Can India Overtake China and Become Asia’s Economic Engine?

A customer checks a gold necklace before buying it at a jewelry showroom on the occasion of Akshaya Tritiya, a major gold buying festival in Kolkata, India, on May 3, 2022. Rupak De Chowdhuri/Reuters

Commentary

U.S. President Joe Biden launched the Indo-Pacific Economic Framework for Prosperity (IPEF) on May 23. The pact, we’re told, “seeks to strengthen economic partnership among participating countries with the objective of enhancing resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness in the Indo-Pacific region.”

Participating countries include South Korea, Australia, Brunei, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, Thailand, Vietnam, and, perhaps most importantly, India—the world’s fastest-growing major economy.

Commenting shortly after the launch, U.S. Secretary of Commerce Gina Raimondo said: “As businesses are beginning to increasingly look for alternatives to China, the countries in the Indo-Pacific Framework will be more reliable partners for US businesses.”

She’s right.

Although many of the biggest businesses in the world are based in China, the tide appears to be turning, with more of these businesses looking to jump ship and establish roots elsewhere. Maybe, just maybe, India offers a sustainable, attractive, highly lucrative alternative to China. If so, then India, which is expected to overtake China as the world’s most populous country by 2027, could become Asia’s new economic and industrial powerhouse. For far too long, China—more specifically, the Chinese Communist Party (CCP)—has been the dominant voice of Asia.

According to a recent article in The Economist, China appears to be “losing its pragmatic approach to managing the economy.” The CCP’s ideologically rigid pursuits ignore, either consciously or otherwise, the “economic and geopolitical realities” of the modern world.

When it comes to conducting business in China, an increasing number of companies, especially U.S. companies, have realized that the risks far outweigh the rewards. To operate in China, a company must fully submit to the CCP, bending to its every wish and every demand. Compliance is key. It’s non-negotiable.

As the CCP continues to double down on its “zero-COVID” policy, essentially placing millions of people in major cities such as Beijing and Shanghai under house arrest, those who have the option of leaving the country are availing of it. These include major companies like Apple and Airbnb.

Airbnb CEO Brian Chesky speaks during an event in San Francisco, on Feb. 22, 2018. Airbnb announced on May 24, 2022, that it will stop representing short-term rental properties in China and focus its business in the country on serving Chinese tourists looking for lodgings abroad. Eric Risberg/AP Photo

Hours after the launch of the new international framework, San Francisco-based Airbnb announced that it would remove all Chinese listings from its popular platform over the next few months. The story, first reported by CNBC, came at the same time as Airbnb continues to invest more money in the Indian market.

According to its website, the company recently established a technology hub in Bengaluru, Asia’s answer to Silicon Valley. The hub was established “to create local, skilled jobs, with plans for the center to cater to a few hundred people in the initial phases, followed by an expanded footprint in the future.”

Another major U.S. company that has decided to cut ties with China is Apple. As Livemint reported, “according to sources familiar with the company’s manufacturing plans,” Apple executives see India as “the new China.”

With its large population and low production costs, India appears to be a highly attractive, considerably less hostile alternative.

According to the piece, Apple recently instructed a number of its contract manufacturers to focus on increasing production outside of the communist nation, “citing Beijing’s strong anti-coronavirus stance among other factors.” This is a significant story for many reasons. More than 90 percent of Apple products—including the iPhone, iPad, MacBook computers, and, until very recently, the iPod (R.I.P.)—are manufactured in China.

People wearing masks are pictured at an Apple Store on the day the new Apple iPhone 13 series goes on sale in Beijing, on Sept. 24, 2021. Carlos Garcia Rawlins/Reuters

Apple, it seems, wants to cut ties with China completely. Better late than never, some might say—and rightly so. The CCP is a direct threat to the United States and its many allies; it’s in the interests of all Western companies, especially U.S. companies, to look elsewhere for a place to call home.

Although India appears to be a country more than willing to offer such companies a home, the Indian market is “a tough nut to crack,” as Business Standard’s Bhaswar Kumar recently warned. Operating in China is, for lack of a better word, difficult; penetrating the fiercely competitive Indian market requires serious work.

In 2020, as Kumar noted, Walmart Inc., the American multinational retail corporation, fired 56 of its executives based in India. The move “underscored the challenges Walmart was facing in expanding its wholesale business in India.”

Six years prior to Walmart’s decision, Carrefour, the eighth-largest retail chain in the world by revenue, completely exited the Indian market. It simply couldn’t compete in such a crowded, unforgiving environment. Although Carrefour is both a popular and profitable company, it’s not Airbnb, and it’s certainly not Apple. Carrefour offers groceries. Airbnb and Apple, on the other hand, offer genuine experiences, lifestyle choices, and unrivaled brand recognition.

At the time of writing this piece, I was based in New Delhi for a few days. Poverty is a major problem here. The gap between the haves and have-nots is simply profound. Nevertheless, India is home to a growing middle class, the type of people with considerable amounts of disposable income to spend on expensive accessories and weekend experiences.

India may be “a tough nut to crack,” but the companies that manage to crack this particular nut will make money, lots of money. More importantly, they’ll no longer have to acquiesce to the CCP.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.