Editorial Analysis for 18th November 2020

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Shifting sands for Asian economies


Mains: G.S. II & III International Relations and Economy


  • India faces an uphill task in maintaining it’s viability against highly competitive countries.
  • Discussions on the post pandemic global economy have often predicted that China’s appeal as a business destination would fade, losing favour as the global manufacturing hub.
  • Arguments have been made that production would be dispersed to other appealing locations mostly in Asia, and even to those outside.
  • It was expected that this relocation of production would benefit emerging labour abundant economies.
  • Some labour intensive industries, such as textiles and apparels, have been moving to Bangladesh and Sri Lanka as labour costs in China are increasing.


  • This is perceived as a buffer against being completely dependent on China, referred to as the ‘China +1’ strategy.
  • There are three reasons for firms to remain in China and pursue this strategy:
  • First, starting an enterprise and maintaining operations in China are much easier than elsewhere.
  • Second, Chinese firms are nimble and fast, which is evident from the quick recovery of Chinese manufacturing after the lockdown.
  • Third, many global companies have spent decades building supply chains in China.
  • Hence, getting out would mean moving the entire ecosystem, which involves time and expenditure. This strategy of global firms has led to an intensification of competition among Asian economies to be that ‘plus one’ .
  • Gunnar Myrdal published the monumental ‘Asian Drama’ – An Inquiry into the Poverty of Nations, which focused on South and Southeast Asia.
  • A new ‘Asian Drama’ is likely to unfold with the formal launch of the Regional Comprehensive Economic Partnership (RCEP).
  • Asia’s growth would hinge on the role of trade and investment flows into these economies, and this would again be the centrepiece of global growth, as the 15 member countries account for nearly 30% of the global GDP.
  • The RCEP and the ‘China +1 strategy’ is likely to impact investment flows into Vietnam, India, Bangladesh and Indonesia, which have emerged as key investment destinations.
  • India faces three challenges in this race. First is the task of increasing domestic public investments, which have a central role in economic activity, for both demand and supply sides.
  • According to the International Monetary Fund, “increasing public investment by 1% of GDP could boost GDP by 2.7%, private investment by 10%, and employment by1.2%.
  • Second, India needs a major overhaul in her trade policy, as in the preCOVID 19 era, world trade had been rattled by tendencies of rising economic nationalism and unilateralism leading to the return of protectionist policies.
  • Third is to increase women’s participation in the labour force. While India’s GDP has grown by around 6% to 7% per year on an average in the recent years, educational levels of women have risen, and fertility rates have fallen, women’s labour force participation rate has fallen from 42.7% in 2004–05 to 23.3% in 2017– 18.
  • The stage is set for new Asian Drama. What will be India’s role in it? Well, it will not be on the basis of past accolades, for sure.

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