The Big 5 Viral Acharya Mantras to Benefit from China Plus One

Former deputy governor of the Reserve Bank of India has suggested regulating or dictating the dissolution of India’s Big-5 industrial conglomerates. In this context, this article explains Mr Acharya’s suggestions for the Indian economy and also understand what is the China Plus One strategy. This topic is relevant for the IAS exam economy segment.

Concerns with Big 5 Conglomerates

The Big 5 businesses include Mukesh Ambani-helmed Reliance Group, Tata Group, Aditya Birla Group, Adani Group, and Bharti Telecom.

• These companies have expanded at the expense of smaller regional businesses.
• Concerns about the expansion of conglomerates include the possibility of crony capitalism, excessive debt, and a lack of creative destruction due to the exclusion of new competitors.
• At the same time, these conglomerates have been protected from international companies’ competition by the government’s “sky-high tariffs.”
• With India’s excessive fiscal and cyclically sensitive current account deficits, the increasing concentration of corporate power runs the risk of making inflation even more persistent and developing a vulnerability on the external sector front.

What is China Plus One Strategy?

• Due to low wages, a large labour workforce, and ease of doing business, China has been the number one investment destination for firms all over the world.
• These elements prompted numerous sectors to build factories in China or contract output to Chinese suppliers.
• However, there has been an increasing trend towards diversifying investment into other Asian investment destinations such as Indonesia, Thailand, Malaysia, the Philippines, Bangladesh, Vietnam, and India.
• The phrase “China Plus One” or “C+1” refers to companies that diversify their business operations outside of China rather than making only Chinese investments.
• It was first used in 2013, however, no one person has been given credit for the idea.

Why China plus one strategy? 

• Geopolitical tensions: China has observed escalating tensions on a variety of global sociopolitical concerns. Some of them include the struggle for Hong Kong’s independence, anti-Japanese demonstrations, and clashes in the South China Sea.
• Increased labour costs: Over the 2010s, minimum wages in China sharply increased.
• Taxation reforms: China’s corporate tax system has been consolidated, which has resulted in an increase in tax rates for businesses doing business there.

Significance for India

• China Plus One strategy can prove beneficial for India as locations for investment can be found in India.
• India’s natural resources are sufficient to supply the needs of both the domestic and international metal industries.
• The China Plus One (C+1) strategy, which involves shifting investments from China to other countries, might provide Indian exports of electrical goods a boost.
• The Make In India scheme also promotes the country as an attractive investment destination.
• India’s economic progress may be aided by the growing practice of withdrawing resources from China and reinvesting them in developing nations.

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