India needs to work hard to stay in the competition with Vietnam, Thailand, Indonesia and Bangladesh to gain from the worldâs âChina-plus-oneâ strategy, says Lt Gen S L Narasimhan, a noted expert on China.
In a conversation with Ravichandran Purushothaman, Past Chairman of CII Tamil Nadu State Council and President-India Region, Danfoss Industries (P) Ltd, Narasimhan said they ranked No.5 in terms of gaining from the âChina-plus-oneâ strategy. (âChina-plus-oneâ refers to a supply chain strategy that encourages companies to minimise their supply chain dependency on China by diversifying the countries from which they source parts.)
Narasimhan was at the Confederation of Indian Industryâs Tamil Nadu chapterâs âAnnual Meeting 2023-24â, themed âTamil Nadu â The State of the Futureâ; his role was to give the gathering of the industry an overview of the global geopolitical situation.Â
He said India would need to spruce up its local manufacturing capabilities to seize the âChina-plus-oneâ opportunity. Equally, India would have to attend to land, power and infrastructure to compete with the countries already ahead, he said.Â
Chinese economy overview
Giving an overview of the Chinese economy, Narasimhan said that it had been known for about ten years that the Chinese economy would slowdown and the country would not be able to maintain the double-digit growth rate it had in recent decades. âCovid only accelerated it,â he said, noting that a big problem with the Chinese economy today is low domestic consumption.Â
Although India and China have similar levels of population, Indiaâs domestic consumption is far higher than Chinaâs, Narasimhan said, adding that although the Chinese government was trying hard to ramp-up domestic consumption, it was failing.Â
Asked whyt, he said that because of the pandemic, the Chinese people had begun to save rather than consume. The propensity to save has been reinforced by the real estate crisis in China, in which many people lost their money, making them prefer to save rather than consume.Â
Also, China had a huge problem of unemployment, which was touching 20 per cent, he said.Â
Emerging trends
Asked what the industry should do to respond to the emerging global geopolitical situation, Narasimhan said that businesses should learn to anticipate trends early enough. In this context, he said that the ânext flashpoint could be the South China Seaâ where the Chinese had put floating barriers (at the Scarborough shoal), to disallow Philippine ships from traversing. Â
Alongside early recognition of such emerging trends, the industry should adopt a strategy of âjust-in-caseâ, as much as the popular âjust-in-timeâ approach (which refers to getting raw materials and components just in time to avoid locking up value in inventory.)Â
Mini-lateralism
Answering another question, Narasimhan said that the world was getting more âmini-lateralâ than âmulti-lateralâ, with small groupings of countries â such as the I2U2 (India, Israel, UAE, USA). He said it was good that India did not join the Regional Comprehensive Economic Partnership (RCEP), a China-led grouping, that âdidnât help usâ. âMini-lateralismâ emerged because of the realisation that âtoo many countries is too difficult to handle.â Â
He also observed that many countries wanted an alternative to the existing systems, such as the United Nations and the Bretton Woods institutions, the World Bank and the IMFâas evidenced by the fact that some 30 countries have applied to join the BRICS block.Â
When asked how the armed forces of India and China matched, in case of a conflict, he said, âWe can handle it, donât worry.âÂ
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