India as the world's factory: China may be in denial

Apple’s recent decision to shift manufacturing of its flagship smartphone product, the iPhone, to India has sparked a fresh wave of speculation on India emerging as the world’s factory. While analysts like JP Morgan estimate that India could garner a share of between 5 per cent and 25 per cent of iPhone manufacturing, certain close observers of hi-tech manufacturing in China estimate a 150 per cent growth year-on-year on Apple’s manufacturing in India, by Apple’s lead contract manufacturer Foxconn. The smartphone manufacturing boom in India goes well beyond the iPhone, with Samsung and other players expanding their India production capacity.

Curiously enough, the shift to India has triggered a debate in China on which country is best placed to be an alternative manufacturing and supply chain destination. This topic was the subject of a recent essay by Xu Qiyuan, a Chinese researcher at the Institute of World Economics and Politics, Chinese Academy of Social Sciences. In an English version of the original essay in Chinese, titled “Vietnam, India, and Mexico, who is challenging China's status as the world’s factory?” published by the Beijing Channel newsletter, one gets a rare insight into the Chinese perception of India as a potential competitor. In the essay, Xu writes on the transformation India has seen in recent years registering 8 per cent GDP growth in 2021 while recognising the efforts put in by the Indian government under Prime Minister Narendra Modi towards creating “a large unified market” through the GST regime. Duly recognising India’s talent pool in science and technology, Xu also notes that “India’s innovation and technology capabilities should not be underestimated”. Of particular interest to Xu is India’s IT prowess, presence of nine Fortune 500 firms in India and India’s self-sufficiency with low dependence on China.

However, it is Xu’s comments on India’s socio-cultural environment that are interesting for they lead to the conclusion that India is unlikely to be a viable alternative to China. Specifically Xu attributes “India’s transcendental religious beliefs” for what is termed as a “low desire of the people for economic development”. Further, Xu, while duly noting Prime Minister Modi’s clarion call for an “Aatmanirbhar Bharat”, draws the hasty conclusion that it is primarily directed towards domestic consumption, while going on to reiterate that “religion and culture” stand in the way of tough economic reforms in India. This repeated emphasis by Xu on “religion and culture” and “transcendental religious beliefs” is helpfully put into perspective when Xu makes a questionable assertion on the contribution of “Confucianism” to the Vietnamese society’s desire for development as a factor in its emergence as a manufacturing base.

It is interesting that the myths around the influence of Confucianism on Southeast Asia come not from Chinese scholars but from futurologist Hermann Kahn, who had labelled the Southeast Asian economies as “neo-Confucian”. Writing in a 2009 paper titled “The Confucius connection: From cultural roots to economic growth”, Geert Hofstede and Michael Harris Bond have further expanded on this theory of Kahn on the influence of religious and cultural programming on economic development to make claims on the role of Confucianism in Southeast Asia, which seems to have wrongly coloured the perceptions of contemporary analysts in China with regard to India. The 2009 paper, while focusing on religious factors behind economic growth, also highlights other factors such as open markets and favourable political conditions. It is also noteworthy that the 2009 paper was ambiguous on the extent to which Confucianism had contributed to economic development within the People’s Republic of China, on account of lack of data, while recognising that Southeast Asian culture is influenced by more than a single religious or cultural thought giving the examples of Hinduism and Buddhism among others.

While Chinese analysts such as Xu may be overstating the role of Confucian thought in economic development, it is their shallow and stereotypical understanding of India that needs further examination. It is this stereotypical image of India that manifested itself in the New York Times cartoon some years back on India joining the elite space club and is what is seen in the manner in which India is portrayed by Hollywood and others, conjuring images of snake charmers and godmen.

It would seem that most of these analysts have been overly focused on “moksha” to draw false conclusions of a “transcendental religious belief system”, while missing out on the role “dharma” and “artha” play in the pursuit of uplift of society.

From aviation to hi-tech manufacturing, as India opens up to the world of manufacturing and seeks to develop an alternative ecosystem for global supply chains, it is no surprise that Chinese analysts are looking to stretch the limits of logic to seek comfort in China's manufacturing prowess. India under Prime Minister Narendra Modi has its task cut out in improving ease of doing business and boosting competitiveness to attract more global manufacturing. China, on the other hand, may have to come out of the twin bubbles of zero-Covid and Confucianism to come to terms with the low trust deficit globally that is seeing it not only being ejected from Canadian mines but also witnessing a flight of entrepreneurs from its mainland.

The writer is former CEO of Prasar Bharati