Big ceremonial events invite and trigger hype. As Prime Minister Narendra Modi flies back to Delhi after the SCO Summit, the hype is noisier. Of particular interest is his bilateral meeting with Xi Jinping, China’s president, the first one in eight years. The optimists and hyper-nationalists are overjoyed at how Modi has stood up to the bully Donald Trump. The pessimists and anti-Modi hordes are screaming blue about Modi surrendering to Xi, after they accused him of surrendering to Trump.
The realists are relieved that the bilateral dialogue resumed in a meaningful manner. There is hope of economic cooperation between the two giants even as the border disputes persist. Some have stuck their necks out to suggest that Xi will take concrete steps to open the Chinese economy to Indian goods. This will start the process of addressing the concerns over the massive trade deficit that India racks up with China, close to $100 billion in 2024-25.
But here is a reality check, even for the mildly optimistic analysts who think ‘Make in India’ can make inroads into the homes of the Chinese consumers. As of today, the scheme and slogan have no hope in hell of penetrating the massive Chinese market. The simple fact is: There is hardly anything that India manufactures that can compete with ‘Made in China’ goods in terms of cost competitiveness, innovation or premium quality. Virtually nothing. Forget about China playing games by imposing non-tariff barriers and making things difficult for Indian exporters. It does. But the real issue is manufacturing scale and cost competitiveness.
The Chinese consumer market is an El Dorado. About 287 million smartphones were sold in China in 2024. More than 700 million Chinese took a domestic flight in the same year. More than 20 million Chinese purchased a passenger vehicle in 2024. Some estimates suggest that the annual value of domestic textile sales in China is more than $200 billion. The domestic pharmaceuticals market is worth more than $470 billion. These are just some examples. In a normal scenario, these numbers would be tempting and alluring for Indian companies like Tata Motors, Mahindra, Maruti, Indigo, Raymonds and many more.
But the top bosses in these companies know deep down that they simply cannot manufacture and export a product that is of at least the same quality and cheaper than a ‘Made in China’ product. BYD is a Chinese EV company that has come out of nowhere in the last decade.
According to data released by analysts in Europe, it is beating the miracle American EV car maker Tesla in the European market. What hope do Indian car makers have?
What hope do the Indian makers of textiles, readymade garments and leather accessories have when every major global brand, ranging from Prada to Armani to Gucci has Chinese factories supplying them at unimaginable prices? The iPhone ecosystem in India is a big success. But China still makes more than 70 per cent of these phones in the world at a very competitive price.
One hope for India is that as China keeps moving up the value chain in manufacturing, it may let go of simple things like old-fashioned cars, cheap garments, toys, steel, aluminium, refrigerators and TV sets. After all, countries like the US, the UK, Germany, Japan and South Korea followed a similar trajectory in different periods.
But then China has a labour force of 600 million plus. A majority will still need to be employed in “sweat shops” or massive factories churning out products for global markets. So, China is not going to easily let go of the mass manufacturing of cheap goods. After a decade of ‘Make in India’, manufacturing as a share of GDP in India is less than the figure in China. Indian policy makers will have to think out of the box to even begin to fathom how to cut the $100 billion trade deficit with China.