India should follow the Chinese model of becoming an assembling hub for the world for ‘network products’ such as computers, electronics, and road vehicles to raise its share in the world export market, the Economic Survey for 2019-20 has said.
The call to focus more on becoming a global assembling hub comes even as the government has, over the past five years, laid repeated emphasis on the ‘Make in India’ manufacturing thrust. Launched by Prime Minister Narendra Modi in September 2014, the scheme is still to make an impact in raising the share of manufacturing in India’s GDP. Among the major focus industries targeted under the Make in India scheme, the mobile, telecommunication and electronics equipment manufacturing, is still largely restricted to the assembling of knocked-down kits despite a slew of global companies having set up units in the country.
The Survey suggests integrating ‘Make in India’ with an ‘assemble for the world’ plan, taking a leaf out of the Chinese model of focusing more on capital intensive exports. In China, these policies worked in integrating its domestic manufacturing industries with assembling units for global ‘network product’ companies. Similarly, India could also use its big workforce to penetrate the market of traditional rich countries, which tend to be more quality and brand conscious, the Survey said.
“By importing components and assembling them in China for the world, China created jobs at an unprecedented scale. Similarly, by integrating “Assemble in India for the world” into Make in India, India can raise its export market share to about 3.5 per cent by 2025 and 6 per cent by 2030 is highly feasible,” the survey said.
This, in turn could create about 4 crore well-paid jobs by 2025 and about 8 crore by 2030, the economic Survey has estimated. To achieve this, it must not opt for high diversification-low specialisation exports, which has so far led to India’s lacklustre performance in comparison to China, the Survey suggests.
To drive home the point, the Survey draws from the example of the establishment of Maruti Suzuki in 1981, wherein the joint venture started by initially importing fully assembled cars, followed by semi-knocked down units and then completely knocked-down units. This, the Survey suggests, opened the way, first for auto ancillary companies and then other auto-makers.
The time for India to join the assembling unit hub line is also right, the Survey said, as the growing US-China trade war has forced global value chains such as Apple, Samsung, and Sony to look for alternative locations. Apart from reorienting itself as the assembling hub of the world like China, India should also focus on traditionally labour-intensive sectors such as textiles, clothing, footwear, and toys, the Survey suggested.