India’s Manufacturing Decline: How Policy Choices, Not China, Hold Back Growth – 3 Key Reasons
India’s manufacturing decline cannot be blamed on China, despite claims that Beijing is hindering India’s growth. Historically, China played a significant role in supporting India’s industrial expansion by providing capital, expertise, and components. In fact, both countries had even discussed a manufacturing partnership in 2019. However, after the 2020 Galwan Valley clash, India imposed restrictions on Chinese businesses, including blocking investments and apps, which created a trust deficit. Policies linking economic strategies with border disputes undermined India’s manufacturing potential. As a result, China shifted its focus to Southeast Asia, where trade conditions are more favorable. India’s struggle with manufacturing is more a product of its own policy decisions than Chinese actions.
India’s Manufacturing Decline: How Policy Choices, Not China, Hold Back Growth – 3 Key Reasons
India’s manufacturing sector has been facing a significant decline, but blaming China for this downturn is misplaced. While some argue that China has been blocking investments and technological advancements in India, the reality is more complex. India’s struggles in manufacturing are primarily rooted in its own policy choices and decisions, not external factors like China’s actions.
Historically, China has played a key role in supporting India’s industrial growth. The two countries have collaborated in various sectors, with China supplying essential capital, resources, and technical expertise that India needed to build up its manufacturing capacity. For years, Chinese businesses have operated in India, contributing to the growth of industries such as consumer electronics. Companies like Oppo, Vivo, and Xiaomi, among others, established significant operations in India, helping to boost the country’s manufacturing output.
In fact, there were even discussions in recent years about a potential manufacturing partnership between the two countries. In 2019, during a summit between Indian Prime Minister Narendra Modi and Chinese President Xi Jinping, the leaders expressed their intent to collaborate on expanding India’s industrial capacity. This was not just a symbolic gesture, but a serious effort backed by political will to foster mutual growth in manufacturing. Chinese engineers, workers, and management expertise were crucial to setting up successful factories and industries in India, especially in areas like mobile phone production and consumer electronics.
However, the situation began to change in 2020 after the Galwan Valley clash between India and China. The confrontation led to a significant shift in India’s approach towards Chinese investments. In response, the Indian government imposed a series of restrictions on Chinese companies, including blocking hundreds of Chinese apps and requiring government approval for any investments from neighboring countries like China. This was a direct consequence of rising national security concerns and growing public sentiment against China following the border dispute. Additionally, Chinese executives operating in India faced arrests, further complicating business relations.
A prime example of how these policy changes hurt India’s manufacturing potential is the case of BYD, a leading Chinese electric vehicle manufacturer. In 2023, BYD proposed investing $1 billion to establish a factory in India, which would have created thousands of jobs and contributed significantly to India’s automotive and electric vehicle industries. However, India rejected the proposal, and as a result, BYD chose to focus its efforts on other markets instead, such as Southeast Asia, where business environments were more favorable.
India’s decision to mix economic policies with geopolitical issues led to an unintentional consequence: it made it more difficult for foreign investors, particularly from China, to engage in the Indian market. The focus on national security and political tensions created a trust deficit between Indian policymakers and Chinese businesses. Even when China expressed a willingness to invest in India and help boost its manufacturing sector, India’s policies made it increasingly hard for Chinese firms to operate and thrive in the country.
Meanwhile, Chinese businesses have found other countries in Southeast Asia to be more attractive for investment. Countries like Vietnam, Indonesia, and Malaysia have become key destinations for Chinese companies seeking new markets and investment opportunities. These countries offer advantages such as better trade agreements, established infrastructure, and fewer barriers to foreign investment. Moreover, the economic environment in these countries is more conducive to the growth of Chinese businesses, making them more appealing than India in recent years.
In conclusion, India’s manufacturing sector has faced significant challenges, but these challenges are not primarily due to China’s actions. The decline in India’s manufacturing capacity can be traced back to its own policies that have mixed economic issues with political and border disputes. While China could have played a crucial role in helping India expand its industrial sector, India’s restrictive policies, national security concerns, and public sentiment against Chinese investments have hindered the country’s ability to capitalize on this potential. As China looks to expand its influence in other parts of Asia, India’s manufacturing decline serves as a reminder of how policy decisions can directly impact a country’s economic prospects.