Union Budget 2024: China's overcapacity crisis and its implications for India

Union Budget 2024: As Finance Minister Nirmala Sitharaman is set to announce the Union Budget 2024 at 11 AM in the Lok Sabha, experts are voicing their perspectives on the economic implications of China's overcapacity crisis and the opportunities it presents for India.

Economist PK Basu, in a conversation with Republic TV, has highlighted the severe overcapacity issues facing China, particularly in the real estate sector. "China is grappling with overcapacity across all industries, with a massive surplus in real estate," Basu explained. "There is no substantial demand for new real estate, as most individuals already own multiple properties. Consequently, growth rates of 4 to 5 per cent in China are unsustainable in the long term."

Basu also noted that China's strategy of dumping excess capacity has alienated many countries, leading to a global reassessment of trade dynamics. "The rest of the world is now acutely aware of China's dumping practices, which have been ongoing for over 15 years," he said. "Countries are increasingly focused on protecting their domestic markets. For India, which runs a significant bilateral trade deficit with China, the economic survey suggests encouraging Chinese companies to invest in local production rather than simply exporting components."

B Thugarahan, Managing Director of BlueStar, provided insights into India's potential role in the "China plus one" strategy, which suggests diversifying supply chains away from China. "The assumption is that India could be the 'plus one'," Thugarahan noted. "However, for India to capitalise on this opportunity, we must address key challenges. European and American supply chain managers seek products of the highest quality at the lowest prices—standards that China currently meets due to its domestic scale."

Thugarahan underlined the need for India to improve its domestic scale and improve quality standards. "India needs to build its domestic scale and align with global quality standards," he said. "While the government has initiated several measures, there is still much work to be done."

As the Union Budget 2024 is set to be announced, the spotlight will be on how India can leverage the current economic climate and address the challenges highlighted by experts to strengthen its position in the global market.