NEW DELHI: India and China, two emerging economies of the Asian world, have been keenly watched across the globe for their high economic growth potential. While India's economic boom has largely been driven by growth in the services sector, China on the other hand boasts of a robust manufacturing base that has helped its economy scale new highs.



Comparisons between the two are inevitable and over the years many industry experts and economists feel that India needs to propel its manufacturing sector in order to achieve a sustainably high growth rate. Even as India is looking to push its manufacturing sector, growth in the Chinese economy is dwindling and global investors are looking for an 'alternate China' to park their money in.



Ravi Venkatesan, Former chairman of Microsoft India feels, "For twenty years, China has been a growth engine for many global companies; these companies are now eagerly looking for the next China. No other country is better positioned for this than India. Relatively modest changes in the business climate can unleash a tidal wave of investment and prosperity."



Pankaj Murarka, Head of Equity at Axis AMC says, "With Chinese economic growth dipping, it's high time for India to usher a new set of reforms to unleash its untapped potential to claim its rightful place in the world. And for India to truly realize its potential we need a decisive break from the 'business and politics as usual' of the past. We need a new growth model."



With the Narendra Modi government taking charge at the centre with the promise to provide the necessary impetus to the manufacturing sector, we take a look at five areas in which India should work, in order to be the 'next China'.



1) Manufacturing: China's economic growth has been backed by a very strong manufacturing sector base. While India has missed that bus, it is not yet too late to ensure that the country is able to ride the next-generation wave of global manufacturing growth.



In a recent column in ET, Baba Kalyani, CMD of Bharat Forge said that government has to focus on implementing the national manufacturing policy. "It needs to prioritize indigenization of key sectors like defence, power and railways. If we do not latch on to this next revolution now, we will never be able to catch up," he says.



Echoing the same sentiment, Murarka of Axis AMC wrote in ET, "Today India is on the right side of the demographic curve and will be largest supplier of labour to the world over the next decade. India needs to put 30,000 people to work on an everyday basis for the next 20 years. And this can only be achieved by reviving India's manufacturing and transforming into a global manufacturing hub."

The need for revitalisation of the manufacturing sector has also been highlighted by Ravi Venkatesan "This will require many policy changes including possibly preference for locally manufactured goods in government procurement or local content requirements," Venkatesan has said in a column in ET. "In such matters, India will need to thoughtfully and courageously maintain a fine balance between being compliant with its obligations to WTO on one hand and doing what is in her self-interest on the other," he adds.



According to India Electronics and Semiconductor Association (IESA), manufacturing could create 28 million new jobs in the next 10 years and save foreign exchange, as demand for electronics hardware gadgets is set to expand from $55 billion in 2014 to $400 billion by 2020.



Anwar Shirpurwala, Executive Director, MAIT, the apex body of the hardware sector: says: "The market is there. Talent is also available. With a new government expectations are running high and things should change for the better." But simply having a new government won't kick-start manufacturing and take it to a scale that China or Taiwan offer. Having missed opportunities in the past, experts say the best option is to steer clear of products currently in the market like desktop computers and laptops and look at products of the future like Google Glass. Or even hone expertise in new manufacturing techniques like 3D printing.



In the immediate term, to catch up with the missed opportunities IESA believes foreign collaborations is the way out. Says MN Vidyashankar, president, IESA: "Auto manufacturing took off due to joint ventures with foreign carmakers. We need similar ventures in hightech manufacturing." Already, Japan and Taiwan are scouting for collaborations.



According to IESA 45 Taiwan-based companies are looking at setting up base in India. There's a Japanese City being planned by Japanese companies and is likely to come up in either Pune, or Karnataka or Gujarat. The city will be a hub for Japanese companies keen on tapping the Indian market for electronics and computers.



2) Structural reforms: According to Murarka of Axis AMC, there are enough low-hanging fruits in terms of structural economic reforms that can be unleashed in a short span of time. "The impact of these reforms can be far reaching in reviving India's growth. Areas like land, labour, agriculture, infrastructure, railways, water, mining, tax laws are all in dire need of structural changes," he says.

"India's state-owned enterprises have enormous potential and strengths. But due to poor governance, mismanagement and leaky business practices, they have been corroding and have been a burden on the exchequer for long. We have to set this right, make them globally competitive," Murarka explains.



3) Attracting FDI: From a peak of $31 billion in 2009, FDI inflows declined to $19 billion in 2011 as many companies were put off by the business unfriendly environment; it has rebounded to $28 billion but this is a fraction of the $125 billion that China attracts.



"India is lucky; global companies are naturally drawn to her size, demographics and talent. The government just has to stop scaring companies away. While issues like infrastructure and labour law reform are critical, the foremost task is to make India a less hostile country to do business in," feels Ravi Venkatesan.



The World Bank ranks India 134th out of 189 countries in terms of ease of doing business. "A 40 place improvement over the next five years would make India the world's best destination for global companies many of whom are seeking to de-risk their dependence on China," he says.



Citing solutions, he says, "The top priority must be to stop what Narendra Modi has called "tax terrorism". This is the arbitrary and crude interpretation of tax laws by the revenue authorities which makes India one of the most challenging places in the world to pay taxes; it ranks #158 on the same World Bank scale." "The key is to engage in open-minded dialogue and search for win-win solutions with foreign companies and governments rather than announce policy decision unilaterally," he adds.



4) Judiciary: Judicial reforms form another major part of the reforms process that experts advocate. Murarka says, "Judiciary is the guardian of any democratic system. In a vibrant democracy, it is essential to provide speedy justice to ordinary citizens. And while India does have an independent and active judiciary, we need to carry forward the process of judicial reforms with agility. And for that revisiting our archaic laws and plugging loopholes in the systems is the first step."



Ravi Venkatesan believes that attracts investors despite the legal system rather than because of it. "Improving the efficiency of the judicial system in enforcing contracts and resolving disputes also needs critical attention. Paradoxically for a country that contrasts itself from China by citing the rule of law, India comes in at a lowly 186 when it comes to contract enforcement; only Timor, Tajikistan and Myanmar do less well," Venkatesan says.



"A functioning judicial system would likely also see a reduction in India's risk-enhancing, rampant corruption," he adds.



5) High growth for poverty reduction: Yet another parameter than India can look to China for is poverty reduction. Moving more people above the poverty would provide a definite booster to the country's GDP. It will also be a big step-up in the direction of increasing the demand for goods in the economy.



Murarka of Axis AMC feels that the sustained high growth model that China pursued has led to a decline in its poverty ratio from 85% in the 1980s to less than 10% currently. "In the process it (China) managed to pull 680 million people out of poverty. We should certainly aim to eradicate poverty from our country over the next 10 years and this can only be achieved through sustained high economic growth," he says.