UP’s leadership and governance quality is summed up by one act of UP chief minister Yogi Adityanath not attending his father’s funeral to respect Prime Minister Narendra Modi’s call for lockdown and to deliver his duties. Uttar Pradesh has shown a tremendous promise in last few years with remarkably improved infrastructure, up-ticking GDP growth, large skill pool, and lower wage advantage. The real question is if Uttar Pradesh’s committed leadership will steer the system to get its pie from out-locationing business from China, an opportunity, analysts estimate could range from $ 300 Billion to $ 500 Billion in 5 Years.
EXCLUSIVE FOR INDIAN OBSERVER POST
Renowned expert Vivek Singh attempts to identify measures required to make the most of the shift in UP.
By Vivek Singh, Global Markets & Economy, Delhi
Uttar Pradesh’s management of Coronavirus pandemic has been very impressive on most accounts including quick administrative decisions, supporting the last mile communities, transporting the people stranded in different regions and managing the morale of our frontline Covid warriors.
UP’s leadership and governance quality is summed up by one act of UP chief minister Yogi Adityanath not attending his father’s funeral to respect Prime Minister Narendra Modi’s call for lockdown and to deliver his duties.
Uttar Pradesh has shown a tremendous promise in last few years with remarkably improved infrastructure, up-ticking GDP growth, large skill pool, and lower wage advantage.
The real question is if Uttar Pradesh’s committed leadership will steer the system to get its pie from out-locationing business from China, an opportunity, analysts estimate could range from $ 300 Billion to $ 500 Billion in 5 Years. This article attempts to identify specific measures required to make the most of the shift.
Global economies are melting and business models are in free fall. Romanticism with hyper capitalistic models around global centres of core competency and supply-chains is on the decline. A non-entity virus destroyed the myth about more advanced countries’ readiness to deal with sudden large scale surprises.
Rabobank estimates global GDP to contract by 2.6% and Paul Krugman terms the Covid crisis as ’Ten trillion dollar self-induced coma’. Crude oil futures have hit the floor and Gold prices are ruling the roost. In a bid to move away from enviable Chinese manufacturing juggernaut, Japan, South Korea, US and many other countries are looking for an alternate host to power their plants and that’s where there is a huge opening for Uttar Pradesh.
History reminds us that the biggest beneficiaries of the twentieth century cold war were Germany and Japan, two countries which rose from the ashes. We are on the brink of yet another cold-war like situation where two economic blocks may compete for not only the global dominance but for placing their governance model at the centre stage.
In the conflicting scenario of democracies and non-democracies, India with its deep soft power, credible governance systems under Modi government, huge technical human capital and a proven destination of high growth economy could become a front-running beneficiary. While Uttar Pradesh has been plagued with structural issues in last decades, it seems to have already started moving in the fast lane of development with the largest Samsung plant, some of the longest expressway & power initiatives and ODOP program.
The virus crisis brings in frenzy and unleashes nervous energy. The options are to grow or perish. Decades are lived in weeks and monumental achievements, completely out-of-box, could be achieved in order to keep going. I believe that Uttar Pradesh has its ‘Moment of Truth’ now.
I would recommend the following measures for its disproportionate economic growth in the years to come and would focus on the steps Uttar Pradesh government should take in the immediate term.
Immediate Term policy should be focused on attracting companies relocating out of China and looking for alternate locations. As per CNBC’s report in March 2020, Apple, Google, Microsoft and other 200+ US firms were looking to relocate their manufacturing facilities out of China, as per Mukesh Aghi of USISPF, and were having exploratory discussions with Vietnam, Thailand etc.
A survey by Tokyo Shoko Research Ltd., conducted in February 2020, found that 37% of 2600 Japanese companies are exploring to diversify out of China. Japanese government has already announced a $ 2.2 Billion package to support Japanese companies to relocate out of China. Hyundai and other Korean companies are in discussion with many authorities including Andhra Pradesh to set up their plants.
As the Fortune 500 companies are deeply embedded in the Chinese supply-chain, plugging out is going to be a staggered and complex process. Their expectation from the new host would be tax benefits, favourable investment environment, ease of doing business, professional work force in its skill & work ethic, and institutional support in innovation. While Uttar Pradesh has commenced the next phase of its economic journey, the corona conundrum has triggered the turbo button. Large milestones can be gained in weeks and months. The real gain in the first phase of run will be in terms of incoming business as well as in readying the mindsets, policy infrastructure and institutional space.