Walls will go up

by May 18, 2020 0 comments

If the US goes rabidly protectionist, and others follow, then our Make in India project could suffer a body blow

That the Coronavirus has had a major negative impact on world economies is an undisputed fact. Now, the next assault on economies will be the wall of protectionism that will come up across the globe as leaders struggle to provide jobs to their citizens and the world wakes up to the economic dangers of being a global village with inextricably interlinked manufacturing and supply chains collapsing. The last has been partly because of prolonged disruptions caused by COVID-enforced lockdowns and partly due to a trust deficit in value chains originating in China. Japan has already announced that it is pulling out its manufacturing activities from China and the US is doing the same. And we are already seeing the first glimpse of protectionism with the US President laying down the law for companies like Apple. Donald Trump, in his usual blustering and aggressive style, has bluntly declared that he could levy new taxes on American companies that move their manufacturing bases from China to any country other than the US. He has never made any bones about his protectionist agenda and has time and again asked American firms to shift their manufacturing to the US to help create more jobs, a move that resonates with his agenda of ‘Make America Great Again.’ Particularly in an election year.

This protectionist attitude is going to deal a body blow to India’s plans to woo firms away from China and emerge as the next manufacturing hub as many firms mull expanding their manufacturing bases to more than one country to avoid a repeat of the present disruptions. In fact, Prime Minister Narendra Modi talked about making India a strong part of the global supply chain and the Government is developing a land pool double the size of Luxembourg to lure businesses moving out of China. New Delhi has even asked missions abroad to look for firms scouting for options to invest outside China. State Governments, too, are busy evolving their own programmes for bringing in FDI. If all nations begin to follow the path shown by Trump, it will be a hard and long toil for India where economic healing is concerned as it might witness a U-shaped recovery instead of the V-shaped one that we are hoping to see. If that happens, India will have no way out but to respond with protectionism of its own. So the world will be in a lockdown in more ways than one.

(Courtesy: The Pioneer)

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