In our article “India positions itself among the powers of Asia”, which appeared in our Italian paper Il Partito Comunista n. 417, we described the implications of the imperialistic quartet of China, Russia, India and the United States, and how New Delhi could afford it, thanks to material factors and objective objectives, a certain political autonomy capable of favoring one’s own imperialist expansionism. This policy allows it to make agreements with the various imperialist fronts, through a profitable ambivalence that originates from the material basis of the expansion of Indian capitalism, increasingly determined to gain a leading role in the disputes of international capital.

The current year has confirmed this trajectory. With strengths but also limitations and weaknesses, the South Asian giant is trying to become an alternative manufacturing power to China, taking away from the latter the primacy of “factory of the world”.

 

The Disputed Indo-Chinese Border

Last December 9 troops of the Indian army clashed with the Chinese in the district of Tawang in the region of Arunachal Pradesh, which borders the north with China, east and south-east with Burma, west with Bhutan and south with the federation states of the Indian Assam and Nagaland. The greater part of the region is in contention with Beijing, which claims the southern part of Tibet.

According to Indian sources, Delhi’s troops pushed back Chinese troops that had crossed the border (Line of Actual Control, or LAC) and that China has disregarded an agreement formed last September. Beijing has, on the contrary, said that the Indian troops had allegedly trespassed while a Chinese People’s Liberation Army patrol was underway.

An escalation to be expected after the Delhi government’s decision to increase the stationed troops in Ladakh, an Indian territory bordering between the mountains ranges of Karakorum and Himalaya. Even though the past clash retains a moderate intensity—only injured soldiers can be counted on both sides—it is however a clear expression that relations between the due giants of Asia remain very tense.

Clashes of this kind, which generally involve exclusively the use of bladed weapons, are nothing new. The previous skirmish occurred in January 2021 on the disputed border of the Indian state of Sikkim. In June 2020, on the other hand, in the Galwan Valley between Ladakh and China’s Aksai Chin, clashes had resulted in the deaths of 20 Indian soldiers and an unknown number on the Chinese side, as we described in issue n. 23 of this newspaper.

The disputes involved several border areas and, as early as 1962, resulted in a war ending in India’s defeat; it was not followed by the conclusion of any peace treaty between the two countries, who are formally still at war.

The Sino-Indian border is about 2,200 miles long and involves as many as 12 regions. It consists of three segments, separated by Nepal and Bhutan. The first, to the west of Nepal, runs into the Himalayan range; a shorter section follows between the two small buffer-states; while to the east of Bhutan it extends to Burma. This long border is among the most heavily armed in the world, manned on both sides by tens of thousands of soldiers and heavy weapons, and sees new military infrastructure growing continuously. The most critical areas are Aksai Chin, granted by Pakistan to Beijing and claimed by New Delhi, and much of India’s Arunachal Pradesh, claimed by China.

The past April 3, the Chinese government changed the Mandarin names of 11 areas within what China calls Southern Tibet. The Global Times newspaper, which is under the Communist Party of China, pointed out that five mountain peaks, two rivers, two regions, and two population centers were renamed. The toponymy change has two precedents: in April 2017 it affected six localities and in December 2021 another 15. The Chinese document also announces a willingness to change the administrative status to two Tibetan border territories, Mainling and Cuona, still partly occupied by India, which would change from county to city, a condition that would allow the establishment of government buildings and barracks in those areas.

 

The Challenges of Indian Capitalism in the Present Phase of International Crises

According to various sources, including the projections of the United Nations, India has become the most populated country of the world in 2023, surpassing China. The official data of 2022 estimates 1.38 billion inhabitants against 1.41 for China. While a slight population decline is expected for China in the coming years, India’s population continues to increase. This determines an increase of work force. Today around 30% of the Indian population is comprised of those between the ages of 15 and 30, a figure that puts India among the “youngest” countries in the world. The average age in India is 28.4 years, and in China about 10 years older. This demographic trend contributes to the expansion of Indian capitalism, which has long been positioned among the great powers of Asia and is on its way to compete with China in the manufacturing field as well.

Furthermore, for competing on the industrial plane with its powerful neighbor, India will have to first accomplish many transitions. In the first place, necessary massive investments to overcome the current fragile infrastructure by modernizing road, rail and telecommunications networks. In the second, it is going to have to eliminate the remnants of antique socio-economic formations, above all in the endless countryside, that still opposes capitalistic penetration and the transformation of millions of poor peasants into wage laborers, making the labor market more flexible.

In addition, the state will encourage the establishment of new companies through tax breaks, dismantling bureaucratic control defending state gigantism, attracting foreign investment, and ending traditional protectionism in industry.

