Technically speaking, China’s loss is India’s gain

Technically speaking, China’s loss is India’s gain
The Indian manufacturing sector is getting a massive boost as many American companies shift their manufacturing bases from China to India.Courtesy: Reuters

The US-China Trade war and the re-establishment of migration chains, means that India is well placed to catapult to the top as tech hub, notes a new report.

The US China spat is nothing new. Amidst growing concerns about the security of the Indo-Pacific region, China’s continued aggressive bullying and more and more countries joining forces to counterbalance China’s unchecked ambition for global dominance have all resulted in a boiling of geopolitical tensions.

It is common knowledge that China has long leveraged its monopolies in rare earth, supply chains and manufacturing to get other countries to toe its line. So far, the only counterweight to dragon’s rising dominance in the east has been India – a balanced, responsible and democratic rising power. Whether it is building and maintaining multilateral strategic alliances through good will and support, supplying millions of doses of vaccinations to the countries around the world, or guarding the security and free movement within the Indo-Pacific, India has showed through example what a responsible global power looks like. And the world is paying attention. Particularly the US.

The US-China trade war which started off over tariffs has now extended to a cold war, spurring many American companies to shift their manufacturing bases from China to India.
China has long leveraged its monopolies in rare earth, supply chains and manufacturing to get other countries to toe its line.
China has long leveraged its monopolies in rare earth, supply chains and manufacturing to get other countries to toe its line.Courtesy: Getty Images

US – a key player

The US-China trade war which started off over tariffs has now extended to a cold war, spurring many American companies to shift their manufacturing bases from China to India. In fact, this “strategic decoupling” and relocation of supply and value chains now ‘offers India an historic opportunity to transform into one of the world’s most important technology hubs,’ according to a recent report released by Hinrich foundation.

The report titled ‘India: A 21st century technology hub? How US-China geopolitical rivalry could benefit New Delhi’ states how India is well positioned to absorb these supply chains due to the reforms rollout by the Modi government to attract foreign direct investment (FDI), create new infrastructure, and promote special economic zones (SEZs) and technology clusters.

Fintech-driven services in India could be worth US$170 billion by 2025.

What India has to offer

India’s 1.3 billion strong population offers a rich consumer market for MNCs with the growth in the middle and upper-income segments fuelling strong consumer demand for digital devices and online services such as smartphones, e-commerce and retail.

Then the Indian digital stacks such as Aadhar, one of the largest in the world, are fast becoming a springboard for fintech and e-commerce companies from India and overseas. This financial inclusion and digitisation wave has recorded 2.2 billion transactions monthly. India is on the verge of commencing possibly the world’s largest fintech boom, as millions of “unbanked” come online in the platform economy, the report points out.

According to McKinsey, fintech-driven services in India could be worth US$170 billion by 2025. Other directly related sectors such as education and job upskilling services could be worth another US$130 billion.

The US, the EU, Taiwan, and Japan are India’s largest foreign investors in the technology sector. Services, computer hardware, software, and telecommunications represent the top categories of investment. Because the world’s largest technology companies already have a significant presence in India, they are well positioned to participate in growing India’s production capacity, states the report.

India is on the verge of commencing possibly the world’s largest fintech boom, as millions of “unbanked” come online in the platform economy.
India is on the verge of commencing possibly the world’s largest fintech boom, as millions of “unbanked” come online in the platform economy.Courtesy: Getty Images

So, can India be the next tech hub?

The ingredients are all there and the Modi government seems determined to boost India’s manufacturing prowess through various schemes such as the Production Line Incentives (PLI), removing or increasing the allowance of FDI investments to create ‘Innovation and Entrepreneurship’ hubs in higher education institutions to attract universities amongst others. However, as the report notes, for India to succeed the government will have to continue to fix systemic issues that have hampered earlier efforts to grow the manufacturing sector.

The US, the EU, Taiwan, and Japan are India’s largest foreign investors in the technology sector.

‘If it can overcome its main challenges, geopolitical developments bode well for New Delhi. India is growing in importance, for example, as a security partner for Washington and its allies. As a democracy, India’s alignment on technology related values also puts the country in a favourable position. All of this could draw in more global value chains.’

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