination for Japanese investment , surpassing South East Asian countries in the post COVID.
JBIC applauded India’s shining growth. It reiterated India the most promising destination for Japanese business consecutively for 2 years, viz 2021 and 2022, beating out China and USA in its annual survey.
During Abe’s Prime Ministership,Japan-India relationsmadea great leap in economic engagement and financial assistance to develop India’s infrastructure. Abe’smove for Japan’s global power and reliance on partnership with India for diversifiedmultilateral dynamism, including flexing political muscles fora counterweight to China, brought the two nationsinto a close bond.
The new era of Japan -India relation witnessed aparadigm shift from mere bilateral economic relation to special strategic relation, including defence and global partnership. The relations extended to joint partnership for economic development in third countries.
With Modi set for 3rd term in the government, will India’s dependence on China abateorvice-versa. Even thoughVietnam has been hyped as alternative to China after COVID 19, it failed to affirm itspotential to replace China for supply chain.
One of the major risks for dependence on Vietnamisthatit* growth dependssubstantially on imports from China. Most of these importscomprise of electronic and electrical items, including critical components, parts and intermediates. Vietnam assembles them and export. It is yet to rise to the level of manufacturing cutting edge technology in China. As a result, wheneverChina’s supply chain industryshrinks, the Vietnamsupplychain industry feels the pinch.
Given this,should India vie for Vietnam as alternative to China or seek conciliation toa trade war with China?
Chinese investors aregushing into India, despite India’s restrictive measures, increasing by five times in 2023.Thisdecodes a new modeof Chinese investment. China enters India as a supply chain partner of its principalforeign investor, other than Chinese. For example,Appleis planningto increase its production in India, decoupling from China. It encouragesitsChinese supply chain companies to shift to India. Apple askedChinese battery manufacturer, Desay (Huizhou Desay Industrial Company), to openfactories in India.
India’s zeal to develophigh tech industry inspired Japanese to change its trackof investment in India. Inspired by Modi’s come back for 3rd term, Japan tilted towards India.It signed MOU for establishing semiconductor ecosystem in India. Renesus Electronic Corporation, Japan signed deal with CP Power of India to manufacture semiconductor chips in Sanand, Gujarat. Presently, India does not manufacture semiconductor chips.
According to a survey byPew Research Centre (PRC), 55 percent Japanese respondents viewed India Favourably, against 34 percent said Unfavourably.
These changing narratives of China and Japan towards India underModi government demonstrate a positive directive, despite both nations being entangled in rivalry.How India coaxesthese two countriesand stems benefits is a matter of India’s balancing of its influences between these two countries.
