|Demand of the question |
Introduction. Contextual Introduction.
Body. Impact of China-US rivalry on India. How India should approach the two countries.
Conclusion. Way forward.
World order is posed to change with emerging economies like China and India. The rivalry between the global power United States and rising China is increasing and is likely to deepen. It has intensified in past two years covering trade, technology, naval activities in the South China Sea, and diplomacy. This has enormous strategic implications for all including India.
How US-China rivalry will impact India?
- Relocation of Companies:US tariffs are likely to induce foreign-invested companies to relocate from China. Vast majority of China’s exports are still accounted for by foreign-invested companies. This may lead to companies moving to India. Recent Make in India initiative will boost this.
- Reduced Capital flows: Due to China US rivalry, economies will go for Protectionist measures that will impact overall capital flows.
- Opportunity for India: US-China rivalry offer an opportunity for India. India can become more competitive in segments such as textile, garments and gems and jewellery since India already has an edge.
- Weakening of rupee:The rupee will be weaken more due to decreased capital flows. This will make imports costly but would help Indian exports which will become cheaper.
- Economic growth: Current global economic order will be dismantled. Thus could impact India’s exports and imports impacting its economic growth.
- Inflation: This would reduce supply of finished goods and raw material which will increase the general price for the consumer. This would lead to inflation. Moreover, the burden of increased tax from the duties will also be borne by the final user.
- Indian stock markets: Indian share market will go down as seen recently through drop in stock markets, due to the cautious approach of the investors. Also flow of foreign investment may be reduced.
How India should approach US and China?
Under present uncertain circumstances, there is a need for different plans suitable to different economic environments.
- India should develop a balanced foreign policy outlook for both the nations focussing on its economic growth and development.
- India should push US on visa reforms and on increasing foreign investment in India.
- Strategic defence deals at lower price should be pushed using India’s increased strategic significance in the region.
- India should exploit this opportunity to emerge as new manufacturing hub by pushing US companies through better and easy regulations supported by labour reforms.
- India should focus on the US market for items in the categories of machinery, electrical equipment, vehicles and transport parts, chemicals, plastics and rubber products. The supply chains in China for all these products are likely to shift to other economies.
- India should correct its negative balance of trade with China through increased exports of pharmaceuticals and agricultural products to China, as the situation presents right time for India to further its cause.
- India can focus on numerous goods for expanding its exports to the US and China markets following the hike in duties by both countries on imports from each other.
- Foreign direct investments from the US and China should be encouraged by boosting confidence of firms in India’s business climate. In the domestic industry, it is important for India to enhance productivity while adding technology to its domestic production in the identified products.
India is a major emerging power in the world. With present US-China rivalry it should not miss an opportunity to further its Make in India initiative and emerge as an export hub. What is needed is proper policy push and reforms in indian market.