China has managed to build up a value chain so extensive that almost everything required to make a product can be sourced and acquired in the country.
www.businessinsider.com
This is summarise problem for any emerging nation including India on replacing China end to end internal production chain. Something that need to be build on decades. Western media focus much on Covid restriction. However signs already shown China relaxing.
There are problems setting up in India according to this article
Why India Can’t Replace China. Unfortunately it's paywalled.
"Announcements of new projects (as measured by the Center for the Monitoring of the Indian Economy) have again fallen off after a brief post-pandemic rebound, remaining far below the levels achieved during the boom in the early years of this century. Even more striking, there is not much evidence that foreign firms are relocating production to India. Despite all the talk about India as the investment destination of choice, overall foreign direct investment has stagnated for the past decade, remaining around two percent of GDP. For every firm that has embraced the India opportunity, many more have had unsuccessful experiences in India, including Google, Walmart, Vodafone, and General Motors. Even Amazon has struggled, announcing in late November that it was shutting three of its Indian ventures, in fields as diverse as food delivery, education, and wholesale e-commerce.
"Why are global firms reluctant to shift their China operations to India? For the same reason that domestic firms are reluctant to invest: because the risks remain far too high.
"Of the many risks to investing in India, two are particularly important. First, firms still lack the confidence that the policies in place when they invest will not be changed later, in ways that render their investments unprofitable. And even if the policy framework remains attractive on paper, firms cannot be sure that rules will be enforced impartially rather than in favor of “national champions”—the giant Indian conglomerates that the government has favored.
"These problems have already had serious consequences. Telecom firms have seen their profits devastated by shifting policies. Energy providers have had difficulty passing on cost increases to consumers and collecting promised revenues from the State Electricity Boards. E-commerce firms have discovered that government rulings about allowable practices can be reversed after they have made large investments according to the original rules."
Most of us are familiar with Indian Defence procurement and the Indian govt's "Make in India" policy. We are also familiar with HAL which is govt owned and the stranglehold that it has on Indian aircraft manufacturing, much to the detriment of Indian military aviation across the three services. It's always very late, well below spec, poor quality, and well over budget. Then there's the bureaucracy that only the Indians can achieve.
"At the same time, national champions have prospered mightily. As of August 2022, nearly 80 percent of the $160 billion year-to-date increase in India’s stock market capitalization was accounted for by just one conglomerate, the Adani Group, whose founder has suddenly become the third richest person in the world. In other words, the playing field is tilted.
"Nor can foreign firms reduce their risks by partnering with large domestic firms. Going into business with national champions is risky, as these groups are themselves seeking to dominate the same lucrative fields, such as e-commerce. And other domestic firms have no wish to tread in sectors dominated by groups that have received extensive regulatory favors from the government. ...
"India faces three major obstacles in its quest to become “the next China”: investment risks are too big, policy inwardness is too strong, and macroeconomic imbalances are too large. These obstacles need to be removed before global firms will invest, since they do have other alternatives. They can bring their operations back to ASEAN, which served as the world’s factory floor before that role shifted to China. They can bring them back home to advanced countries, which played that role before ASEAN countries. Or they can maintain them in China, accepting the risks on the grounds that the Indian alternative is no better."
There is also the domestic Indian economy which doesn't have the burgeoning middle class that the PRC has.
"India’s market of middle-class consumers remains surprisingly small—no more than $500 billion compared with a global market of some $30 trillion, according to a study by Shoumitro Chatterjee and one of us (Subramanian). Only 15 percent of the population can be considered middle class according to international definitions, while the rich who account for a large share of GDP tend to save a large share of their earnings. Both factors reduce middle-class consumption. For most firms, the risks of doing business in India outweigh the potential rewards."
However, I cannot see the Indian govt undertaking any structural and systemic reforms because there are far to many vested interests involved and it still has the Hindu brahmin class system which is embedded within the society.
"If the Indian authorities are willing to change course and remove the obstacles to investment and growth, the rosy pronouncements of pundits could indeed come true. If not, however, India will continue to muddle along, with parts of the economy doing well but the country as a whole failing to reach its potential.
"Indian policymakers may be tempted into believing that the decline of China ordains the dizzy resurgence of India. But, in the end, whether or not India turns into the next China is not merely a question of global economic forces or geopolitics. It is something that will require a dramatic policy shift by New Delhi itself. "
I don't know if India will change all that much in the short to medium term because I think that the current structural model is now firmly embedded within the Indian culture. The English have a lot to answer for.
