India to benefit from shifting manufacturing base but China won’t give up without a fight: Citi economist

Citi’s Chief EM Economist, Johanna Chua believes India's impressive economic growth trajectory has caught the attention of investors seeking new opportunities.

Speaking to CNBC-TV18, from the sidelines of Citi's 2024 Investor Conference Chua highlighted the growing optimism toward India as a promising manufacturing alternative. She pointed out that India has had a lot of positive momentum from previous reforms, like the production linked incentive (PLI) schemes, and a lot of improvement in infrastructure.

“India has had its own domestic reforms happening at a time when the world is also looking for alternatives of China, China plus one...The nice thing about India is also there's a lot of large domestic market, and that makes it more attractive for companies also to go into India," Chua said.

However, she noted that it will be important to monitor if India will be as open to imports of parts to make to enable seamless manufacturing system, because India also wants to develop its own domestic supply chain.

Contrastingly, China faces structural challenges hindering its previous growth patterns, notably in real estate, which is expected to undergo a prolonged recovery period. Additionally, geopolitical tensions persist, impacting China's growth outlook.

But Chua believes China is still very competitive and is not going to give up its dominance in global manufacturing without a fight.

“China is still very competitive and we can see that in across a broad array of goods. So that does pose a little bit of competition. But for now, especially for India's domestic market, there's a lot of long runway to go. So I think we are very optimistic that this manufacturing story can continue.”

Vietnam, another emerging manufacturing hub, Chua noted, faces challenges due to its reliance on China's supply chain ecosystem and its smaller domestic market compared to India.

On March 12, Jane Fraser, the CEO of Citigroup also talked about how India is currently shining on the global stage and has a unique chance to stand out.