China Has A Solution To One Of Modi's Problems
Panos Mourdoukoutas , CONTRIBUTOR
Narendra Modi has a serious problem: his economic policies don’t create enough jobs to employ the country’s growing young labor force. And he needs to find a solution to the problem quickly, before the 2019 elections. Otherwise he will be history.
But like all of India’s problems, China claims to have solutions to its neighbor’s employment problem: Turn India into its backyard factory for labor intensive products.
That’s according to a recent Global Times editorial, which advises Modi to work together with China to develop labor intensive industries. “It would be best for Sino-Indian cooperation, for the time being, to be focused on labor-intensive and export-oriented industries, which could tap into India's abundant labor resources,” writes Mao Keji, researcher with the Pangoal Institution. “Considering both countries' comparative advantages, such cooperation may well relieve India's current trade deficit, and other issues such as overreliance on foreign capital and insufficient employment opportunities, while providing China with more avenues for growth. Industrialization is vital for India to become a global economic powerhouse, and China can benefit by playing an active role in this. Fortunately, both India and China now seem readier than ever to deepen bilateral cooperation in this aspect.”
What sort of cooperation? Some kind of “created in China, manufactured in India” relationship.
That’s the kind of cooperation that China desperately needs for a number of reasons. One of them is that rising internal labor costs has eroded its competitive advantage vis-à-vis countries like India and Vietnam.
Then there’s China’s need for new markets for products that face U.S. tariffs. And additionally, the need to get rid of its polluting industries, which have made life miserable for its citizens.
Does India need this cooperation?
There are advantages to having China manufacturing labor intensive products in India. Like the creation of job opportunities for India’s low skilled labor force, something Modi needs as he faces elections next year.
But there are disadvantages, too. The arrangement could raise China’s influence in India, nurture some kind of neo-imperialist relationship; and the move could compound the pollution problem in already polluted Indian cities.
That’s why India’s policy makers should take China’s advice with skepticism.
Meanwhile, there’s a better advice for Prime Minister Modi: spend less time abroad and more time at home. Because the gap between the country’s rich keep on growing bigger and bigger as he travels from Switzerland to China -- and Indians think they are worse off than they were three years ago.
That’s according to a Gallup survey, which finds a big decline in the percentage of Indians who rate their lives positively enough to rate it as "thriving" since Modi assumed office.
The survey findings provide a different picture from that which one gets when looking at India’s financial markets. In fact, they have been soaring, up close to 27.56% in the last two years.
Nonetheless, only 3% of Indians consider themselves thriving in 2017 compared to 14% in 2014 (see table 1 below).
Apparently, Modi’s policies that have helped the Indian economy grow have yet to touch the masses. Living Wage Family in India remains almost flat in the 17300-17400 INR/Month range over his tenure. Meanwhile, wages paid to low-skilled labor decreased to 10300 INR/Month in 2017 from 13300 INR/Month in 2014.
Source: Tradingeconomics.com and Gallup News.
Then there’s the persistence of corruption, the rise of nonperforming loans in state-owned banks, high taxation, poor public health, and chronic income inequality — something that Modi inherited from previous administrations (see The World Inequality Report 2018).
All these could explain the contrast between the high hopes of the Indian people for their economy and what they are personally experiencing.
As Prime Minister Narendra Modi heads into the 2019 elections, that should be a matter of great concern.
Factswelcome 13 hours ago
A question for Mr. Panos Mourdoukoutas ---China kick-started her economy by serving as a low cost labor market for the West. In exactly the same manner that you called "Some kind of “created in China, manufactured in India” relationship". The nations that China offered the cheap labor to were ones like America, Japan and EU nations. It also came with pollution.
Did YOU,Mr. Panos Mourdoukoutas, caution China about " neo-imperialist relationship" with the West? If not, why not?
Has China, in YOUR view, turned into a neo colonial state of the West? If not, why should India be different? What is BEHIND your warning?
您是否担心中国和西方形成某种“新帝国主义关系”? 如果不担心, 原因何在? 在你看来，中国已经变成了一个新殖皿煮义的西方国家吗?如果不是，为什么印度要担心?在你的警示背后隐藏了什么?
Paul 14 hours ago
Moving low-skilled manufacturing jobs to India is a good idea, provided that China can raise the skill levels of the workers displaced in their current jobs. The U.S. hasn't been able to. The U.S. has an added problem: It's not willing to sell its high end high-tech products to countries like China, contributing to its trade deficit. China would be less likely in doing so.