Conversely, the economists were beamed with the hope for a brighter side of devaluation of Chinese yuan for India. The devaluation will sprout seeds for the uptick in the economic development in India, instead. The threat of import surge from China that devaluation would shadow Make in India, was nudged down by the economists. Rays of hope surfaced in the discussion as how best the opportunity can be utilized to prop up manufacturing activities in India.

The fear for export dwindling due to yuan devaluation, which may cause adverse impact on trade deficit , is rather seen with a positive angle from the perspectives of cheap imports. It is argued that the devaluation of 1.9 percent to 2 percent will incur marginal impact on the flow of imports from China. Chinese currency has already appreciated by more than 25-26 percent over the periods of five years. Devaluation of 1.9 -2 percent could hardly trigger gushing flow of imports from China.

However, in terms of total impact on trade deficit , it will be paramount. This is because trade deficit between India and China is substantially big. It accounts for one third of India’s total trade deficit. As a result, swelling of imports from China should impact adversely India’s total trade deficit. But, given the oil price crashing down , the impact of increased imports from China may not unleash a major adverse impact on the total trade deficit of the country.

In contrary, there is a positive side of swelling import from China. It will unleash opportunity to make Make in India a successful venture. chinese yuan devaluation will gear up import base industry in the country. Modern industry , which is an import base industry , will see this devaluation a leg up for development. japan showed the way. In seventies and eighties, the natural resource stricken Japan restructured its industry based on imported natural resources. The key industries like steel and metal industries were developed on import of raw materials , such as iron ore , bauxite , copper and others. Then came the modern industry as a transformation into technology oriented and component and parts based industries. They were electronic and automobile industries.

India is in the midst of great transformation in its manufacturing activities. At present, the pillars for the growth of Indian manufacturing industries are modern industries. The traditional raw material base industries have taken back seat. The industries like textiles, apparel, leather are drying up from the investors’ lists. Employment opportunities are receding in these industries. there was significant shift to technology oriented and component based modern industries. India emerged the manufacturing hub for modern industry by the Multinational companies. the modern industries like telecom, automobile and electronics have become the new template for the growth of industry in the country. In other words, while the modern industries are on the springboard for growth, the traditional industries are sagging.

Telecom, electronic and automobile industries depend on component and parts. China is the biggest supplier of component , parts and equipment for telecom and electronic industries to India. Over 50 percent of the imports of parts, components and equipment, required for telecom and electronic industries, come from China. Recently, there is boom in manufacturing of handsets in the country, instead of sourcing from outside. Some, who were importing and selling in the domestic market, are contemplating to set up new units and some, who have already set up units, are considering to scale up production. Micromax, Lava, Celkon, Spice Mobility and Karbon, who have small facilities of manufacturing handsets , are planning to double their capacities in the country. Even the Chinese makers like Gione and OPPO Mobiles are planning to manufacture handsets in India. At present, India is the second biggest market for mobile phones. About 67 percent of the handset market is met by imports. A huge potential lies in manufacturing handsets in the country.

Basically, Indian manufacturers of handsets are assemblers. Around 80 percent component and parts are imported. China is the biggest supplier of component , parts and equipment to India. Cheap imports of component and parts from China will encourage handsets manufacturers in India. More importantly, the cheap imports will make mobile phones and computer more viable for the poor people in the country.

The threat to the domestic industry due to yuan devaluation needs to be viewed as a blessing in disguise. Cheap imports of electronic component and parts will accelerate India’s manufacture of electronic equipments instead, as India lags in manufacturing these items. Almost the entire demand for integrated circuits is imported. Given the power of domestic demand and strong economic fundamentals, Foxcon of Taiwan and Xiami of China have succumbed to Modi’s call for Make in India. Unsuccessful attempts for land reforms are unlikely to deter Foxcon of Taiwan and other MNCs’ from their investment plans. A recent World Bank report revealed that 20 states have land banks.

Chinese yuan devaluation is unlikely to make any breakthrough in China’s export. Its major export market USA is under the grip of uncertainty and EC is engulfed by deflation. Resurrection of domestic demand in China is a far cry. China is on the brink of deflation. The capacity utilization in major sectors fell to 70-72 . Concerns are looming large over further dipping in the prices with the excess capacity widening. The contagion impact of the global recession will continue to affect China’s growth, leaving despite the Chinese currency dips. India is in a portion to take full advantage of this situation.(IPA Service)