Can India compete with China?

India is already being held back in mass manufacturing by restrictive labour practices and poor infrastructure – meaning the answer to the above question is already a resounding no in some sectors.

The rise of the rupee is also a concern, as this article from The Economist highlights .

The problem for India is because it has spent the last 15 years gradually opening its capital account and liberalising its financial market, it cannot do what the Chinese do so effectively – intervene to keep its currency competitive.

Export markets are going to get a great deal tougher next year as the US, and probably Europe, enter recession.

And so how will Indian manufacturers cope in these tougher markets versus their Chinese competitors, given the handicaps of the rupee that could remain high and weak infrastructure etc? The answer is likely to be not particularly well.

Reduced export sales will weaken the stellar petrochemical consumption growth we’ve seen over the past few years.

It will be interesting to see the effect that this will also have on polypropylene. Reliance Industries is due to commission its 900,000 tonne/year plant in Gujarat in mid-2008.

, ,

Leave a Reply