India's true mfg rival is Vietnam, not China

If India wants to build a robust computer and electronics manufacturing industry, it needs to shift focus, fast. Instead of concentrating on the domestic market, it should become regionally competitive and export-driven. That means recognising that Vietnam, not China, is its biggest rival.

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The latest reminder of this urgency came last week with a US appeal for New Delhi to make the business environment easier and more transparent to navigate, or keep losing out on foreign direct investment. Cutting import duties ought to be high on the list, US Ambassador to India Eric Garcetti told the Indo-American Chamber of Commerce on Jan 30.

If you tax inputs, you are taxing your outputs, Garcetti noted. “You are not taxing us, you are not protecting the market. What you are doing is limiting a market.”

A day later, the Indian government reduced tariffs on a range of imported components including battery covers, lenses, antennae and mechanical parts to 10 percent from 15 percent. The timing might look like New Delhi was following orders, but it’s more likely a coincidence and even possible that Washington knew it was coming.

The US constantly pushes foreign leaders to open up their markets and to make life easier for international companies. It’s not alone. In July, Japanese Foreign Minister Yoshimasa Hayashi “requested cooperation to improve the investment environment” during a visit to India that included a meeting with Prime Minister Narendra Modi.