Assemble in India: Why it may not be prudent to follow China’s strategy
The Economic Survey 2020 was tabled on Friday, January 31st, amidst an economic slowdown, coupled with rising food inflation. While the Survey emphasized on the importance of an expansionary fiscal policy and an investment-led growth, it also advocated 10 key ideas that could help address some of the structural issues that have caused the slowdown. Among the idea of creating wealth, enabling entrepreneurs, examining go nment’s intervention, and reducing financial stress, one of the focus was on creating jobs and growth by emphasizing on “Assemble in India for the world” and integrating it into our “Make in India” programme.
The desire to continue to build on initial reforms and programmes undertaken during Modi 1.0 comes across loud and clear in this idea. But what it also stressed was to chart a China-like, labour-intensive, export trajectory. It was argued that by adopting a strategy like that of China, India can not only improve its share in global exports, but also create well-paid jobs.
Creating jobs will be crucial in order to deal with concerns regarding sustaining consumer demand at the macro level, and the economic survey addressed this issue. Highlighting the importance of the manufacturing sector in its ability to create jobs is also worthwhile. However, following China’s strategy might require some prudence among policymakers given that the world has dramatically changed in terms of technology and the environment since China adopted it in the early 1990s.
Post its liberalization, China rode the wave of globalization and low factor costs aided in creating a scale and capacity that was needed to be globally competitive. During this process, China also emphasized on building its own infrastructure, thus creating a sustainable demand for its own manufacturing produce. As the economy expanded its scale and scope of production, it also evolved in terms of creating its own ecosystem of technology and entrepreneurship.
This time it’s different
Over the past few years, Industry 4.0 has provided manufacturers with faster, flexible, and more proficient processes that produce goods of higher-quality and at lower costs. Manufacturing industry leaders in today’s world have taken an increasingly large role around climate change and environmental sustainability as well as resource scarcity. Besides, India has to fight the wave of anti-globalisation and trade uncertainties that the world is experiencing currently.