“Last month has seen a lot of action in the Financial Markets across the world. This was mainly due to the financial crisis in China. China, the world’s second-largest economy after the United States, had been growing so rapidly for so long that this growth was taken for granted by the world at large. During this phase, China was a very big importer of raw materials and exporter of finished goods. Suddenly, the world seems to have realized that this is no longer true. Moreover, the Chinese government seems to have realized that and has been trying measures like allowing pension funds to invest in the stock markets hoping for some stability and devaluing their currency to make their exports more attractive. Unfortunately, the problems were much more severe and continued to persist. What are the repercussions on the world in general and India in particular? Depending on whom you listen to, it could sink the US economy sending the world into a great depression at one end and at the other end is an excellent opportunity for India to attract investments that would be withdrawn from China. All in all, uncertain times ahead!
What would be the impact on our industry? In the very short term, the currency devaluation should reduce the prices of items manufactured in China – mainly electronic hardware components. However, once other countries join the devaluation war to stay competitive, this will soon stabilize. The worry though is because of the downturn, many of the giant factories with seemingly infinite capacity are likely to shut down. Surely, this will cause disruption in supplies and increased prices. Many global companies having their manufacturing facilities in China would be looking for alternate manufacturing locations to mitigate this. If India can present a strong case by providing world class facilities at close to Chinese rates, this just may be the fillip the ‘Make in India’ campaign needs.”