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India offers alternative as China becomes less investible for foreign cash: Gavekal Research

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In October, the International Monetary Fund (IMF) said China, the world’s second biggest economy, is expected to grow at 3.2 per cent this year and 4.4 per cent in 2023. That compares with GDP growth of 8.1 per cent in 2021.

The IMF forecasts India growing at 6.8 per cent in 2022 and 6.1 per cent next year.

China’s economy has been hit by zero Covid policies designed to restrict the spread of the coronavirus pandemic that have led to lockdowns of major cities, such as Shanghai, and made it more difficult for overseas investors and business owners to travel to the country.

A health worker takes a swab sample from a girl to be tested for Covid-19 coronavirus at a collection station in Beijing on Wednesday. Photo: AFP

A health worker takes a swab sample from a girl to be tested for Covid-19 coronavirus at a collection station in Beijing on Wednesday. Photo: AFP

Other economies, such as India, have widely reopened to foreign travel and investment as they rely on vaccinations to control infections and a policy of living with the virus.

In particular, India has an opportunity to become more of a global manufacturing base as foreign direct investment and supply chains have shifted out of China, Miller said.

Workers make glass bangles at a home workshop in the Indian industrial town of Firozabad in October. Photo: AFP

Workers make glass bangles at a home workshop in the Indian industrial town of Firozabad in October. Photo: AFP

However, India continues to have a number of structural issues that constrain its manufacturing growth, from difficulty in obtaining land for factories to policies that have encouraged smaller, domestically focused factories and made it harder to expand their workforces, according to Gavekal.

“I don’t think India has got its act together in terms of an overarching policy framework to try to attract FDI and try to increase its export market share globally,” said Udith Sikand, senior emerging markets analyst at Gavekal. “This is a problem that has bedevilled India for the last 75 years. It’s not unique to the last 7 or 8 years.”

“They’ve done a lot to improve things on that end, but policy is still fairly schizophrenic,” he said. “On the one hand, you want to invite companies to come meet in India. On the other hand, you’re often trying to fight off foreign investors to try and protect industries within India itself.”

The news is published by EMEA Tribune & SCMP210520-twitter-verified-cs-70cdee.jpg (1500×750)

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