Key Takeaways

• Noah Smith argues China aims to undermine Indian manufacturing, viewing India as a geopolitical rival.
• India’s manufacturing sector has declined, with its share of the economy dropping to 14.3% instead of the targeted 25%.
• China has played a vital role in India’s industrial growth, historically providing capital, technology, and expertise.

China and India’s Manufacturing Tensions

American economist Noah Smith has addressed the ongoing tensions between China and India in his latest blog, claiming that China is seeking to weaken India’s manufacturing sector due to the perception that India poses a geopolitical and economic threat. This perspective has gained traction amid debates in India concerning the Modi government’s recent choice to let the USD 23 billion Production Linked Incentive scheme expire, which was aimed at boosting manufacturing.

The discussions center on a concerning reality: India’s manufacturing sector has not only failed to meet expectations but has experienced significant decline. The ambition was to increase the manufacturing contribution to India’s GDP to 25% by the current year; instead, it fell to just 14.3% last year. Pointing fingers at China for this downturn is misguided. Historically, China was India’s closest partner in terms of industrialization, offering crucial investments, technology, and expertise necessary for growth. A decade ago, Chinese businesses, including major mobile manufacturers like Oppo, Vivo, and Xiaomi, were rapidly expanding their presence in the Indian market and continue to maintain substantial operations today.

Interestingly, a notable moment in Sino-Indian relations occurred in October 2019 during a summit between Chinese President Xi Jinping and Indian Prime Minister Narendra Modi. A joint communique indicated an interest in exploring a “manufacturing partnership,” a proposal put forth by Xi himself, signaling a commitment to cooperation.

In September 2019, significant steps were taken to foster this partnership with the sixth India-China Strategic Economic Dialogue held in New Delhi, featuring key Chinese officials across various industries. This high-level engagement demonstrated China’s genuine intent to collaborate with India beyond mere dialogue.

China’s industrial capacity has been essential for India, providing the expertise and resources needed to establish state-of-the-art manufacturing facilities. Achievements in sectors like consumer electronics can be attributed to the knowledge transfer initiated by Chinese engineers who helped local workers understand the complexities of manufacturing. This acknowledgment underscores a critical reality: China’s contributions have been pivotal in India’s industrial achievements. The previous collaboration illustrated potential for mutual growth, as neither country could reach its economic goals in isolation.

In summary, while India’s struggles in manufacturing are often attributed to external factors like Chinese competition, historical alliances and contributions reveal a more complex picture. The narrative surrounding India’s manufacturing sector must consider how past partnerships with China have helped shape its industrial landscape. It raises important questions regarding the future of bilateral relations and industrial cooperation between the two nations, as both strive for economic growth in an increasingly competitive global environment.

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