THE GIST of Editorial for UPSC Exams : 31 August 2020 Despite the messaging, it is still advantage China(The Hindu)

Despite the messaging, it is still advantage China(The Hindu)

Mains Paper 2: Governance
Prelims level: World Trade Organization
Mains level: Government policies and interventions for development in various sectors and issues arising out of their design and implementation

Context:

Many U.S. companies as well as the analysts who advise them are cognizantof India’s goal of becoming an alternative supply source and investment destination to China.

Will remain likely:

First, despite media reports and strong messaging from Washington, fewer U.S. companies than predicted might quit the People’s Republic of China.
Companies focused on the Chinese domestic market rather than as a base for exports will likely remain, at least for now.
Those that do leave may not choose India as a relocation destination.
Despite India’s noted success in attracting Apple suppliers to India, many U.S. companies with experience working with China are not convinced that India has the PRC’s established industrial base and expertise.
They also see other Asian countries as more competitive.
To change their minds, these scepticsmust be convinced that India offers the benefits of China with fewer risks.

The good and bad points:

To be sure, India’s identity as a democratic “un-China” is one of its strongest selling points. There are no Indian government hackers stealing foreign companies’ industrial secrets.
India’s open and vibrant press, independent judiciary, and other advantages of democratic governance also provide a favourable contrast to China.
Yet, India might appear more like China to potential foreign investors than New Delhi might think, particularly given policies that seemingly disadvantage foreign investors who pose the greatest competitive threat to India’s domestic counterparts.
To be clear, India’s goal of creating national champions is not necessarily anti-competitive in itself.
But when policies such as taxes on foreign e-commerce companies and education providers seem constructed to disadvantage foreign investors, investors will stay away.
India’s large and increasingly well-off domestic market, while alluring, will likely not convince foreign companies to accept limits and conditions they might not accept elsewhere.
Although early foreign investors in China endured years of losses caused by disadvantageous PRC policies, today’s shareholders demand more accountability and faster profit-making from companies in which they are invested.
There are also now many more competitor investment destinations, both within and outside of Asia.

Why China scores?

China continues to offer investors many advantages, such as a manufacturing infrastructure and skill level that allows innovations to move quickly from prototype to product.
This took decades of strategic planning.
India’s own planning has been impressively stepped up in recent months, with the government identifying key sectors; surveying major companies about perceived roadblocks to Indian investments; and increasing Invest India’s outreach.
But more is needed. For example, China’s specialised industrial zones are massive, collocating companies, factories, logistics, and even research and universities.
The Indian government Budget that pledged to create equivalent zones is too small and is allocated among too many locations to compete.

Focus on states:

The recent World Trade Organization (WTO) dispute panel ruling against India’s special economic zones policies, which the Indian government intends to appeal, might actually provide a chance to take a fresh look at the kinds of WTO-consistent industrial bases that are possible.
New Delhi can start by focusing development in those Indian States that have already demonstrated the ability to produce and export in key sectors.
Foreign capital could also greatly increase infrastructure funds beyond government spending alone.
India might also usefully build up new industrial centres with an eye to geography, for example linking the southeast of the country to supply chains in Southeast Asia.
In fact, by putting resources into States not led by the ruling national party, India will signal clearly that it is committed to economic openness, no matter who is in power, reassuring investors.

Conclusion:

India has taken a great step to reduce the number of investments needing approval by the Centre, and to increase intra-Ministry coordination on foreign direct investment policies.
The same coordination could usefully be extended to the appointment of a high-level official or body in the Prime Minister’s Office to ensure any and all proposed economic policy changes are consistent with the goal of attracting foreign investment.
A policy framework that is transparent, predictable, and provides increased consultations with existing and potential foreign company stakeholders before introducing new Indian economic policies, will play a crucial role in determining India’s foreign investment outlook.
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Prelims Questions:

Q.1) With reference to the circles of Archaeological Survey of India, consider the following statements:

1. There are 29 ASI circles across the country.
2. In Archaeology, the Hampi city in Karnataka is a place of international repute hence Hampi Mini Circle has been converted into a full-fledged circle.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: B