Passers-by on a street in Bangalore.Andrea Rizzi
At first glance, the scene is just one among infinite emblems of India's contrasts. A boy walks naked down a dusty street near a group of shanties with corrugated roofs, a family is sitting there in a way that does not seem to enjoy free time, but waste time that should be different, while in the background stand modern towers of flats of more than 20 floors. However, what happens in this territory transcends the local issue of inequality. Here a pulse with a global significance is being fought.
Shacks and towers stand in the area between the airport and downtown Bangalore. The city is the most vibrant tech hub of an India struggling to make the most of the West's desire to reduce its reliance on Chinese manufacturing, boosting new production hubs in other countries and new supply chains. Here, in this area, there are already plenty of business parks, while others are under development. Truckloads of laborers and tools to prepare infrastructure kick up clouds of dust, and the stained city that spreads buries dozens of the hundreds of natural lakes in the area. Here, the government of the Indian state of Karnataka maneuvers to get the Taiwanese company Foxconn to set up a new plant to assemble next-generation iPhones.
Passers-by on a street north of Bangalore.Andrea Rizzi
Historically, the vast majority of Apple's products have been assembled in China by Foxconn and a few other contractors. But the US company is accelerating a gradual diversification process that responds, among other things, to the need to protect itself from the risks linked to geopolitical tensions between Washington and Beijing. Foxconn already has plants in India, but small in size compared to its operations in China. Until recently, it only assembled outdated or marginal products in the South Asian giant, but now it also wants to manufacture advanced ones.
The Bangalore plant, if realized, would have a global symbolic value in the midst of a struggle in which many countries struggle hard to position themselves, with Vietnam as one of the most thriving. It is a competition on a global scale. India has a geopolitical asset in this race: it is a country of enormous weight that Westerners yearn to have on their side as a counterweight to the rise of China. The reluctance, these days, of many democratic leaders to clearly express their support for Canada after Prime Minister Trudeau denounced serious indications of the involvement of the Indian government in the assassination of a Sikh leader in its territory shows the importance that many attribute to maintaining a good relationship with New Delhi.
Priyhank Kharge, Minister of Information Technology of the Government of Karnataka, State of which Bangalore is the capital, says in an interview with this newspaper that "the deal is done" and that the land has already been assigned, although he avoids giving specific details. "It will come," he insists, referring to Foxconn, a strategic manufacturing giant. The company, however, maintains discretion in this regard. Asked twice, she did not respond.
Bangalore, a megalopolis with an estimated population of about 12 million, is an environment that demonstrates both India's global potential and its remaining challenges, from poor infrastructure to internal political tensions. In Karnataka, Prime Minister Narendra Modi's party, Hindu nationalist Narendra Modi, suffered a heavy defeat in May, and the nationally opposed Congress Party governs.
From 'call center' to world reference
The city knew how to evolve from "call center of the world", as some said, to a thriving reference center for the industry in the information technology sector and others, such as space. From here the successful mission that managed in August to land a robotic vehicle on the hostile south pole of the moon was managed. A feat that, in addition to its intrinsic value, has evidenced in the eyes of world public opinion the technological capabilities of the country.
India has great assets to attract investment and gain ground from China. "It has a unique demographic advantage with its huge and cheap pool of young talent from both skilled and unskilled workers, many of whom speak English," says Samir Saran, president of the Observer Research Foundation (ORF), a think tank considered the most influential in the country according to a University of Pennsylvania assessment.
Mohammed Muzammil, 29, is one of them. His personal story is emblematic of the collective. He speaks good English, and years ago he worked in one of those call centers that, in the words of Minister Kharge, made Bangalore the "back office of the world". In 2016, from the hand of a friend, he began to learn the use of the SAP computer program. He found work with that specialization, first with Schneider Electric, then Deloitte. He has been unemployed for three or four months, but he is completely calm. He and his wife are expecting a baby — contributing to India's powerful demographic boom — so Mohammed is looking for an option that would allow him to telecommute. That's just why, he says, he hasn't found yet. Work, for someone like him, there is.
Mohammed Muzil, in Bangalore.Andrea Rizzi
Geopolitics and labor are not the only assets in the great global manufacturing pulse. "A growing middle class will soon make India the third largest domestic consumer market," Saran says. Settling production here is, from the outset, a way to compete in a growing domestic market, and that is also marked by measures of internal impulse to the industry with protectionist features. The Make in India program promoted by the Modi government encourages domestic production and, on the contrary, discourages imports.
India has improved the ease of doing business – it has gone from 142nd in 2015 to 63rd in 2020 according to the World Bank's index in this area – its GDP is advancing at the fastest pace among the largest economies (it is expected to be 6% this year) and, according to Saran, "it is becoming more integrated into the global economy through bilateral free trade agreements in view of the state of multilateral trade. For many countries that no longer want to put all their eggs in the Chinese basket, India, because of its affinity, is a clear alternative," concludes Saran.
"India has lost the industrial revolution, it has lost the agrarian revolution, but I think we are in the right place and at the right time for the space revolution, to lead it," says Shaju Stephens, chairman and CEO of Aadyah, a space company founded in 2016 with global customers. Next to it, a room with about thirty young engineers, all under 40, a third of them women, exhibits the assets of India. The space sector is proof of that.
