I keep hearing that protectionism doesn't benefit the people of a country, but China and now this feel like counterexamples. Am I misreading?
Manufacturing is such an iconic aspect of the economy that every government or policy maker loves to talk about it and show progress in it. India has unnecessary incentives put in place for manufacturing and Apple is taking advantage of it. But overall it's a bad deal for India.
The clothing industry does this all the time — they'll build up a local economy until it's too expensive, and then move on to the next desperate area.
If you're trying to be appealing to industry by racing to the bottom you're essentially fighting an extended battle for last place.
India, unfortunately, has a long record of getting this exactly wrong.
Wait, uh, why is this a bad thing? Isn't that what we want, to build up a local economy, to build up local capital which if the local populace invests wisely would allow their labor force to be eligible for more skilled jobs etc.
I think more likely is that more complex manufacturing will come in as infrastructure and skill set is more in place. Also improved economy leads to better education, supporting service industry.
Clothing industry may have left India and China, but both are better off now.
Where did the factories go? Bangladesh, where workers cost less and are abused more.
http://www.msn.com/en-us/money/markets/inside-alabamas-auto-...
China on the other hand went full Leninism and destroyed the elite (which TBH might have been more suited in India's case after Independence), so when Deng Xiaoping opened up, there were few "special interest groups" to guide things in their favor. Things today are different. China appears to me to be increasingly taking the old (crony-)capitalist route (is there any other ?). China does exactly what Ola/Flipkart want. Let's be clear as to who this benefits.
One moral is that systems can't compensate for a systematic destruction of social ethics. The other probably is to not fall into the word trap. Things meaning vastly different things are "PR-ed" with similar names to attain semantic advantages over the plebs.
[1]. Amusingly, many of these houses were built in collusion with the British Empire, and some even had their origins in the Opium trade with the Qing.
You don't need to make 30% of something to sell it Chinese retail stores, so I don't think the two are comparable. India also has strict employment laws where once a company reaches a trivial size, it is illegal to fire anyone. The firing is then done by via government petition and you better have an airtight case to do so. So a lot of companies don't scale past x employees to avoid all the added regulation that would hurt them. That's a brake on their economy.
China is almost the opposite of this. They have so few rules and regulations that western product manufacturing moved there to enjoy the low prices. This had a trickle down effect locally. All those jobs and cheap stuff meant that they could ride the coattails of these behemoth Western economies looking for the lowest cost of manufacture. Then the Chinese slowly turned that momentum into their own manufacturing with their own brands and added token protectionism at best to keep the Westerners at arm length, but not enough to chase them away like Brazil and India do with their strict protectionism.
These two countries couldn't be more different. China has a $11T GDP while India has merely has $2T, even with similar populaions. China has literally 5x the economy India has due to market liberalization, low regulations, and embracing the world economy.
things like self sufficiency, long-term strategic growth planning, etc. are not factored in.
also:
labor costs are huge in these scenarios.. if indian factory workers were paid what US auto workers are/were paid, I doubt apple would be taking the same strategy.
same could be said for indian mfg in general and also china..
Moreover shipping costs already serve as a natural protectionist barrier, yet we still outsource manufacturing jobs.