While these ambitious goals in India’s ruling class’s agenda are not easy to achieve, especially in a short period of time, it should still be remembered that Indian capitalism is not starting from scratch. India has become the fifth largest economy in the world after surpassing Russia, Brazil, Canada, Italy, France, and finally the United Kingdom since 2014. According to the International Monetary Fund (IMF); by 2028, India is expected to become the third largest economy in the world, bypassing even Japan and Germany. The G-20 was hosted last September 9-10 in New Delhi where it emerged that India will be the fastest growing nation in 2023.

The central statistics office, for the statistics of New Delhi, paints a rise in industrial production. The past April there was a +4.2% increase on an annual basis, which is followed by a better figure in February, +5.6%, and in line with +4.3% of December 2022.

In the April-June quarter, manufacturing production increased by 4.7%. In the first eleven months of the fiscal year in India, which begins in April, industrial production increased by 5.5%, against the 5.2% estimated by economists.

Expansionary scenarios for Indian capital emerge from various economic indicators, largely determined by domestic demand. Steel production increased by 11.9% in the April-June quarter, while steel consumption increased by 10.2%. Cement production is also growing strongly, 12.2% more in the April-June quarter, while that of coal increased by 8.7%. Sales of commercial vehicles increased in the fiscal year 2022-23 by 34.3%, while sales of private vehicles rose by 18.7%.

 

The Industrial Contention: the Domination and Slowdown of the Chinese and the Moves of the Indian Giant

The course of capitalism over the decades has led to China’s emergence as the world’s leading manufacturing hub, an achievement made possible by several factors including the relatively low cost of labor and land, the presence of technologically advanced companies, adequate infrastructure for communications and distribution of goods, and the policies of the Chinese bourgeoisie, clumsily disguised as socialist, yet aimed at attracting and encouraging foreign capital investment.

However, the international crisis of the capitalist system, growing trade tensions with Washington, and the global Covid-19 pandemic have, at least partially, jammed the Chinese supply chain. During the most acute periods of the pandemic, there were several forced company closures in China with consequent impact on certain industries such as electronics, automotive, and pharmaceuticals. This chain of events has affected the market on a global scale. It is therefore no coincidence that the Chinese economy has fallen to its slowest growth rate in decades. Against the backdrop of the general crisis of capital, Beijing faces problems such as a high youth unemployment rate, crisis in the real estate sector, and scarcity of public financial resources.

It is in this scenario that several multinationals are diversifying their dependence on China for their supplies. At the same time, India seeks to accredit itself on a global scale as an alternative manufacturing hub to Beijing. This process has been underway for several years, if as early as the beginning of the 2020s when a Swiss financial institution claimed that India was becoming the preferred destination for capital seeking an alternative to China.

India has several advantages for international capital. According to some studies, the basic wage of Indian workers is about $300 per annum while in China a worker with the same qualifications earns three times as much. In addition, operating expenses are lower than what a company would be required to incur in China, after the Indian bourgeoisie took steps to create “special economic zones” that offer, among other advantages, exemption from export duties and sustained incentives. In short, an environment conducive to the rapacity of capital.

Also to be considered are the positive trade relations that the Indian giant, unlike China, has with the U.S. gendarme.

On this trajectory, Indian Prime Minister Narendra Modi launched an investment plan called Gati Shakti, “speed force”, in 2021, which includes a series of investments to make India’s backward infrastructure more competitive. The plan to modernize logistics and connectivity has a long-term scope that will continue until 2040.

The central government has also adopted taxation favorable to the manufacturing sector. In 2022, the corporate tax rate was reduced for the first time in 30 years. In addition, new companies were able to take advantage of a reduction in taxation from 25% to 15%. This policy, which is expected to be replicated in the future, is intended to make India competitive with emerging economies in Southeast Asian countries such as Vietnam, Thailand, and Indonesia.

Always in an effort to attract foreign capital, last March the Indian government earmarked some $6 billion to be allocated mainly to the electronics manufacturing sector.

 

Apple’s Choices and Obstacles to Chinese Companies

We are thus facing an international framework that is subject to rapid transformation. Already, today a big multinational like Samsung has relocated production of much of its components outside of China. Apple has announced the initiation of production of the new series of iPhones simultaneously in India and China starting next fall. Apple has a large factory near Chennai, on the Bay of Bengal and capital of the state of Tamil Nadu in eastern India, where assemblies of various products are made. The factory was opened in 2017 by Foxconn, a Taiwanese multinational company and longtime partner of Apple that has become the world’s largest manufacturer of electrical and electronic components.

