The Asian Century needs a large manufacturing cluster to exclude Indian manufacturing

In the past few days, India’s first domestically produced fast train “Honor to India” has become the focus of international public opinion. As the Indian side announced on the social media that the train was in trial operation and official operation on the 17th, as well as various "accidents" disclosed by the Indian media, it once again caused people to talk about "Made in India" and mixed ridicule. Some people say that “Made in India” will replace “Made in China” and create a new gimmick for the “Dragon Elephant Battle”. This may not be the case.

“Made in India” is needed for transformation

On September 25, 2014, the incumbent Indian Prime Minister Modi was ambitious to launch the “Made in India” program, announcing that India should be built into a global manufacturing center. In the next 10 years, the proportion of manufacturing in GDP will be 17% increased to 25%.

Modi's vigorous promotion of the "Made in India" strategy is not only to fulfill the campaign promise, but also the inherent needs of the transformation of India's economic development model. In fact, as early as 2011, the Indian National Congress Party Singh government specifically introduced the "national manufacturing policy" to revitalize Indian manufacturing. Therefore, in the implementation of "Made in India", the Congress Party and the People's Party have formed a potential consensus.

According to the experience of countries with economies in transition, the development of manufacturing industry is the key to maintaining high economic growth. The 2008 world financial crisis and the resulting “anti-globalization” movement further highlighted the position of manufacturing in economic development. India's manufacturing GDP ratio is far behind the ratio of 25% to 40% in developed countries and other emerging economies. India's manufacturing sector accounts for 15% to 17% of GDP per year, making it difficult to achieve breakthroughs.

The reason is mainly because India has chosen a different industrialization development path from the West and China, that is, a technology-intensive, service-oriented industrial model. The priority is to develop technology-intensive manufacturing, in which information and software services are provided. The industry is at the leading level. The development of information technology has also made India a “world office”, while the service industry represented by computers, software services and information technology accounted for 61.9% of GDP in 2016.

However, with the development of the Indian economy, the imbalanced industrial structure and high unemployment rate have become more prominent, and the service industry has limited ability to create jobs. For example, software, finance, telecommunications and other service industries with rapid development and high output value have less employment, while traditional service industries such as wholesale, retail and transportation absorb a large amount of employment, but have limited contribution to GDP and are not conducive to the improvement of labor quality. As a result, India’s dazzling demographic dividend is difficult to play, and it is imperative to adjust the industrial structure and increase employment opportunities. Therefore, the Modi government has repeatedly mentioned “Made in India”, and unified the tax system, improved the domestic business environment, revised the relevant labor bills, relaxed foreign investment restrictions, launched “skills India”, “entrepreneurial India”, “digital India” and “smart cities”. "Supporting measures."

After several years of development, “Made in India” has achieved certain results under the influence of the Modi government's vigorous promotion and global value chain adjustment and domestic macroeconomic improvement. The Bank of India data shows that India's manufacturing growth in 2015-2016 fiscal year. The rate was 9.3%, which was significantly higher than the growth rate of 5.5% and 5.6% in the previous two fiscal years.

However, due to many factors at home and abroad, there is a gap between the current performance of “Made in India” and the original intention of the Modi government. From an international perspective, due to the imbalance between supply and demand in the international market, "reverse globalization" and the "re-industrialization" of Western countries, India's attraction of foreign investment will face double competition between developed economies and other emerging market countries.

Sino-Indian manufacturing cooperation has great potential

For "Made in India", many Chinese netizens hold two attitudes: one is not to miss every opportunity to read jokes, and the other is that "Made in India" will threaten "Made in China." The author believes that “Made in India”, which is still in the climbing stage, has the same situation in some respects as “Made in China” in the past, and we should treat it with an objective attitude.

First, China's manufacturing exports have been ranked first in the world since the global share in 2010 increased to 19.8%. India's manufacturing exports are on the rise, but exports are far from China.

Second, China is taking the path of factor-driven-market-driven technology-driven industrialization. China's goal is to shift to a technology-driven, upstream climb to the global value chain. As China's labor price and land prices rise, the advantages of labor-intensive manufacturing in China are gradually disappearing, which has forced China's manufacturing industry to transform. India's industrialization road is contrary to China. It is driven by technology-driven-market-driven factors. The development direction is to shift to market-driven and factor-driven, create more job opportunities, give play to the demographic dividend advantage, and stimulate economic growth. The difference in the development stage of China and India's manufacturing industry provides a space for cooperation in the development of the manufacturing development strategies of the two countries. Both sides can take advantage of India's labor cost advantage and China's capital and technology advantages to jointly improve the development level of the manufacturing industry, respond to the "re-industrial" strategic impact of developed countries, and achieve mutual benefit and common development.

Third, the industry of China and India's manufacturing industry is weak and complementary. In the world market, from 2000 to 2017, the export similarity index of China and India's manufacturing industry is between 47-60. Although there is competition but not intense, the competition industry is mainly concentrated in food processing and manufacturing. In the pharmaceutical manufacturing, textile and other primary products, as well as in the industrial processing of petroleum processing and coking, non-ferrous metal smelting, and in the capital and technology-intensive industries such as medical manufacturing, transportation equipment manufacturing, and special equipment manufacturing. The complementarity is greater. From the trade closeness index of the two countries, China's trade closeness to India is generally on the rise, but India's trade closeness to China is low and has shown a downward trend in recent years. This also explains the Sino-Indian trade deficit. The big reason is that if China and India further adjust their import and export structure in light of their own advantages and the disadvantages of partner countries, China-India trade will be able to achieve greater development, and the trade potential of the two countries can be truly released.

Therefore, we do not reject the successful promotion and smooth development of “Made in India” and form a large manufacturing regional cluster in East Asia, Southeast Asia and South Asia in Asia. This will not only facilitate the development of China-India relations and the formation of the “Asian Century”. It will help to enhance the global industrial chain layout capability and promote the globalization process.

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