Even as India stared at a barrel of 27% tariffs for most of its exports to the US, executives and government officials saw the advantage. Smaller competitors like China and Vietnam, India's biggest economic rivals, were getting worse.
India has been pushing hard in recent years to become a manufacturing industry that will replace China, and suddenly it appears to have gained an advantage.
India and its small rivals then received a 90-day rep hearing, and President Trump doubled China and raised its tariffs to 145%.
The empty tax on Chinese imports into the US presented “an important opportunity for Indian trade and industry.”
India has a huge labor force and has long tried to put an elbow in China's manufacturing industry, but its factory is not ready. For the past decade, Modi has pursued the goal of the name “make India.”
The government has paid incentives to companies producing goods in the strategic sector, budgeting more than $26 billion and trying to attract foreign investment in the name of reducing China's dependence on imports. One of its goals was to create 100 million new manufacturing jobs by 2022.
There was a success. Most eye-catching is that Taiwanese contract manufacturer Foxconn began manufacturing Apple's iPhones in India and moved work from China.
However, the role of manufacturing in India over a decade has been reduced from 15% of the economy to under 13 years of age compared to services and agriculture.
Manufacturing and the work it brings are considered essential to India's rise as a global force. China is the largest Asian nations with an economy five times larger than India, and is rushing towards prosperity by creating and selling what they want to buy in the rest of the world. However, manufacturing accounts for 25% of the East Asian economy, twice as much as India's.
Public infrastructure has come a long way under Modi's direction. However, a decade has not been enough time to train the country's growing workforce to meet the needs of businesses. And when it comes to tying India's pockets of economic strength together, the route remains uneven.
Just an hour on a new eight-lane highway from New Delhi, Haryana's RAI Industrial Park occupying the land that grew wheat and mustard crops in the beginning of this century. Some of the factories on the dusty grid inside have been grinding auto parts and processed foods for 20 years. Others are just starting and hoping for an imminent breakthrough.
Vikram Bathla, who founded Likraft, which manufactures lithium-ion batteries for vehicles in 2019, said access to technology is the most frustrating obstacle for his business. He relies heavily on imports, and imports need to take time to buy and ship bulk items, and find it difficult to hire the people they need to do very technical jobs.
“We can buy equipment, and we do” – and most of it comes from China. “What we don't have,” he said, “a skilled worker who uses it.” For five years he has been trying to catch up with his competitors that began 15 years ago.
Mr. Batra posted the pace among the 300 workers in Recraft, tall, calm and English-speaking, most of which immigrants from poor Indian states quietly bent onto a bench, illuminated, and assembled the batteries. They start with cells imported from China, some of them are labeled “Made in Inner Mongolia.”
Other workers operate larger machines, also imported from China, with welded cells and electronic components as batteries. The finished product is marked as “made in India.” However, the supply chain is foreigners.
It's not just a high-tech phenomenon. Another factory, half a mile away in the same industrial park, also relies on foreign input.
Autokame designs, cuts and sews car seat covers for the Indian market. Its high-precision fabric cutter features a cry, robotic arm, and is imported from Germany and Italy. You will also need to import synthetic fibers.
Expensive raw materials are just the tip of the iceberg, said Anil Bardwaj, executive director of the manufacturing trade organisation. He also contributed to the issue, he said, was the high cost of land, a lack of the right kind of engineers and a lack of good funding from the bank. Many of the difficulties he and other owners face are about inconsistent government policies and deficits, issues that have been tormenting Indian industry for decades.
Bhardwaj also cited a less obvious need that manufacturers would not face: a sensual justice system. The Indian courts were late and their rulings were arbitrary, he said, giving small businesses like his colleagues mercy to the mercy of large corporations that can have better lawyers and political influence.
“That's why people really fear big Indian companies,” he said.
Small businesses cannot afford to stand up to them, or to stand up to the politicians and regulators that respond to them. India's court system is backed up so miserably, with over 50 million cases pending, entanglement can be fatal for small players as well. So they avoid growth and miss the efficiency of scale.
He and other experts have acknowledged significant improvements in recent years. For example, the shortage of Power ten years ago has become abundant in places like industrial parks in Haryana, but it is not as reliable as the small factories there. Many government processes have been streamlined at the time of Modi's inauguration.
And the state was able to replicate some of the production systems that made Chinese factories the world's vy wishes. The cluster of Apple suppliers in Tamil Nadu is by estimates that produce 20% of iPhones worldwide. Up until the past few years, almost everything was made in China.
Records at major airports in Tamil Nadu show that outbound electronics shipments doubled to more than 2,000 tonnes a month in the weeks since Trump announced the 27% tariff, just as Apple and other companies had accumulated stock. Trump's decision to rule out smartphones and other electronic devices on Friday could be in a hurry to ship his iPhone to the US.
Still, long-term changes are ongoing. Those who work closely with Apple's suppliers were not allowed to publicly discuss their plans, and the supplier said they hope to increase production so India can earn 30% of the iPhones around the world.
Politician Kanderwal said India is ready to seize the overnight benefits caused by 145% tariffs on China across many industries, including electronics, auto parts, textiles and chemicals.
Factory owners are eager to do the same for being small. But they see a big old Indian obstacle that has been in the way of a very kind that has resisted reform for decades.
