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China is weaponizing its investments in neighboring economies

China is weaponizing its investments in neighboring economies

<strong>When do you think the Indian and the global economy will start showing signs of recovery?</strong>

The world today is far more interconnected than ever before. Economies are closely intertwined because of trade. It may take as long as another year or two for economies to pick themselves up and gradually move upwards, and this is assuming no Wave 2 occurs. India's advantage is her population and the chance to take complete advantage of the size of the domestic market. India also has the potential to offer a space for companies moving out of China. For India, the immediate priority has been to contain the spread of the virus, but India must also use this time to create a more detailed recovery plan. Merely identifying priority sectors will not be enough.

<strong>Is there a need to relook trade strategies with China?</strong>

India's relationship with China has always been tumultuous. Border skirmishes and conflict along the India-China border have been a reality for many years. It is also no surprise that China has been weaponizing their investments in neighboring economies and Africa as a way of tactical advancement. In today's environment, crippling a country's economy is easier and far more deadly than any kind of conventional warfare.

Under these circumstances, India should ensure that she does not depend on Chinese imports for essential products. In fact, if this crisis has taught as anything, it is that an over dependence on one country is not advisable.

A total ban on imports from China is also not possible since trade is in favor of China. However, if Aatma Nirbhar Bharat is indeed a priority for the government, these are better enforced for strategic commodities. We must also keep in mind that Chinese goods don't always necessarily enter directly; they also come through other neighboring countries.

India must strategize not with the aim to best China in trade but to re-evaluate what products the two countries trade in and what would constitute as essential for India. Any excessive dependence on a single country in these times, especially on countries with whom India may not have the best relationship, is undesirable.

<strong>Which sectors will be the first to recover?</strong>

India will have to focus on those sectors that have, ironically, benefited from the pandemic. Three sectors stand out—e-commerce, pharma, and textiles.

Even as India copes with the crisis at hand, shopping patterns are likely to change in favor of e-commerce. E-commerce companies in India also have access to international markets, and this is something India should capitalize on. Linking permissible foreign direct investment (FDI) norms to exports rather than to local sourcing will provide a much needed impetus to exports. It will also provide micro small and medium enterprises (MSMEs) the necessary access to new markets.

India's own domestic demand for necessary drugs and masks will carry these sectors forward. India also has the capability to supply certain pandemic related essentials to other parts of the world.

<strong>How does India Inc reinvent in this new global order?</strong>

This is the time to put the improvements in the ease of doing business (EoDB) indicators to test. As businesses look to exit China, if India wants to ensure that at least some part of the business comes to India, it is important that businesses feel welcome. Even though India has shown remarkable improvement in the World Bank EoDB ranking in the last three years, they only represent Mumbai and Delhi. The government’s own rankings of states for EoDB are also under test.

For India to reinvent herself, it is important to approach EoDB differently. A sectoral approach to EoDB is necessary to ensure that for those businesses exiting China and looking to come in, doing business is made easy. This is also true for sectors that could propel India onto a path of recovery, especially e-commerce.

<strong>What are the positives that can be extracted from this crisis?</strong>

For India, this crisis has exposed the inherent lacunae in how industry has been treating the migrant laborers. The biggest positive that could come out of this crisis is if India acknowledges the gross inadequacies in how migrant laborers are treated, and set it right for the recovery journey. This crisis has also brought to the fore in a forceful manner industry's dependence on migrant labor.

As India debates and discusses changes to the labor code, it must take into account the needs and welfare of migrant laborers as well.

<strong>What factors—macroeconomic or otherwise—are boosting India at this point and which are the ones that need attention?</strong>

E-commerce has the potential to help the Indian economy to recover. The government must re-examine its approach to e-commerce. A good policy could boost exports and encourage Make in India. During the lockdown, new business models have also emerged and these must be allowed to grow and flourish.

A glaring omission in the government's plan for recovery has been the tourism sector, particularly the food and hospitality sector and this must be set right immediately. This sector has been one of the worst affected, and yet, the government is yet to offer any respite for the sector. Tourism in general and food and hospitality particularly have many interlinkages to other sectors. They are large contributors to employment and to taxes. This sector will also be one of the first sectors to attract income spend. A strong recovery plan for this sector will go a long way in helping the sector and those dependent on it indirectly as well..