Prime Minister pitched India as an investment destination at the U.S.-India Strategic Partnership Forum.
What is the pitch?
India is being pitched as an investment destination that could serve as a manufacturing hub at the heart of global supply chains.
The pitch comes in the backdrop of the government’s keenness to use the disruptions that the pandemic has caused to the cross-border movement of goods.
India wants to use this opportunity to lure potential investors to India, especially those looking to relocate from China.
This tack is consistent with recent initiatives to explore supply-chain synergies with other economies, including Japan.
What is the significance?
Even if a few multinational enterprises can be drawn to set up manufacturing bases in India, the Indian economy will stand to gain FDI, new jobs and tax revenue.
Officials must have advised Mr. Modi that U.S. businesses were the ideal target given the ongoing trade stand-off between US-China.
On the face of it, the approach seems inarguably sound.
What are the friction factors?
The rub lies in the government’s recent ‘Aatmanirbhar Bharat’ initiative, of making India more self-reliant.
Over the decades, the global FDI investors prioritised policy stability and largely barrier-free access to local and international markets.
The drive for self-reliance has spurred Ministries to urge companies and industry sectors to replace imports with ‘Made in India’ substitutes.
The thrust of the initiative is evidently ‘import substitution’.
It is hard to imagine any potential foreign investor in manufacturing being ready to source capital goods locally.
However, Mr. Modi stressed that the push for self-reliance shouldn’t be interpreted as India turning its back on the world.
India’s decision to not join the RCEP trade pact would put investors who seek to tap RCEP member countries’ consumers at a tariff disadvantage.
