A welcome hand

Domestic investment is sluggish and consumption is in a slump. It has dragged GDP growth into its tailspin. Contrary to this dismal outlook, foreign investors were unperturbed and poured in cash, reposing confidence in strong parameters of the Indian economy. Amidst this paradoxical situation of investment, China emerged as a new brand of potential investor, leaving aside the political row.

Chinese media was upbeat on the Indian market. According to Global Times, a respected English-language newspaper published in China, "More Chinese phone makers are considering relocating their production bases to the Indian market". Acceding to this movement, it added: "Chinese companies are bringing their assembly lines to India are exactly what the country needs to recover economic momentum and revive Make in India".

Caught in the uncertainty over domestic investment, foreign investment is seen as a strong engine to drive the Make in India movement. Chinese investment, though small as compared to investment by leading investors like Singapore, Japan, Netherland, UK and USA, is considered more pertinent for the Make in India initiative.

Make in India depends on four main pillars. First, to boost manufacturing and gain more share in GDP. Second, to make India a global hub for manufacturing. Third, manufacturing should widely be spread length and breadth in the country. Lastly, manufacturing should be the main aim for employment generation. To this end, Chinese investments are considered beneficial for Make in India's principal objectives.

Chinese investment in India spurred during the past two years. It increased by 136.8 per cent in 2018, from USD 165.3 million in 2017 to USD 391.2 million in 2018. Five years ago, it was merely USD 72.3 million in 2013.

China was never seen as a foe in terms of economic relation by Modi. His hobnob with China was not sudden and new as a Prime Minster of India. His vie for Chinese investment began with his stint as Chief Minister of Gujarat. He visited China four times as a Chief Minister. His yearning to engage China as an important economical partner overwhelmed China's authority.

Today, India is the second-largest producer of mobile phones in the world, according to Chairman of India Cellular and Electronics Association (ICEA). From a mere two companies manufacturing mobile phones in 2014, today the country has 265 companies engaged manufacturing mobile phones and accessories, with substantial investment from China.

India is the second biggest market for mobile phones in the world, ahead of USA and behind China. In smartphones, China established a strong foothold in Indian market, outsmarting Koreans. Over 67 per cent of the market share of smartphones is held by Chinese companies in the country. Of the top six smartphone makers, four are Chinese. They are Xiaomi, Vivo, Realme and OPPO. Market leader Xiaomi, which had one manufacturing unit in 2015, now has seven facilities in the country.

Nearly 95 per cent of consumption of mobile is met by domestic production. Thus, manufacturing of mobile phones exemplifies the success of Make in India, driven by Chinese investment.

Chinese companies have taken up an active role in boosting start-ups in the country. The Start-up culture is a new movement for technology-driven manufacturing and employment generation during Modi regime. China made a big entry in financing the start-ups and made a strong pitch for the growth of this sector in the country. According to an estimation, Chinese VCs (Venture Capital) invested USD 5 billion in 2018, compared to USD 3 billion in 2017 and USD 668 million in 2016.

Among the top Chinese investors were Alibaba, Shunwai Capital, Fosun, Tencent and Xiaomi. Sectors that have been seen as attractive for Chinese VC funds are consumers, food-tech, logistics, retail, AI (Artificial Intelligence), IoT (Internet of Things) and fintech.

Factors, which attributed to Chinese investment overseas were slow growth in its domestic market and their start-up funding slowing down. Looking for investment opportunities overseas, India has been perceived as a fast-emerging market. A large and young population, who are increasingly using the internet, makes India a big market.

Correspondingly, the paucity of funds in India gave ample opportunities to the entry of Chinese VCs. The size of Indian start-ups is comparatively smaller as compared to Chinese counterparts. This facilitated Chinese VCs to crowd the Indian market.

In the first wave, Chinese VC majors in technology start-up entered Indian market. E-Commerce giant Alibaba is a case in point. It invested large sums in Snapdeal, Paytm and Big Basket. Tencent invested in food delivery, such as Swiggy, gaming Dream11 and online insurance, like Policy Bazar.

In the second wave, investment came from financial investors, such as Shuewei Capital. It invested in food delivery start-up, such as Zomato.

Eventually, increasing Chinese investment had a cascading impact on the trade balance between India and China. The concern over rising trade balance with China started mitigating with the deficit trade balance narrowing down. The trade deficit with China, which heightened to USD 63 billion in 2017-18, receded to USD 53 billion in 2018-19. This resulted in a decline in total trade deficit by 15 per cent in 2018-19.

Thus, Chinese investment unleashed a big benefit to the Indian manufacturing sector and countering the widening trade balance of the country. First, it imparted onslaught on the trade balance and second, it boosted the manufacturing of mobile phones and supported start-ups, which widened the employment opportunities.

Given the Chinese investment binge and it being an important member of BRICS, Chinese investment harps on uptick in India's growth trajectory through a new face of Make in India. Underpinning the Chinese significance in increasing the investment, which is the need of the day for the revival of the economy, NITI Aayog evinced interest in Chinese investment.

Both NITI Aayog and National and Reform Commission of China entered several agreements for economic cooperation in 2016. NITI Aayog Vice-Chairman Rajiv Kumar urged Chinese investors to invest export-oriented industries and export to the world, after losing opportunities in the USA due to trade war.

Views expressed are strictly personal