Aesop’s fables never grow old. This one is a mirror to the US and China as they recklessly fight for global supremacy and trade advantages, while an underrated fox, India, may yet have the last laugh.
The US has in recent weeks attempted to pin the entire blame for the Covid-19 pandemic, and its disastrous impact on the world’s health and economy, squarely on China. In the latest salvo, US secretary of state Mike Pompeo claimed, without offering proof, that Washington has enough evidence to prove that the novel coronavirus was created in a Wuhan lab.
This closely follows President Donald Trump’s recent cavalier threats to renew his trade war against China, which set global markets, from Dow Jones to FTSE to Nikkei, trembling. Badly stung by mounting Covid-19 deaths, the US seems to be readying a fierce wave of new trade sanctions against China. It is also politically convenient for Trump to shift blame in an election year. He faces harsh reproval for his initial and prolonged state of denial on the dangers of the pandemic, which lost him precious time to contain the virus spread.
Beijing also bears some responsibility for this growing catastrophe, given its early efforts to deny the seriousness of the outbreak, its treatment of whistleblowers who sounded the alarm and its alleged attempts to manipulate the World Health Organization.
That’s not to mention the attempts of some Chinese officials to float an evidence-free theory that the virus was unleashed in Wuhan by the US Army.
Now, while Washignton and Beijing have locked horns and engage in a dance of destruction, alarmed companies are scrambling to get out of China.
Following Trump’s open declaration of a trade war last year, US manufacturing showed a distinct upswing and imports from China were hit the hardest. Global manufacturing consulting firm Kearney recently released its annual Reshoring Index, which showed a “dramatic reversal” of a five-year trend, with China suddenly the top sufferer among 14 worst-affected Asian exporters.
US companies have been remaking their supply chains, urging their Chinese partners to relocate elsewhere to avoid punishing tariffs, or by not sourcing from China at all.
Japan is following suit. Tokyo has offered Japanese companies a $2.2 billion stimulus package to move production out of China.
Enter India. New Delhi stands to immensely benefit in pharmaceuticals, chemicals and engineering. The other big opportunity is likely to be in telecom and electronics manufacturing and services.
India has announced incentive schemes for electronics-manufacturing clusters, including the manufacturing of electronic components and semiconductors, for which it has set aside $6.6 billion. The Department of Telecommunications is among the few that have secured a waiver on Covid-19 lockdown and work-from-home norms.
The surging investment would be a boon for Indian Prime Minister Narendra Modi and would help New Delhi hit its target to grow the manufacturing sector to 25 percent of GDP by 2022.
India’s most populous state, Uttar Pradesh, has been among the quickest to pounce on China’s lost meal. The state’s chief minister Yogi Adityanath has asked officials to bring swift changes to labor laws to attract trade and investment, after more than 100 US-based companies in a recent webinar pointed to the need for easier labor norms. Uttar Pradesh is also creating an online system for all land allotment for industries and commercial enterprises.
States like Haryana and Andhra Pradesh are wooing companies from the US, Japan, South Korea, Germany and Singapore, among others.
Bloomberg recently reported that 461,589 hectares – an area equaling two Luxembourgs – has been earmarked across the country for factories leaving China. Nearly a quarter of it is existing industrial land.
Access to land has historically been a barrier to foreign companies wishing to operate in India, with investors needing to find and acquire land themselves. Indeed, the urgency of the current moment may now provide India with the push it needed to implement reforms on land, labor and taxes.
While India has taken phenomenal leaps lately in the World Bank’s Ease of Doing Business rankings – jumping from 142nd in 2014 to 63rd in 2019 – the country still faces serious challenges relating to land acquisition, its antiquated labour laws, bureaucratic delays, much-reduced but still-lingering corruption, and tax unpredictability. It is not going to be easy to make these inadequacies vanish overnight.
But with a vast and young English-speaking workforce, deep reforms, and a politically stable government and democracy, India may just be Aesop’s proverbial fox. As the American lion and Chinese bear wound each other in an ugly spat, the fawn is for the fox to feast on, provided it is quick and agile.
Original: RT – Abhijit Majumder