The Economic Survey 2023-24, presented by Finance Minister Nirmala Sitharaman, highlights the complex and intertwined nature of India-China economic relations, cautioning against the assumption that India can easily take over manufacturing spaces vacated by China. Despite India's emergence as a fast-growing major economy, the Survey stresses the "China Conundrum," questioning whether China is even vacating light manufacturing sectors, as recent data does not support this notion.
The Survey points out that China's dominance in global supply chains remains a significant global concern, particularly in light of supply disruptions caused by the Ukraine conflict. While India has grown faster than China in recent years, India's economy is still only a fraction of China's. This disparity poses challenges, especially in the context of the energy transition where China's near-monopoly over critical and rare earth minerals production and processing is already a cause for global worry.
As India aspires to become a manufacturing powerhouse, its strategy's success is closely linked to the growth of the Chinese economy. The Survey raises a crucial question: Can India integrate into the global supply chain without first integrating into the Chinese supply chain? India's ambition to accelerate its green energy goals is hindered by China's access to essential raw materials and monopolistic practices.
The Economic Survey notes that China's dominance in numerous product categories poses a risk of economic coercion, where the Chinese government could restrict access to crucial inputs for political leverage. Furthermore, China's monopolistic practices have significantly limited the potential for new entrants to emerge as competitive manufacturing powers. Research by the Rhodium Group suggests that the Chinese government, under Xi Jinping, can encourage companies to partner, merge, coordinate to gain market shares, raise prices, restrict product access, or favor domestic firms within their networks, further consolidating China's market power.
Overall, the Economic Survey underscores the challenges and complexities India faces in its bid to become a major manufacturing hub, particularly in the shadow of China's entrenched global supply chain dominance.
