India’s Missed Opportunities: Arvind Panagariya on the Challenges in the China-Plus-One Strategy
India has failed to fully capitalize on the China-plus-one strategy due to significant internal policy hurdles, as explained by Arvind Panagariya, Chairman of the 16th Finance Commission. While the country boasts a large domestic market and skilled labor, it remains uncompetitive compared to Southeast Asian nations like Vietnam and Thailand. Panagariya argues that labor laws and land acquisition policies are key areas requiring reform to attract foreign investment and boost manufacturing output.
Internal Policy Barriers: The Roadblocks to Growth
According to Panagariya, India has missed a golden opportunity to attract multinational corporations that are looking to diversify their supply chains away from China. Countries such as Vietnam, Malaysia, and Thailand have made significant strides in attracting global investments due to their lower labor costs, streamlined tax structures, and proactive trade agreements. India, however, still struggles with outdated labor laws and complex land acquisition processes, which make it harder for businesses to operate efficiently.
Panagariya suggests that India needs to overhaul its labor laws, which are often considered inflexible, and simplify land acquisition procedures to make it more attractive for foreign firms to set up manufacturing units. He believes that these reforms could make India a prime destination for multinational companies seeking to establish production outside of China.
India’s Advantages: Size and Market Access
Despite these challenges, Panagariya emphasized that India holds significant advantages over Southeast Asian countries. India’s massive population and growing middle class offer a large consumer base for businesses. Additionally, India’s skilled labor force in sectors like engineering and technology makes it an appealing location for companies looking for highly trained workers to scale up production.
Policy Reforms Essential for FDI Growth
Panagariya strongly advocates for comprehensive reforms in India’s labor, land, and regulatory frameworks. These reforms are necessary to create a favorable business environment that will attract foreign investments and facilitate the country’s growth as a global manufacturing hub. By improving India’s ease of doing business, the government can encourage multinational corporations to set up shop and take advantage of the country’s vast market.
India’s Path to Becoming a Manufacturing Hub
To unlock its potential under the China-plus-one strategy, India must address its internal policy challenges. Panagariya’s recommendations on labor law and land acquisition reforms are critical for improving India’s attractiveness to foreign investors and ensuring its place as a global manufacturing leader.