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How China's Sputnik moment can be India's big break

The US-China trade war could be an extraordinary opportunity for India; many American firms and potentially even European and Japanese companies will be looking for new countries and new suppliers to source from

  The Donald Trump administration's decision to blacklist Huawei and cut off access to western software and chip technologies has been called China's Sputnik moment. It will now galvanise China to develop its own independent technology infrastructure and capabilities. Commentator Fareed Zakaria has suggested that this may be America's Sputnik moment too, finally spurring it to wean itself off Chinese suppliers and outcompete China. This rupture of trust and relationships is no ordinary trade spat over cars or soybeans. It could result in a new Cold War, a bipolar tech world with two hermetically walled-off technology ecosystems. This would have seismic consequences for companies and countries everywhere. Already companies are scrambling to rethink their supply chains, their procurement strategies, and potentially relocate manufacturing. This rupture is starting with electronic hardware but could spread across many more products.
Depending on how it plays out, this trade war could be an extraordinary opportunity for India and its new government. Many American firms and potentially even European and Japanese companies will be looking for new countries and new suppliers to source from. They will also need to find new markets since they may no longer be welcome in China. Equally Chinese companies will need to find new markets to reduce their reliance on America. With our size and capabilities, India is a natural prize for both sets of firms.
We are already seeing this in tech. India is the largest market outside China for smartphone vendors like Xiaomi, OnePlus and Lenovo. It is also a must-win market for US tech companies like Google, Facebook and Amazon which find themselves shut out of China. Chinese firms Alibaba, Tencent, Bytedance, etc. are some of the biggest investors in Indian internet start-ups like Ola, PayTM, Swiggy and Bigbasket. The fight is not just for market and revenue share but also for data-share in a world where data may be the new oil. India must have a strategy to benefit from all this interest rather than unwittingly become a battleground and victim of the proxy-war between these tech titans. Currently we do not nor do we have many significant Indian firms beyond Reliance Jio in the game, which is a grave risk.
The trade war can also breathe new life into Indian manufacturing. No large country has become prosperous without a substantial manufacturing sector and without exporting its way to prosperity. This has been a major challenge for India. Many experts have concluded that the window of opportunity for export-led growth has closed for India making it impossible for us to replicate the success of Japan, South Korea and China. President Trump may have just flung the windows wide open again. However, opportunity is one thing, speed and execution are an entirely different matter. The fact is that despite substantial progress on our Ease of Doing Business ranking, and the Make in India initiative, India may be losing ground on manufacturing competitiveness to an array of countries including Mexico, Vietnam (electronics, footwear, machinery) and Bangladesh (textiles and garments) whose exports have soared even as ours have shrunk.
India has repeatedly demonstrated the ability to accomplish amazing things when there is a clear mission, political will, strong leadership and effective partnership between policy makers and industry. The emergence of India IT and pharma firms as globally competitive players, and more recent progress in areas such as Aadhaar, digital payments, data connectivity show that nothing is impossible. Political will and leadership must breathe new life into Make In India. This time, Make in India is not just Make for India, but for the world. The idea of industrial policy is sometimes viewed with suspicion because it can translate into protectionism and poor outcomes for customers and country but we will need a robust industrial policy. Such a policy will focus on enhancing our competitiveness sector by sector especially in labour-intensive industries like garments and footwear, where India's competitiveness has been declining. Many experts have been pushing the idea of Special Economic Zones (SEZs) where ease of doing business - acquiring land, obtaining environmental clearances, good infrastructure - is made dramatically friction-free. Such zones may be used as sandboxes to experiment with reforms such as flexible labour laws before they are rolled out nationally.

Finally India has to be marketed and both Indian and global firms must be wooed and encouraged intensely. In the now famous word's of our prime minister Narendra Modi, they have to be convinced that India is now dead-serious about converting red tape into red carpet.
The rupture of trust between America and China and the consequent disruption of global supply chains represent an opportunity that India cannot afford to squander. Is the new government listening?




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