For more than a year the globe has been affected by the pandemic. Geopolitical relationships have changed. Many countries have had to rethink their value chains and over dependence on China. Countries have augmented their supply chains and moved their manufacturing bases from China for both political and economic reasons. India has done the same, mostly driven by the border escalations that occurred a year ago, but also because of the realisation that India was much too dependent on China for imports and investments.

The definition of national security is changing. With methods of warfare changing, national security can no longer only encompass internal and external security, but must also include economic security. It is far easier to launch economic warfare than conventional warfare.

 Economic security consists of various components, but in its broadest sense, it is strategizing India’s economic ties with her allies and her more difficult neighbours. For decades India has always viewed China as a favourable economic ally. One cannot ignore the fact that China is an economic power and together with India, this Asian bloc was touted to be the power bloc of the coming decades. Then Galwan happened.

In the past year, there has been a clear shift in thinking with regard to investments from China. New policies have come in as a way to track Chinese investments in India. E-commerce companies asked to provide source of procurement for their products and changes to the FDI policy indicating that all investments coming in from countries’ with whom India shares a border shall no longer be under automatic route, are but two examples. Chinese companies have been left out of the 5G auction and national ministers have also been known openly to state that they will no longer entertain Chinese bids in government projects.

While these are all commendable, it is necessary for India to move beyond the rhetoric. When the trade wars began and companies were exiting China, India failed to attract them. Today, India has another opportunity and it is paramount to not miss it. Small calibrated steps would go a longer way than grand gestures.

Take for instance India’s own electronics manufacturing capabilities. Despite being one of the largest consumer markets, India’s share of global electronic manufacturing is a mere 3.6 per cent as of 2019, even though domestic manufacturing itself has grown at a CAGR of 23 per cent over the last five years. In the electronic manufacturing sector, it is astounding to think that India has no display manufacturing units. All domestic requirements are being met only through imports, and mostly from China.

India’s display market is not a small market. On the back of a growing smart phone and television market, the sector currently stands at a value of $5.4 billion in 2020, according to an ICEA report. The cumulative demand over the next five years is expected to increase to $60 billion. Not only is there a huge opportunity for lowering India’s import bill by developing domestic capability, this sector also presents ample opportunity for exports.

Displays are the most expensive parts of phones and televisions and account for anywhere between 25 per cent and 50 per cent of the input cost. This is mostly because displays are imported. Building domestic manufacturing capability will lower cost of production and thereby drive demand further. The potential is enormous.

MEITY has already recognised this opportunity and had issued an expression of interest in March 2021 inviting proposals from companies to set up display fabricating units in India. This is a good first step, but hardly adequate. For India to quickly ramp up manufacturing capability, the government will have to do a lot more.

Access to cheap credit will be of foremost importance. Some kind of viability gap funding may be considered to help the industry to set up new manufacturing units. Incentives must be provided in terms of tax holidays to allow for the units to scale up. India must aspire to provide for an effective single window clearance system for all approvals that should be provided in a time bound manner. Ease of doing business cannot just exist in paper, but also in practice.

India has for long tried to increase manufacturing output and has had difficulty to meeting the targets. This sector will provide the necessary impetus. Even though India does not have first mover advantage, the demand in India alone offers the opportunity for large scale production, often a common problem. If India wants to indeed lower dependence on China or for that matter any one country, this is a good place to begin. If yet again, we do not act fast, then we would have missed another golden opportunity yet again, and that indeed would be pity.

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Views expressed above are the author's own.

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