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Wednesday, April 21, 2021

The secret of the Quad’s renewed viability? India’s manufacturing ability

By undercutting China’s economic leverage over member nations, India has helped Quad 2.0 overcome a significant tactical hurdle.

Written by Akhilesh Mishra |
Updated: March 12, 2021 8:49:59 am
The dependence on China’s factories is what kept the grouping of democracies from emerging. India has raised its hand to solve that problem.

The strategic case for the Quadrilateral Security Dialogue, better known as the Quad, has always been sound. A rising China, with its authoritarian one-party system, is a challenge to the democratic order. It made sense, therefore, for democracies around China to pool their resources and strengths and present to the world a better and more sustainable model of governance.

The strategic case for the Quad has, however, always faced a tactical hurdle. China was the factory of the world. It had become an almost indispensable cog in the global supply chain owing to its low-cost manufacturing prowess at a mass scale. How could any grouping hope to challenge China’s power-play dynamics while at the same time being dependent on its factories to sustain its economies? It was exactly this dilemma that stunted the first iteration of the Quad soon after its birth in 2007. As long as there was no equivalent manufacturing destination to rival China, the case for an “arc of democracies” would remain confined to concept papers in think tanks.

But two recent developments have completely changed the dynamic. Australia returned to the Malabar Naval exercises in 2020, after 13 years. And on March 12, the first summit-level meet of the Quad — comprising the US, India, Japan and Australia — is scheduled to take place.

So, what has changed between 2007 and 2020 that Quad 2.0 has become viable? The answer is the globally visible rise in India’s manufacturing ability. Consider the following examples.

First, the success in PPE kits. At the beginning of the COVID-19 pandemic, India was manufacturing zero PPE kits. As the world — including the developed economies — was scrambling to secure supplies from China, India not just created an overnight world-class manufacturing capacity to meet its own needs but also started exporting PPE kits. From zero to almost a million kits a day — the ability to scale was breathtaking. The same was the case with ventilators and other essential supplies, such as the drug HCQ.

Second, the soft power of Vaccine Maitri. While the developed countries are scrambling to secure vaccines for their domestic population, India is not only vaccinating its own people faster than any other country but is also exporting millions of vaccines to countries in need — and all through domestically-manufactured vaccines. From Canada to Pakistan and from the Caribbean Islands to Brazil — Made in India vaccines have been a life vest across the globe.

Third, the enterprise of India’s private industry — a hallmark of the deepening manufacturing base. As a recent New York Times report noted, when it came to syringes — without which the vaccines were useless — the global scramble again led to India and Hindustan Syringes & Medical Devices, among other manufactures. Hindustan Syringes alone has ramped up its manufacturing capacity to almost 6,000 syringes a minute!

Fourth, India’s success in precision high-end manufacturing. The PLI scheme launched for electronics’ manufacturing evinced unprecedented global interest with 22 top companies, including the top manufactures for Apple and Samsung mobile phones. Over the next five years, a manufacturing capacity of over $150 billion and exports of $100 billion have been tied up through this scheme.

Fifth, the success of India’s fourth-generation fighter jet programme and the orders placed by the Indian Air Force for 83 Tejas jets. Very few countries have the ability to indigenously manufacture such high-tech fighter planes and India’s success is one more milestone in its journey towards emerging as a global manufacturing destination.

Concurrently, India has been reforming its economic policies to make it even more attractive as a manufacturing destination. India has the lowest tax rate anywhere in the world — 15 per cent for new manufacturing units. FDI norms have been relaxed across the board and automatic approval processes instituted for FDI even up to 100 per cent. Privatisation of PSUs is now an established process. Labour laws have been finally reformed and compliance burdens significantly eased. Taxation is now faceless, thus ending the spectre of rent-seeking. A well-functioning, world-class bankruptcy law is in place. Interest rates are low. And India’s digital infrastructure rivals the best in the world and in many cases beats it.

All of this has enabled the world to envision India in a new light — as the new global manufacturing hub. All the benefits that China provided — quality, scale, speed, skilled manpower and a vast domestic market — are now operative for India but without the drawbacks of the Chinese model.

The only arrow that was missing in the quiver of the Quad has now been attained. The strategic case for the Quad was never in doubt. The dependence on China’s factories is what kept the grouping of democracies from emerging. India has raised its hand to solve that problem. Quad2.0 is now a viable global alliance. It’s no wonder that the Quad summit will be the first high-profile global meet that the new US president, Joe Biden, will be attending. The new world order post-COVID is being rewritten before our eyes and India, led by Prime Minister Narendra

Modi, is playing a leading role in establishing this order.

This article first appeared in the print edition on March 12, 2021 under the title ‘A factory for the Quad’. The writer is CEO, Bluekraft Digital Foundation and former director (content) MyGov.

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