As China gains prominence over Japan in India’s foreign relations, the new government in New Delhi has approved an in principal memorandum of understanding relating to the establishment of five industrial parks in India. The proposed parks expected to be started in the Indian states of Uttar Pradesh, Andhra Pradesh, Gujarat, Maharashtra and Karnataka, also hold a caveat; the India is allowed to establish similar industrial parks for Information Technology and Pharmaceuticals in China. India’s commerce and industry minister, Nirmala Sitharaman who is accompanying Vice-President Hamid Ansari to China this week is expected to meet her counterpart Gao Hucheng in Beijing to further strengthen this proposal.
By holding a reciprocal agreement, India might just have a good deal on her hands. According to experts, allowing China to set up industrial parks in India will not only ascertain New Delhi to increase exports, but will also allow her to give her IT and Pharmaceutical sectors access to the huge Chinese market. Kept protected, India has been trying relentlessly to penetrate into these sectors of the Chinese market, yet by keeping their chips close, India seems to have found the secret sauce to not only permit Chinese companies to help develop her markets but also strategically enter China’s fiercely protected IT and Pharmaceutical sectors. In order to balance her odds, China will not be the only country to be given permission for an industrial zone, but Japan and South Korea too will be given atleast a zone each.
While the project for the proposed five industrial parks has been on the cards for a while now, the approval for an MOU paves the way for a big ticket agreement to be ratified between the neighbours for when Preisdent Xi Jinping comes calling in November. While firm ground work was clearly laid by his Prime Minister Li Keqiang and Foreign Minister Wang Yi, signing the MOU would mean a huge step forward for China India relations.
Besides enabling India to grab a more even footing in her balance of trade with China, the proposed MOU will also allow for more stagnating Chinese companies to be fed with an increasing number of Indian consumers. Analysts expect China’s economy to remain flat for a while now as prices peak and disposable incomes shrink. Chinese B2C companies have been vying to enter the Indian market space owning to the work flag bearers Huawei and ZTE have put in to change Indian sentiments towards Chinese goods. With prices of raw materials in China rising, including salaries and logistic costs, Chinese companies are extremely keen to both manufacture and sell to the burgeoning Indian consumer. While Indian consumer spending is still on the rise, Chinese companies are keen to capture a market of a billion strong and are hoping that the second largest market after China will help them remain buoyant.