"If anyone wants to reduce risks in dependence on China, we, Bangalore, the State of Karnataka, are their first choice. We lead India's innovation index, we have a lot of skilled workers in white collar or blue jumpsuits, we are agile," says Kharge.
Road not paved
But the road to becoming a fully developed country and a manufacturing center capable of being, if not a competitor, a serious alternative to China, is by no means paved.
Alicia Garcia-Herrero, Natixis' chief economist for Asia-Pacific, sees political and socioeconomic problems threatening the country's upward trajectory. "India certainly has the potential, it has tailwinds. But I see risks. I fear that in the future there may be turbulence, conflict in India," he says. "I am concerned that the current leadership of the country does not adequately welcome all the different Indias that exist. I think that this and an unequal distribution of the prosperity that is being created can cause unrest and conflict. Although it seems that Modi has everything won, I think it is not so. The degree of resentment is great, even within Hinduism, in its more left-wing and intellectual sectors. There are therefore two potentially explosive problems, which go hand in hand, because then the greatest inequality is precisely in Muslim communities, "says García-Herrero.
"India is probably the most diverse country in the world. What unites us are two things: being Indians and the Constitution. If these things are decoupled, things become complicated. When those in power are not very likely to abide by the constitution, then the situation becomes unnerving," says Kharge of the opposition nationwide Congress Party. "Economic inequality is everywhere, but here in the last decade it has widened," continues the minister. "The current government is unable to close the gap. Many probably blame nepotism, or too many pro-rich policies. That is cause for concern. Inequality leads to social unrest."
Priyank Kharge, Minister of Information Technology of the Indian state of Karnataka, in Bangalore, this September. Andrea Rizzi
There are more challenges. For example, infrastructure. From Bangalore, India has gone with admirable fluidity to the Moon, but to go from the center of the city to the headquarters of Aadyah, northeast of the city, on any September morning one can face a 70-minute gymkhana in a taxi that does not travel any straight street for more than 100 meters, during which public transport is not seen and in which a Teflon stomach and goddess patience are required. In the summer of 2022, the city suffered severe flooding, partly due to inadequate urban development.
Bangalore is a symbol of India's turbulent growth. Ashish Verma, professor of Transport Systems Engineering at the Indian Institute of Science, points out that the city does not have an urban master plan and that, having dimensions and population similar to London or Paris, it has only about 60 km of operational metro compared to 400 and more than 200. Naturally, there are works underway to improve. The national Government is also making efforts to promote new infrastructure. But the situation remains very problematic, and the road ahead complicated.
"Here there are works to expand the metro network, but they are slow. The rulers give priority to roads. This responds to different motivations," explains the professor. "On the one hand, to satisfy the aspirational aspect of growth, the economy expands, people aspire to have cars, and works are done so that they can circulate better. This is complicated, because India today has about 20/25 cars owned per 1,000 inhabitants and we know from the experience of other economies that when you go from our income levels, about 2,600 dollars per capita, to levels of developed country, car ownership grows a lot, up to 600/800 per 1,000. On the other hand, the priority to roads also responds to issues of corruption. Its management is more immediate and local with respect to metro lines."
Verma points out that, at the national level, a good effort has been made to modernize the trains. But he points out that, if when independence was obtained the proportion of transport of goods and people was 80% by train and 20% by road, now it is the other way around. He also points out that the development of high speed is lagging behind.
This is a key issue. To achieve a global manufacturing role, adequate infrastructure and transport are necessary, from ports and airports to metro lines and railways. The new terminal at Bangalore Airport is a symbol of the effort to improve and is probably one of the reasons why a company like Foxconn is considering setting up nearby.
Accusations against the Adani group
Among the challenges are not only political and infrastructural. The Adani case is an example. Gautam Adani is the chairman of a large business conglomerate that has recently been accused of serious manipulations and fraud in the markets. The group denies the allegations, but they have had enough credibility to subtract tens of billions of dollars from the group's stock market value. Adani is very close to Prime Minister Modi. What is at stake in the inquiries is confidence in the neatness of the Indian market and its regulatory bodies.
Another challenge, Stephen points out, is that of raw materials. "This, in my view, is a bigger challenge than infrastructure." China has for years developed a network of access, extraction and refinement of strategic raw materials. India is very dependent on this sector.
The macroeconomic picture also has chiaroscuros. Along with GDP growth, and having managed to lift hundreds of millions out of poverty in recent decades, there are also signs that exports are advancing. In the smartphone sector, in fiscal year 2021 they amounted to about 5,000 million dollars. In 2022, to more than 11,000, according to data compiled by S&P.
Employees at a Foxconn mobile factory in the Indian state of Tamil Nadi, in 2019. Karen Dias (Bloomberg)
Overall, according to the consultancy BAIN, manufacturing exports amounted in 2022 to a value of 418,000 million dollars, an annual growth rate of 15%. In that year, China exported goods worth more than three trillion. But foreign direct investment, which peaked in the 2021/22 fiscal year at about $83 billion, has fallen the next to about $000 billion. If the GDP grows strongly and in a few years the country will be the third economy on the planet, GDP per capita is still 71,000 dollars. Indonesia, 2,600; China, 5,000; Spain, 13,700.
With these assets and liabilities, India bids in the great global manufacturing struggle. Its future will influence the balances of the new world order. The wastelands around Bangalore will clarify how the pulse is decanted. In any case, Mohammed Muzammil and those like him are seen as confident in a better future.
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