The relationship between China and the Cupertino-based company is fruitful but complex. The Californian multinational cannot lose the huge Chinese market, but assembling its products in India responds to a number of factors including the blatant vulnerabilities found in the supply chain at the huge Chinese Foxconn manufacturing complex in Zhengzhou—the nicknamed “iPhone City”—and where during the Covid-19 pandemic, the workers’ anger we described in issue n. 50 of this paper had erupted. For months the distribution of cell phones was slowed as a result, causing losses estimated at several billion dollars. Foxconn’s investments in India are also prompted by the problematic political and economic relations between Chinese and U.S. imperialism, exacerbated by tensions over Taiwan. It is no coincidence that, as we write, the Chinese authorities have begun checks for alleged tax irregularities on Foxconn subsidiaries in the provinces of Guangdong and Jiangsu.

The effects of this path were not far away: while India produced only 1% of the world’s iPhones in 2021, in the fiscal year ending March 2023 it produced nearly 7%, worth more than $7 billion.

The British multinational Nothing has also decided that from July its new Phone_2 will be manufactured in India. The California-based multinational Google has reportedly already contacted companies such as Lava, Dixon, and Foxconn, which had access to government incentives to promote local production.

What is significant, however, is what happened to the Chinese company Xiaomi, which suffered an asset seizure of nearly $700 million, accused by the Indian side of making remittances to foreign entities disguised as royalty payments, thus exporting tax-free profits. The de facto seizure halted the Chinese company’s operations in India. The same was repeated for the large Chinese company Vivo: Indian police raided 48 of its offices and froze 119 bank accounts worth about $60 million. Included in the dock was also Oppo, another Chinese consumer electronics company that allegedly implemented tax evasion operations totaling $551 million. The telecommunications leader, China’s Huawei, was also accused of evading $100 million in taxes and, along with ZTE, yet another major Chinese telecommunications company, had been ousted in 2020 from bidding on India’s new 5G network infrastructure, a sale worth tens of billions of dollars. The Indian government has also banned several made-in-China apps including TikTok.

 

Precious Microchips

Diversification of the electronics supply chain is involving many Asian countries, including India and Vietnam, whose governments aspire to host some of the production in the high-tech sector that is now done in China.

In December 2021, India’s ruling bourgeois gang passed a law allocating 760 billion rupees, $10 billion, to finance the emergence of a domestic microchip industry. Some estimates predict that revenue from this industry will grow from $20 billion in 2020/21 to $63 billion in 2026.

There were no semiconductor manufacturing centers on Indian soil before several projects were implemented in 2022, financed 50% by the government and supplemented by incentives from regional states. India’s Minister of Electronics and Information Technology reported that manufacturing in the country would reduce dependence on imports by avoiding slowdowns or production stoppages due to supply delays. Indian Premier Modi traveled to Washington in late June where several trade agreements were signed that, among other things, provide for microchip production in India.

Among the most important undertakings is the one announced by Foxconn in alliance with Vedanta, India’s leading aluminum producer with interests also in the telecommunications sector. For the first factory, which is expected to be set up in Gujarat, the Taiwanese company would guarantee an investment of about $120 million, to which would be added financial support from the government. The announcement by Micron Technology, a U.S.-based multinational company based in Boise, to build a new plant in Gujarat as well, that will enable the production of electronic memories to meet the growing demand of the markets, is recent. Micron’s investment, in several phases, will be more than $800 million. The U.S. multinational will receive 50% tax relief from the central Indian government and 20% from the state of Gujarat. IGSS Ventures of Singapore plans to invest $3.2 billion in a new plant in the southern state of Tamil Nadu. Another project is that of Elest, a subsidiary of Rajesh Exports, which plans to build a display factory in the southern state of Telangana with an investment of about $3 billion.

But scrutiny of the requirements placed by the government for the disbursement of state grants is causing delays in the implementation of many projects, while others have already completed the first stages of agreed planning.

 

Attack on the Conditions of the Working Class

 

To the possibility of concretely becoming a manufacturing alternative to China, snatching from it even fractions of its industrial output—equivalent in any case to billions of dollars—India’s ruling class has not been unprepared on the home front.

In the southern state of Karnataka, in an area with a population of more than 60 million, about 40% of whom live below the poverty line (itself a distorted bourgeois parameter that is insufficient to account for the real extent of poverty) partly as a result of pressure from some multinationals interested in bringing manufacturing there, a reform of labor laws has been adopted to better squeeze workers. In this state, home to much of the country’s technology industry, one of the most flexible labor regimes on the Indian subcontinent has been imposed. 12-hour work shifts will be allowed in factories, up from the previous limit of nine. Women will be “free” to work night shifts, emulating fellow women in China and Taiwan where they numerically dominate on the production lines of electronics factories. The maximum overtime limit rose from 75 to 145 hours in three months.

