Accessibility links

India Hopes to Benefit From Economic Slowdown in China

  • Anjana Pasricha

FILE: Employees of, an Indian online discount shopping website, work inside their company office in New Delhi.

FILE: Employees of, an Indian online discount shopping website, work inside their company office in New Delhi.

India has not been spared the ripple effects of the economic slowdown in China as its stock markets have tanked and its currency has lost value. Still, there is optimism that as China’s economy loses steam, India could benefit.

When Pawan Anand began exporting steel tools and appliances some 10 years ago, overseas markets were not always easy to capture. India trailed way behind China, which was the world’s most competitive manufacturing hub.

But times are changing. Anand, based in the business hub of Gurgaon, near New Delhi, is all set to tap new clients and expand business for his firm. He finds it easier these days to compete with Chinese firms.

“The way we can compete is that dollar is also strong for us, even the raw material prices in our local industries have also come down and the other factor where we are competing well is the wages, the wages that we pay to our workers, which is less than what Chinese people might be paying,” said Anand.

Anand’s optimism is shared by many in the government. The reason: India’s economy is picking up pace just as China’s is slackening.

India imports more than it exports, so tumbling oil and commodity prices are proving to be a boon. A cheap labor force could boost manufacturing, needed to create millions of jobs.

Principal economist at India Ratings & Research in New Delhi, Sunil Sinha, said India is in a “sweet spot”.

“China no longer being such a very attractive capital say for global capital and on the other hand Indian growth likely to pick up further, means that its attractiveness to global capital would improve.” And given the huge infrastructure deficit this country has, we are really in need of foreign capital, so attracting the right capital with the right policy and the right economic agenda would really be beneficial," said Sinha.

Unlike most East Asian countries, India’s growth has been fueled not by exports, but by domestic consumption.

Economists say India’s huge domestic market is being eyed by global companies facing flagging demand the world over. And China’s slowdown is making India look much more attractive. Some multinational companies like Foxconn, Siemens and Alstom are already stepping up facilities in India.

Challenges remain, however, as India seeks to become the world’s fastest growing economy. A year and a half after the government promised to roll out the red carpet for investors, key reforms remain stalled, disappointing domestic and foreign businessmen. Growth in the April to June quarter slowed to 7 percent from 7.5 percent in the previous quarter, raising questions whether India can be insulated from the tremors of the Chinese slowdown.

India's Chief Economic Adviser Arvind Subramanian is confident that India’s growth momentum has not flagged.

“Overall, economic growth is moving in the right direction. Of course, the pace of growth is perhaps still below what the economy needs and what the Indian government has targeted, and that pace we expect to pick up with all the reforms that are ongoing,” he said.

Subramanian points to companies like Xiaomi and Foxconn that have announced big investments in India and calls the slowdown in China a “historic opportunity” that could relaunch growth in India.”

Show comments