Home » Mutual benefits

Mutual benefits

China´s interest in supporting development of the infrastructure sector in India will lead to a win-win situation for both the economies, says Prabodh Thakker, President, Indian Merchant´s Chamber. Excerpts:

China is keen to finance India´s infra development plan. What do you think this proposed association between the two nations could mean for the Infrastructure sector?
The Chinese are particularly keen to invest in the railway sector, especially electrification, high-speed trains, wagons, last-mile connectivity and gauge conversion. They have also identified sewage treatment and tunnel building as areas where they can offer substantial expertise. All this bodes well for economic cooperation between the two nations as India is currently planning a bullet train on the Mumbai-Ahmedabad route and many high speed trains all over the country. Until our transportation sector gets a major infrastructural boost, all talk of heading towards a double digit economic growth rate will ring hollow. Positive externalities of transport networks include the ability to provide emergency services, increases in the value of land and enhancing connectivity in far flung parts of the country to bring about genuinely inclusive and sustainable growth. Apart from transportation infrastructure, China is also keen to set up industrial parks in India in sectors such as agro-processing and manufacturing. Not only will this give a boost to our agricultural and manufacturing sector, it will also enable China to tap further into the vast Indian market to sell their goods and services. It will lead to a win-win situation for the economies of both countries and open up a vast swathe of the local markets for further development.

What are the key drivers for both countries when it comes to the infrastructure sector?
India needs a big boost in its transportation infrastructure since that is the key to unifying the country in a physical sense. However, unbridled Chinese investment into the infrastructure sector could lead to a worsening of our trade balance. We need to proceed with it, but strategically, particularly in areas like SEZs, which have the potential to boost our exports in the long run. Furthermore, there are sensitive sectors in the economy like nuclear energy and defence, where we need to proceed carefully before allowing China (or any other country) access to investment in its infrastructural development. For both countries, urbanisation is a major driver of infrastructural development. Urbanisation is, creating huge demand for private and public sector infrastructure development such as power stations, electricity grids, water supply and treatment plants, roads, railways, airports, bridges, telecommunications networks, schools, hospitals, and more. All over the world, infrastructure development is being increasingly viewed as the vehicle for transforming low and middle income countries – the category into which both India and China fall – into emerging or developing nations. Rapid urbanisation in both India and China – and the development of smart cities, on which our government is focusing so much – will be the key drivers for both countries to engage in infrastructure development.

Which other sectors hold an opportunity for China to explore business opportunities in India?
India´s renewable energy sector holds great potential for Chinese investment. Solar and wind energy, in particular, could do with adequate infrastructural investment and technological knowhow. Our power sector is also not up to the mark and Chinese investment in its infrastructural development could help to close the gap in terms of gross generation and energy shortages. India is today an energy guzzler and with the demand for power growing exponentially, the time is ripe for China to explore these areas for infrastructural investment. A steady forecasted growth for our manufacturing sector – which is topmost on the government´s agenda – will necessitate access to more reliable and larger volumes of power generation in the future. Manufacturing has backward linkages into agriculture – which still forms the backbone of the rural economy, where the majority of our population resides – and thus, remains critically important in the overall development strategy of the nation.

Our pharmaceuticals sector also holds great promise for China. The registration of existing drugs in China takes 3 to 5 years compared to just 3 to 6 months in India. This sector, thus, holds a world of opportunity for China.

How will China´s support help the Indian infrastructure sector?
The geographical neighbourhood has produced many commonalities in culture which should be handy for India and China to work together. In this connection, China´s collaboration will help the Indian infrastructure sector in many ways and both will gain equally. The energy and transportation needs of a rapidly growing industrial sector and India´s massive population have put the existing infrastructure under intense stress. India is forced to import a big share of total energy consumption in order to meet the ever increasing demand. Moreover, the lack of adequate means of transport and power supplies is starting to choke further growth opportunities. Unless we can get our infrastructure act together, the economic future of our country looks bleak. China can play a vital role here given its cutting edge abilities in certain key areas. After all, amid a period of declining growth in global trade, China is facing economic challenges of its own. Supporting India´s economic development may help China to secure a sustainable future market for its manufacturing products. Given the different structure of the two economies, China seems confident that there is not much economic rivalry to fear. Moreover, the Chinese investment in India may complement their current activities in Africa and boost the entire Asian region.

– Garima Pant

Comments

Leave a Reply