An Indian government official commented to the Financial Times, “India is set to become the next big manufacturing hub. When we compare India with other countries [...] we have to increase our efficiency by a big margin in terms of increasing labor productivity”, obviously on the skin, sweat and blood of the working class.

Mallikarjun Kharge, current president of the Indian National Congress and member of the Parliament of Karnataka, who emerged victorious in the local elections in May, said, “[i]f anyone wants to reduce dependence on China, we, Bangalore, the State of Karnataka, are his first choice. We are at the top of India’s innovation index, we have many white-collar workers and skilled workers, we are agile”.

Foxconn, one of the companies that dictated the rules of the game to the Indian government, welcomed this reform and promptly informed the Indian executive of its intention to establish a new iPhone manufacturing plant in this state as well, in addition to the one already in Tamil Nadu. It will be a complex on an area of 120 hectares, with a cost totaling $700 million, near the Bangalore airport. A manager from the Taiwanese giant comments, “[b]eing able to run production with two 12-hour shifts, with plants running 24 hours a day is very important to us”. An estimated 100,000 workers will work in the new plant, numbers reminiscent of China’s hellish factories.

The Possible Ambivalence of Indian Imperialism

The Indian giant is, however, grappling with several unresolved internal factors, like the agrarian question, which is still crucial in some parts of the country, and which we will have to study in depth.

The Indian economy seems to give international capital some more assurance than other emerging countries. According to some estimates, India ranks second among the countries that contribute most to the growth of the world economy. It is no coincidence that the IMF has reiterated that the Indian giant remains a “beacon of light”. For capitalist leeches, we add.

Of course, India is not comparable to the military might of the United States, nor can it yet compete with China’s industrial production, but its economy has reached the stage of full imperialist maturity, beyond the hogwash that many false communists propagate even within that country. For us and for Lenin, imperialism is a superstructure of capitalism, a material stage in the development of capital, and it is certainly not correct to reduce it to a political choice, to a subjective will expressed by the bourgeois ruling classes of each state. Every single bourgeois national State is drawn into the world imperialist system as competing “national trusts” (to quote Bukharin) that struggle to capture higher shares of surplus-value globally. A firm may be in debt or running on losses, but insofar it is a firm, it competes against other firms on the market. A capitalist State may be imperialized by a higher power, but insofar as it is a capitalist state it is necessarily imperialist itself, even if its power is extremely feeble relative to the other States. Such is the folly of all modern “anti-imperialism” abstracted from Marxism—it becomes merely a cover-up for yet another imperialism.

The United States cannot afford to lose Delhi as a key ally in Beijing’s containment strategy in the Indo-Pacific and therefore for the time being is forced to take note of the nonchalance and autonomy with which the Modi government acts, a non-secondary player on the international chessboard. At the same time, it would be wrong to think that India-U.S. ties have as their only common ground the contrast to China. Washington is today India’s leading trading partner. But if the United States is number one, archenemy China is number two, and alliances in the world of capital are by nature very fickle.

Certainly, reducing dependence on Beijing is a goal that the Indian bourgeoisie will pursue beyond the demands and pressures of its U.S. ally. And Modi’s visit to the States seems to have been very fruitful, particularly in the two strategic areas of technology and military, in which New Delhi lags far behind other major powers.

At the same time, to sustain the growth of its own industry, Indian imperialism needs to source a huge and growing volume of cheap energy products. So, beyond Modi’s statements in Washington, India will be interested in maintaining profitable relations with Moscow, and will continue to buy cheap Russian crude oil, and will continue to sell some of it back to Europe. The economic and political relationship with Russia allows India not to rely exclusively on Western powers and characterizes its present ambivalence, which for now rules out an alignment to a defined imperialist front. It is no coincidence that trade between the two countries during the current year was 20% higher than in 2022. And that is until the inevitable next generalized war of capital.

With its vast police and military, equipped with the most modern kinds of surveillance systems, one of the world’s largest navies and air forces, advanced satellite imaging and possession of nuclear weaponry, overseen by a towering network of centralized bureaucrats and a tightly-knit judiciary, India today is one of the most striking examples of the capitalist monster-state. The Indian giant looms as one of the major protagonists in the international bedlam of capitalism. But the deep crises of capital will come to abruptly interrupt the dreams of the Indian bourgeoisie, grappling with an increasingly numerous, concentrated, organized class of pure wage-earning proletarians. All they lack now only is the address of the reborn world communist party, that will guide the self-emancipation of the proletariat, not only in India but worldwide.