Upset over the strong foreign investment flows into Indias tech sector, the Chinese media is now attacking the slow pace of growth of manufacturing.
It noted the fact that foreign investment flowing into India’s tech industry at an accelerated pace has been seen as grounds for optimism, which some have even touted as a sign of the booming Indian knowledge economy.
It said Indian tech startups raised a record $7.2 billion in the quarter ended June, according to a recent Financial Times report citing data from Tracxn.
Also, the World Investment Report 2021 by the UN Conference on Trade and Development showed that in June, India became the fifth largest recipient of foreign direct investment inflows by receiving $64 billion in 2020.
“However, India’s industrialisation has been progressing slowly, which is not something foreign investment can change. In fact, most of the foreign investment has gone into India’s high-tech industry such as the information and communication technology sector,” China’s mouthpiece Global Times reported.
While the Indian government rolled out some ambitious stimulus policies to lure investment in the domestic manufacturing sector during the Covid-19 pandemic, the impact is not as big as expected, it added.
While noting the strong FDI inflows, the Chinese mouthpiece attacked India’s manufacturing capability.
“Such result is actually not surprising, given India’s weak manufacturing foundation, which has been exposed during the pandemic. And the reason behind this is that the Indian government used to pin its industrialisation hope on the development of the IT sector, which it believes is a shortcut to overtake China on the curve,” the Global Times said.
It added that, however, it turns out that there is no shortcut after all. India needs much more than favourable investment policies to develop its manufacturing. It needs to lay a better foundation for industrialisation, it said.
Without the support of a mature supply chain, smooth logistics and skilled workers, it is impossible for foreign investment to drive the overall manufacturing growth, it added.
“And without the full development of the manufacturing industry, India will always only be a potential large market,” the Global Times said.
“Yet, it would only be a wishful thinking if someone really believes foreign investment could help lift the Indian economy out of its current situation,” it added.
With many still worrying about the potential impact of a possible third wave of the pandemic on the economy, it should be noted that a sustained economic recovery will not only hinge on whether the Narendra Modi government is better prepared for a third wave, but also whether it could push forward with industrialisation in the right direction, it said.
For a long time, economists generally believe that for a populous country like India, the government can alleviate unemployment pressure and promote the overall development of society only through industrialisation. The same approach may also work for its economic recovery.
