Somehow China has always been a sort of benchmark for many in India.
I feel the China comparison is ingrained in our collective psyche. If FDI levels surge there, immediately comparison is drawn here that ours is paltry. If US president visit there we start discussing when was the last time that US prez visited here. When international sports event take place we start counting the medals tally – in comparison of course (though the numbers are always a case of comparison of Mountain and mole hill in sports.) In every social and economic index the comparison is inevitable. Often the better performances are explained away with “ oh, that is a communist state / in a democratic country like ours you can’t do this or you can do that or this…” Nonetheless, by many parameters China out did India and we were looking for an opportunity to out do them.
Now, it looks like, the moment has arrived. Here is a story, which says that MNCs prefer India to China to open shop.
The sum up of the key reasons are: Profit margins are higher in India than in China due to various factors; Indian companies honor contracts better than the Chinese ones, the legal system is clear and effective to make things easier for settling complex business issues; Banking system is in perfect order with NPA (non performing assets) much lower in over all banking scene; media is alive and kicking in a vibrant democracy to make course corrections; and above all Indian voters are intelligent to over throw an erring government once every five years.
Cool !! So, the MNCs are shifting base to India from China? I want to see more numbers to buy this story. However there was one aspect in this story, which I quite didn’t understand. The reason number one in the story says that MNCs are not able to produce for local market in China and book profit, because the local manufacturers – backed by the State – compete among themselves and sell at impractically low price. Now does that mean Indian consumers are paying more for the products from these MNCs assembly lines here?
I guess it is worth going deep into it and find out why should I pay more for my washing machine, if the quality is the same as it is made in China. Any explanations from readers? But that reminds me of another issue. That the MNCs need not worry about the “State Backing” of local manufacturers in China. That would amount to protectionist measures and since China also is a member now of WTO, perhaps the protectionist measures should go there too? Or am I being too naïve?
However, the story concludes that so long, India has been the proverbial tortoise to China’s hare when it came to economic growth. “Maybe, now the tortoise is all set to overtake the hare.” The story ends.
But looks like the correspondent hasn’t heard about the modern Hare – Tortoise story yet!!
After losing the race, the hare reflected on the reasons for its failure. It realized that it was over confident and has taken the success for granted. It decided to be more alert and invited Tortoise for another race. This time the hare was fast and quick as its nature and won. – Moral of the story “don’t take things for granted and be fast and quick.
Now Tortoise began to think. It invited Hare for another round and this time the Tortoise changed the route. Hare began fast but there was a river en-route. The hare stopped wondering how to cross over. The tortoise swam across and won. Moral – Make strategic planning to use your core competency.
By now both had become friends and decided to compete as a team. Hare carried the tortoise on its back for the first half of the race. When the river came, the tortoise carried the hare on its back and they won the race as a team. Moral- individually one may be brilliant. But when you work as a team against a common situation, you are able to utilize the advantages of each other and win as a team.
Now apply this story for a global international trade scene with China and India as Hare and Tortoise.