The Hindu Editorial Analysis- 15th February 2025 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Dealing with China’s Weaponization of e-supply chains

Why in News?

In mid-January 2024, China imposed travel restrictions on its engineers and technicians working in Indian manufacturing facilities. This move involved recalling Chinese workers already in India and halting exports of specialized manufacturing equipment to India.

These restrictions have had a significant impact on production, as China holds a monopoly on certain high-tech manufacturing equipment crucial for various industries. In an attempt to mitigate the labor shortage, Taiwanese workers have been brought in to fill the gap left by the Chinese. However, the absence of specialized equipment remains a major hurdle for production processes in India.

Geopolitical Competition and China’s Strategy

• China is leveraging economic tools to hinder India’s manufacturing growth.
• By restricting the transfer of technical knowledge from Chinese workers to Indian workers, China aims to preserve its competitive edge.
• The limitations on specialized machinery disrupt production processes, making it increasingly difficult for India to position itself as a global manufacturing hub.
• China’s strategic actions ensure that global companies remain reliant on its supply chains, maintaining its dominance in high-tech manufacturing.

India’s Role in the China Plus One Strategy

• Global companies are actively seeking to reduce their dependence on China by diversifying their production bases to other countries, including India, Vietnam, and Mexico.
• India has emerged as a key destination for this shift, with its manufacturing sector evolving in a manner reminiscent of China’s past development trajectory.
• However, China aims to curtail India’s ascent as a competitor in the global manufacturing landscape.
• By imposing restrictions, China seeks to remind global companies of its indispensable role in the production ecosystem while limiting India’s rise as an alternative manufacturing hub.

India’s Efforts to Attract Manufacturing Investments

• The Indian government has been proactive in supporting the expansion of major smartphone manufacturers in South India as part of its strategy to boost manufacturing investments.
• In 2023, Indian factories successfully assembled advanced smartphone models, showcasing the country’s growing capabilities in high-end electronics manufacturing.
• During the fiscal year ending March 2024, India achieved a significant milestone by assembling smartphones worth $14 billion, reflecting the robust growth of its electronics sector.
• Notably, in 2024, India marked the first-time assembly of a high-end smartphone model, further establishing its position in the global electronics market.
• State governments in South India have also prioritized attracting investments in smartphone manufacturing, aligning with the broader national objective of enhancing domestic production capabilities.

‘Make in India’ and Government Support

• Large-scale electronics manufacturing is a crucial aspect of the ‘Make in India’ initiative, aimed at boosting domestic production and attracting foreign investments.
• The Production-Linked Incentive (PLI) scheme, which encourages manufacturers to produce goods in India, has been increased to ₹8,885 crore ($1.02 billion) in the Union Budget 2025. This is a significant rise from ₹6,125 crore ($0.70 billion) in the previous year, reflecting the government’s commitment to promoting manufacturing.
• In the Union Budget 2025, import taxes on essential mobile components such as printed circuit boards, camera modules, connectors, and lithium-ion battery manufacturing machinery were removed. This move aims to facilitate the growth of the electronics manufacturing sector by reducing the cost of key inputs.

India-China Relations and Economic Dependency

• India and China reached an agreement on military patrolling rules in October 2024, marking a step towards easing tensions that had persisted for four years in the eastern Ladakh region. This diplomatic progress indicates a thaw in the strained relations between the two countries.
• However, despite the improvement in diplomatic relations, China’s economic actions reveal that geopolitical competition will continue to be a significant aspect of India-China relations. India’s Economic Dependency on China
• India remains dependent on China for various manufacturing components and machinery, which continues to influence economic negotiations between the two countries. This dependency highlights the intricate economic ties that exist despite geopolitical tensions.

India’s Long-Term Strategy

• In the short term, India should focus on collaborating with global companies to negotiate with China regarding the supply of manufacturing components and machinery.
• In the long term, India must prioritize the development of its own supply chains and technical expertise to reduce dependence on foreign suppliers, particularly China.
• Currently, India is primarily involved in the final assembly of smartphones, which is just one part of the manufacturing process. To become a full-scale manufacturing hub, it is essential for local industries to expand and diversify their capabilities beyond assembly.
• The National Manufacturing Mission is a positive step towards enhancing India’s manufacturing capabilities, but it requires substantial financial support to establish and develop industrial clusters across the country.
• Skill development programs and on-site training initiatives should be tailored to focus on industry-specific specializations to build a skilled workforce capable of meeting the demands of various manufacturing sectors.
• Encouraging private investment in manufacturing will be crucial to creating a robust network of Indian contract manufacturers, catering to both foreign and domestic brands. This will help build a self-sustaining manufacturing ecosystem within the country.

PYQ: 

‘China is using its economic relations and positive trade surplus as tools to develop potential military power status in Asia’, In the light of this statement, discuss its impact on India as her neighbour. (150 words/10m) (UPSC CSE (M) GS-2 2017)