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Modi's Call To 'Make In India': China Not A Foe - Analysis [Eurasia Review](Eurasia Review Via Acquire Media NewsEdge) By Subrata Majumder Prime Minister Narendra Modi's call to foreign investors to "Come, Make In India" on Aug 15 from the ramparts of the Red Fort has sparked a rethinking on Modi's yearning for foreign investment, notwithstanding the fact that the BJP was averse to FDI in multi-brand retail. He is the first prime minister to welcome foreign investment, without making China an exception. His assertiveness to balance trade through foreign investment in manufacturing reflects his outreach to consider that China is not a foe. Narendra Modi was never averse to soothe relations with China. His desire for special relations with Beijing began when he visited China in November 2011 as chief minister of Gujarat. Modi was active in courting Chinese investment. A large chunk of Chinese investment in India worth US $ 900 million is centred in Gujarat. Despite Huawei being suspected of hacking defence information, the Chinese are now on the priority list of the Modi government for foreign investors. During the recent visit of an Indian delegation to China, led by Vice President Hamid Ansari, Indian Commerce Minister Nirmala Sitharaman signed MoUs with her Chinese counterpart for setting up four industrial parks in India with Chinese investment. China too seems comfortable working with Modi. The Chinese official news agency Xinhua was upbeat about focusing on Modi's message that "developing relations with China is one of the important tasks of India's diplomacy". The Chinese media was quick in highlighting the reciprocation by Chinese Premier Li Keqiang when he extolled Modi's overture, saying that China was willing to enhance mutual trust with India. Both sides' eagerness to renew the relation unleashed hope for putting a lid on the mistrust created after the India–China conflict. China is one of the biggest foreign investors abroad. It emerged the third biggest foreign investor in 2013 in the world, according to United Nations Conference on Trade and Development (UNCTAD)'s World Investment Report. The Chinese binge for overseas investment started in mid-2000s. It was catapulted by the Go-Out –Policy, launched by new Chinese President Xi Jinping. From a below annual average of US$3 billion before 2005, Chinese FDI abroad surged to US$ 50 billion in 2010 and further boomed to US$ 90.17 billion in 2013. USA was the biggest destination for Chinese investment, accounting for over 16 percent of the investment in 2013. Hitherto, however, developing countries, including resource base countries such as Australia and Canada, were the major destinations for Chinese investment. In Southeast Asia, Chinese investment gained prominence in Myanmar, Malaysia and Thailand. Even though USA has been the biggest receiver of Chinese investment, concern over cyber security pervades. It stymied the attempts by the mysterious Chinese telecom equipment maker Huawei to buy assets in USA. The haste on the Chinese side for a thaw in relations with India was sparked by the change of guards in the Chinese leadership in 2012. Global realities forced China to buckle down and led it to realize that in the event of gloomy Western economy, which decimates export prospects, India stands a saviour to the Chinese economy. China emerged the biggest trading partner of India since 2011-12. But the gushing export by China led to a yawning gap of trade deficit. For one US dollar worth of India's export to China means three US dollar worth of imports from China. More than one-fourth of India's total trade deficit was accounted for by Chinese exports to India. The high trade deficit prodded the current account deficit above the comfort zone – nearly 4 percent of GDP. One of the antidotes to rising trade deficit is to encourage Chinese investment in India. China has overflowing foreign exchange reserves. The economic doctrine of FDI says that it transfers capital, builds up a strong platform for investment and manufacturing in the host country, reduces the trade deficit by import substitution and increasing export and creates buoyant opportunities for employment. Chinese FDI in India is miniscule. During January 2000–February 2014 (up to May), FDI from China was US$ 410.2 million. The interesting feature of Chinese investment in India is that during the period of 11 years of 2000 -2011, Chinese investment was meagre. It was merely US$ 90 million. Chinese investment leapfrogged after 2011. During the period of two-and-a-half years of 2012–2014 (up to May) China poured in US $ 320 million. The surge in Chinese investment corroborates to the resurrection of bilateral relations with the installation of the Xi Jinping regime in 2012. The hostile relations between the two countries softened in 2010 when India-China Strategic Economic Dialogue was set up during the visit of Chinese Premier Wen Jiabao to India in December 2010. This was the first serious approach by China to have better relations with India. China's renewed interest was spurred by its assertiveness in Asia and Washington's provocation to use India to contain China. Further, India-China relations took on a new dimension with the escalation of Japan's interest in India beyond commercial relations and India's reciprocation to it. The visits of Japan's imperial couple Emperor Akihito and Empress Michiko in 2013 after five decades reaffirmed the new dimension in the relation between India and Japan. Till now, Japan was reticent in acknowledging India's growing role in the Asia Pacific region. Now, even Japanese Prime Minster Shinzo Abe has a special affinity for Modi as demonstrated by his successful visit to that country. Modi paid a five-day visit to Japan during which both sides decided to take their ties to a new level – a Special Strategic Global Partnership – with increased economic and defence cooperation. China is losing its sheen as the sole beachhead for foreign investment. The catchword "don't put all eggs in one basket" is troubling the foreign investors' confidence, putting them in dilemma whether to invest in the expansion of China. Wages are going high with the American pressure to delink the renminbi with US dollar. Corporate tax has been unified, resulting in the end of concessional tax regime for foreign investors. Inflation is rising, pushing up food prices. Therefore, if the cyber security paranoia does not wobble the US and it is able to emerge the biggest destination for Chinese investment abroad, then why cannot Modi's yearning for Chinese investment be utilized as an antidote to balance the trade and fructify his dream of making India the global hub for manufacturing. (Subrata Majumjder is Adviser, Japan External Trade Organization ( JETRO). He can be reached at [email protected]) The post Modi’s Call To ‘Make In India': China Not A Foe – Analysis appeared first on Eurasia Review. (c) 2014 Buzz Future LLC Provided by SyndiGate Media Inc. (Syndigate.info). |