- Software firms feel that although they're welcome, they're unable to grab government contracts
- Investors think there's a need for greater clarity in China's regulations
- Most oppose FTA as India may not be able to compete with China
- A regional trade deal is a better option for Indian companies; it'll remove several non-tariff barriers
But some of these issues may get sorted out after President Hu's visit. Kamal Nath, the commerce minister, has publicly said there is no bias against Chinese investment, but inflows in "sensitive" areas need to be regulated. Corporate observers indicate that after the easing of the visa regime for Chinese businessmen, India is likely to clear the visas of 1,800 Chinese technical executives, who were meant to help Reliance Industries lay the pipeline to transport gas from its fields in Andhra Pradesh to Gujarat.
At the same time, Indians too complain of difficulties in investing in China. The software firms feel that while they're welcome, it's "difficult" to get projects from the Chinese government. Adds Subash Menon, CMD and CEO, Subex Azure, "What we've seen is that Chinese companies are rather slow in opening up. Only if you have a strong local contact can you get things done fast. But the real issue is IPR (or the lack of it) which is a big question mark, and that is what affects software companies."
Ravi Kant, MD, Tata Motors, hints at another set of problems while indicating that "despite global trade in the automotive sector heading towards either China or India," the bilateral figures for the two "are very low". He explains: "I must insist that the Chinese regulatory authorities need to relax the investment norms, which currently demand huge investments in case anyone is considering a facility there. We need greater clarity in rules and regulations of doing business in China if we have to truly collaborate with each other."
Therefore, Indians are cagey about opening the floodgates for Chinese FDI. Menon puts it succinctly: "This whole security issue (regarding FDI) has been blown out of proportion, including the Hutch-Orascom case. FDI from China should be allowed as inflows from China at this moment are a pittance. China invests significantly in several other countries, including those in Europe, but they they have no concerns. However, that doesn't mean we throw caution to the winds. We need to take a cautious approach, but not close it altogether."
A similar caution is advised by the Indian business community when it comes to a bilateral trade agreement. Most are against FTA. "An FTA can't be signed unless India is on equal footing with China. In the textiles sector, China has an investment of $100 billion, and we can't even hope to compete with that scale," feels S.P. Oswal, chairman, Vardhman group. Adds D. Ravindran, director-general, Automotive Tyre Manufacturers Association, "FTA will be disastrous as no one knows the subsidies given to Chinese manufacturers."
Instead, they are comfortable with a regional trade agreement (RTA), as has been agreed between the two nations during President Hu's visit. Explains Anjan Roy, economic advisor, FICCI, "An RTA that seeks to reduce non-tariff barriers can be mutually beneficial. It'll help India to ask for removal of restrictions like compulsory labelling of all exports in the local Chinese language and non-acceptance of self-certification in exports of picture tubes, pharmaceuticals and food items."
In this environment of unease, only a few Indians are ready to take on the Chinese challenge. One of them is Adi Godrej, chairman, Godrej group, who maintains, "Only when we compete with China will we realise the true nature of their manufacturing excellence. Aggressive competition is always welcome as it's the consumers who benefit in the end." His views are seconded by R. Ramakrishna, ED, Bajaj Electricals, who believe Indian firms have to develop a specific China-centric strategy to counter any threats. "In '02, we decided that instead of giving into the impending China invasion, we should benefit from it." And he did it successfully.
