New Delhi, Jun 24: Decoupling from China is the need of the hour, but there remains the larger challenge to insulate India’s economy from China without incurring prohibitive costs.
This was observed here by Economic experts on Wednesday, a day after India, China agreed on “gradual, verifiable disengagement” in eastern Ladakh.
” In a world of globalised supply chains, it’s difficult to disentangle India’s economy from that of China at short notice, but there are two ways the Government can carry forward the exercise to strategically decouple India from China,” the experts maintained.
They said, both involve extensive government intervention, but for them to work, it needs smart approaches rather than ‘blunt tools’ such as across- the -board tariff increases.
“In the short term, Government needs to identify some labour intensive segments where finished products have been affected by Chinese imports. In these carefully selected areas, tariffs can be used as a tool to encourage production in India,” the experts said.
The longer term problem, they said, lies in China’s stranglehold over strategic industries which supply inputs to Indian firms.
They pointed out that active pharmaceutical ingredients, the building block of medicines, are largely sourced from China.
“This is a strategic area where the Government needs to take measures to help Indian industry make them at competitive rates. This can happen through industrial policy, that is, a deliberate attempt to encourage production in earmarked segments,” the experts remarked.
To avoid the mistakes of India’s import substitution era, they said, industrial policy can aim to lower the cost of production in areas with a strong export potential.
The experts said, the need to compete in a global market can neutralise the ‘perverse’ incentives of the import substitution approach.
“Industrial policy can take the form of parcels of land banks which can be leased and creation of common infrastructure that in their entirety reduce costs for industry,” they pointed out.
Saying that many of these measures have been tried before, the experts were of the view -” But, now they need another push after carefully thinking through what we want to achieve.”
They also commented-” The results may not show up immediately, but, Governments need to persevere if India is to be globally competitive in strategic areas.”
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