Vietnam leads way in Indian interest

Economic cooperation between Vietnam and India continues to grow while navigating the tricky waters of this year’s global issues. Bilateral trade between Vietnam and India has been maintained at a positive level, with the export turnover of goods in the first nine months of 2021 reaching over $4.5 billion, up 21 per cent over the same period last year, according to data from the Ministry of Industry and Trade.

Vietnam is also India’s fourth-largest trading partner in ASEAN, according to the General Department of Vietnam Customs. India has strengths in source technology as well as a good level of science and technology, especially in IT, civil nuclear development, and the digital economy.

Though India is expected to become the world’s fifth-largest economy by 2025, Vietnam may not profit much at the current rate of trade growth. So far, trade grew below expectations, reaching $2.7 billion in 2010 and $10 billion in 2020.

Vietnam’s leading commodity group to India, phones and components, has been decreasing since the beginning in of this year. Export turnover of these items in the first nine months of 2021 only reached $982.2 million, down 6.45 per cent on-year. Meanwhile, computers, electronic products, and components also reached $625.1 million, down 3.96 per cent on-year.

The Fourth Industrial Revolution, US-China trade tensions, and the pandemic have pushed India to focus more on investment and expand the scale of its manufacturing sector to increase its competitiveness in the global market. This year, the government of India simultaneously implemented several plans to position the nation as a global hub for electronics design and manufacturing, incentivise production links, and promote power generation.

These policy interventions are resonating with the “Make in India” programme, which is pushing the nation closer to its goal of acting as the manufacturing centre of the world. According to statistics from India’s Ministry of Statistics and Programme Implementation, the country’s industrial production index has increased from 119.2 points in 2016-2017 to 114.5 points for 2020-2021.

A series of preferential policies to attract investment has been launched, gaining the attention of global corporations. This year, global corporations including GE, Siemens, HTC, Toshiba, and Boeing have all completed or are in the process of setting up production plants in India.

In April, Samsung Display Noida invested over $650 million to move a mobile display and IT factory from China to Uttar Pradesh, India’s most populous state.

And yet, the government of India in March announced grants worth $1 billion in cash for each semiconductor company that establishes manufacturing units in the country, demonstrating the efforts to expand the smartphone industry and improve the supply chain of electronic devices.

Obstacles in production inputs are also being looked at by India to ensure sustainable development in the long term. The Circular Economy in Electronics and Electrical Sector policy draft published by the Ministry of Electronics and Information Technology of India in May demonstrates India’s ambition to conserve natural capital, ensure longer product life, and address product challenges.

India, the third-largest consumer of raw materials globally, is still expected to consume an estimated 15 billion tonnes of raw materials by 2030. The pandemic and fluctuations in global trade have prompted businesses to diversify their supply chains away from China, contributing to increasing the importance of the Vietnam-India trade. Meanwhile, India still only has one free trade agreement with ASEAN.

The need for economic cooperation and connectivity between India and Vietnam in the coming period is high. Vietnam remains the focus country in India’s policy of cooperation and connectivity in terms of bilateral relations, said Sanjay Budhia, chairman of Confederation of Indian Industry, at the 27th Partnership Summit 2021. He pointed out several promising areas of cooperation between both countries, prioritising a digital supply chain for deeper regional integration.

Along with that, Budhia emphasised the need to strengthen the connection of logistics infrastructure, diversify supply chains, and raise the importance of the Vietnam-India trade route, as well as expand cooperation in healthcare and pharma, energy, and digitalisation.