india china: Economic Survey 2024 tells why replacing China in manufacturing isn’t that simple for India

Finance Minister today released the Economic Survey for the financial year 2023-2024. In the economic survey highlighting the performance of Indian economy, the ministry has also touched upon the topic of Chinese challenge. The Economic Survey has called it the Chinese Conundrum. The Survey highlights that it would be wrong to presume that India will automatically take over the manufacturing space vacated by China due to changes in global supply chains. “It may not be the most prudent approach to think that India can take up the slack from China vacating certain spaces in manufacturing. Indeed, recent data cast doubt on whether China is even vacating light manufacturing,” the Survey said.

The Survey said that the Chinese domination over the global supply chains across product categories is a key global concern, especially in the wake of supply disruption accompanying the war in Ukraine. Even though India is the fastest-growing G20 country and is now recording growth rates that outpace China’s, India’s economy is still a fraction of China’s.

Giving the example of energy transition, it said that the China’s near-monopoly over the production and processing
of critical and rare earth minerals has already been a cause of global concern. It will also have significant repercussions for India’s renewable energy programme, which is vulnerable because of its massive dependence on imported raw materials.

The Survey also highlighted that merely putting import restrictions will also not prevent China from dumping cheap imports. “While Emerging Markets and Developing Economies (EMDEs) are resorting to import restrictions as a policy option to deal with the Chinese challenge, it is pertinent to note that some Chinese goods are so cheap
that no amount of tariff can reduce their price competitiveness. Further, some Chinese products can move past these restrictions without being noticed since they are packaged in third countries,” it said.