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India – emerging as a balancing global power

Call it circumstantial compulsions or something else! The US Administration and private business houses and many of the European countries are now looking at India with never-before-eagerness not only for selling products but for relocating manufacturing bases and technology transfer. Chinese territorial aggression-through economic means and geopolitical tensions in other parts of the world including the ongoing Russia-Ukraine conflicts have thrown up this opportunity. This is a win-win situation and it promises to make the world, US and India much better off from a territorial security, geopolitical stability and supply chain resilience perspective, feels Atanu Mukherjee. Speaking to Bizz Buzz exclusively, Atanu Mukherjee, president & CEO, M N Dastur, and chairman of AmCham-East, explains how India should make best use of the situation and emerge as the global manufacturing hub over the next 15 years or so

As part of an AmCham delegation you have recently had series of meetings (nearly 36 or so) in the US with several most vocal and articulate senators, top businessmen and other top functionaries in the US administration. What have been the key takeaways?

The Indo-US relationship is on a new path. The most significant thing, I would say, is a palpable shift in stance on their parts. Earlier we had to approach and impress upon them for various things. But now they are extremely keen on exploring various options here. Given the current geopolitical equations and scheme of things, India is fast emerging as a balancing pillar.

Could you please explain that?

See, the biggest risk to the US, Europe, India and the world today is the nature of monopolistic concentration by China in global supply chains and manufacturing, its territorial ambitions and therefore its potentially extreme disruptive ramifications on the global economy, and especially the US.

Given China’s inherent territorial expansion ambitions, China has used economic means like the BELT and Road initiative, infrastructure financing, and debt support to influence and control Africa, Sri Lanka and Pakistan amongst other nations. Its continuing ambitions for integrating Taiwan into China are well known. The US, is deeply dependent on China for the majority of the manufactured goods, including basic drugs and APIs. Over the past 50 years entire industries and manufacturing ecosystems have moved to China from the US and other developed countries. In the event of a geopolitical eventuality due to China, it is possible and perhaps likely, that the US and the world could be held hostage to Chinese ambitions. Further, the growing Kremlin-Beijing alignment can create an axis power which has the potential to create a global crisis in goods and energy supply and expand military based territorial ambitions across both the Indo-Pacific and European regions. India is the only and most important country for Indo-Pacific security and economic balancing pillar.

The biggest risk to the US, Europe, India and the world today is the nature of monopolistic concentration by China in global supply chains and manufacturing

Does the US eagerness to engage more meaningfully with India is reflected in its initiatives?

The United States recognizes this significant and real threat and has initiated the Quad initiative and the Indo-Pacific Economic Framework (IPEF) for expanding collaboration on security and military and trade. Resilience of supply chains and moving manufacturing away from China is a key objective of the IPEF initiative. India, a signatory to IPEF and a member of the Quad, has been recognized by the US as perhaps the only credible alternative to China for moving manufacturing away at large scale, so as to create a viable alternative for supply chain resilience. This is evident from the eagerness of the United States to engage with India on multiple fronts ranging from energy to infrastructure to supply chain resilience. Its exhortations to engage India into an FTA with US and concessions on market access barriers is another indication of this eagerness.

India also stands to gain significantly from all such initiatives. Isn’t it?

Yes. Yes. Mind you that India, on its parts, has significant territorial annexation exposure from China, as has been seen by the ongoing military skirmishes in the recent past and the annexation of parts of India in the 1960s.

At the same time, Prime Minister Modi’s AtmaNirbhar Bharat and Make in India initiatives positions India well for large scale FDI in moving manufacturing from China to India. Investments in supply chain resilience by US and other nations by investing in India, perhaps gives India the opportunity of a lifetime, to become a large manufacturing based export economy over the next 15-20 years. The current situation promises to give perfect push to AtmaNirbhar Bharat initiative by all means. At the same time security and military collaboration through Quad will help India in securing its northern borders and create the much needed stability by thwarting Chinese territorial ambitions.

So, what are the concrete steps the two countries should look at to make best use of the situation?

I think that the two countries should focus on signing of FTA; targeted technology transfer and manufacturing collaboration through government to government, government to private and private to private enterprises; facilitating relocation of MRO chains, supply chains to India; come up with specific clean energy proposals – clean energy equipment manufacturing, technology relocation, joining R&D initiatives and so on.

Mind you that India offers more or less similar cost structure with that of China. And if things move the way it is being envisaged now, there is every possibility that India, over the next 15-20 years, will become the global manufacturing hub. What India needs to do is to bring in tariff reforms and look at diversion of export markets.

Which are the sectors, the two countries should look at, as starter, when it comes to collaborations, technology transfer and so on?

I think the first and foremost sectors would be defence, energy (technology and manufacturing), semiconductor and pharmaceuticals.

There can be two ways of making a country attractive to outside funds and technology- either through tax mechanism or through incentive mechanism. Given India’s current socio-political and economic situations, I think, only incentive-based mechanism would work here in this country.