India's government, despite initial reservations, allowed Apple to bring its Chinese vendors into the country to support its manufacturing expansion, according to former NITI Aayog Vice Chairman Rajiv Kumar. Speaking recently, Kumar emphasized that India should adopt a more open and proactive stance towards foreign direct investment (FDI), particularly from China.
Kumar, who served as NITI Aayog's second vice-chairman from September 2017 to April 2022, recounted that discussions with Apple began around 2018. At the time, Apple sought flexibility to integrate its existing Chinese supply chain into its Indian operations. After an initial pushback, the government ultimately agreed to the proposal, facilitating Apple's establishment in the country.
Advocating for a 'Promotional State'
The economist argued that India needs to transition from a primarily regulatory state to a 'private sector promotional state.' This shift would involve actively identifying potential anchor investors across various sectors and proactively engaging with them to understand and meet their investment requirements, rather than simply waiting for applications.
"An entrepreneur or the foreign investor should feel welcome at the office when he's going to do something," Kumar stated, highlighting the need for trust in the private sector, academia, and civil society.
He suggested that for each Production-Linked Incentive (PLI) sector, India should target a few key foreign companies, bring them in, and assign a dedicated person within the ministry to facilitate their setup.
Rethinking Chinese Investment
Kumar also made a strong case for India to become more receptive to Chinese FDI, while still safeguarding national security interests. He pointed out that China itself historically attracted significant investment from countries with whom it had fought wars, such as Japan and the United States.
Highlighting China's substantial outgoing FDI, which stands at approximately $250 billion, Kumar argued that India could benefit significantly from attracting a portion of this capital. He noted that China's domestic demand alone cannot sustain its growth, making India a crucial market for its products and a win-win scenario for both nations.
The Great Wall Motor Example
To illustrate the missed opportunities, Kumar cited the case of Chinese automaker Great Wall Motor. The company had expressed interest in investing in India, even taking over Ford's former facility in Maharashtra. However, due to challenges, including difficulties in securing visas for corporate personnel, Great Wall Motor eventually withdrew its investment plans.
Kumar lamented the outcome, stating, "They packed their bags and went because you wouldn't allow visas for their corporate people. They have demonstrated their intent to come and invest here. Why not let them do that?" This example, he suggested, underscores the need for a more welcoming and facilitative approach to foreign investors.