INDIA’s EXPORTS are stuck around $ 300 billion. for quite sometime With imports not elastic, the trade gap has been widening. In the nine months of the current year (April-December 2018), imports were at US$ 386.65 billion and exports at US$ 245.44 billion.
Changes in the geopolitical equations witnessed in recent months call for a quick change in strategy to grab fortuitous opportunities. We cite two such:
The first is the interest of Taiwan to look at India as a potential partner. For a couple of decades now Taiwan has been emerging a large contract manufacturer for assembling sophisticated export products. In this process, the country has been leveraging the availability of cheap labour from mainland China and other countries in south-east Asia.
With increasing costs of labour in China, large Taiwanese companies are turning towards India. Their expertise in training, systems, managing large contract labour on fair employment practices have been helpful in extending their operations to India. The record of two Taiwanese companies – Foxconn and Feng Tay – who have established assembly operations in Tamil Nadu and Andhra Pradesh, merit attention.
Feng Tay has two units for assembling Nike products for 100 per cent export and employs over 27,500, mostly rural women and equip these quickly to handle the assembly operations with efficiency. The company is confident of expanding employment of these two units to 50,000 and every units plans to set up two more such employing another 50,000!
Foxconn set up two units, one each at Sriperumbudur and Sri City, employing around 15,000 each, again mostly women drawn from rural parts of the state. They make three cell phones a second with 1200 micro-components in each!
More investments from Taiwan
More large Taiwanese companies are entering India: Apple’s Taiwanese supplier Wistron is planning to invest Rs 3000 crore in Kolar and Delta Electronics plans to spend Rs 4000 crore in Krishnagiri to set up an electronics hardware plant.
These investments promise the much needed scaling up of volumes for exports. More interesting, when most of our entrepreneurs are scared of labour laws and are reluctant to go for employment on a large scale, these Taiwanese companies provide a contrast: they employ in thousands. This is particularly important for the manufacturing sector which has been experiencing a steep fall in growth in employment.
Another development relates to the US-China confrontation on trade issues. US President Trump is understandably concerned over the adverse trade balance with several countries, particularly China. He tries to tackle this by imposing a higher tariff on Chinese imports and China has been retaliating. This tariff war provides the opportunity for India to attract American companies that had set up shop in China and look for new locations.
India should identify sectors that have the potential for large employment of skilled labour available in abundance at modest wages. A business leader of Chennai pointed to the cost arbitrage in wages: the engineering industry incurs a monthly salary of around $ 200 on skilled labour; he pointed to the steep increase in such labour cost in China in recent times to a level of about $ 2000 for a comparable job. For a few years to come, this wage arbitrage would be available and India should make full use of this.
The export effort would also be strengthened by bilateral, barter-type rupee trade agreements with select countries. For China, with which India has adverse trade balances, it should be possible to attempt balance in trade offering to step up exports of agricultural products like soybean and corn which China is importing in large quantities from South America. This would call for special incentives and favourable contract farming laws.
There are opportunities galore. The country should look at these and work to seize these.