The new government of Indian Prime Minister Narendra Modi, who was sworn in a few days ago, is weaker than his previous governments. Mihir Sharma, a senior researcher of the Indian Observer Research Foundation, published an article on the Bloomberg News Agency website on June 11, and believed that the main reason for this situation was employment. Why is India hard to solve the employment crisis?

In this Indian election, voters punished the ruling Bharatiya Janata Party for failing to create stable employment opportunities, which are expected to be provided by a rising country. Sharma believes that if policy makers want to change this situation, they need to better understand how modern supply chains work.

In the past, the transfer of production from one country to another followed a consistent pattern. When companies realized that they could produce products more effectively in poorer countries, they went there to invest, build factories and create value. Finally, when the second country becomes rich, the cycle will start again, and the third or even poorer country will become a new investment destination.

However, Sharma said that India's attraction to multinational companies is far from meeting people's expectations. Recent data show that India's actual utilization of foreign direct investment fell to the lowest point since the 2008 financial crisis last year. There is a striking disconnect between Indian officials' remarks that India is the "next China" and the depressing reality.

Against the background of rising economic nationalism, global cross-border investment has generally declined. However, the reduction of foreign direct investment in India has nothing to do with this. India's share of global FDI inflows is also declining.

Sharma believes that the operation mode of the decoupling era should not be like this. The problem lies in the outdated thinking of New Delhi.

The way India treats the international economy reminds us of the 1970s. Policymakers seem convinced that trade policy is about reducing imports and increasing exports, rather than focusing on creating more value at home.

Under the pressure of various lobbying groups, officials have been raising tariffs without rules and regulations. They increased subsidies to the manufacturing industry to attract producers. At the same time, for national security reasons, they are trying to exclude Chinese companies from the local supply chain to a large extent.

Such a strategy is doomed to failure. The Indian market is not so big and deep. Multinational companies will not transfer the whole supply chain here to work for it. They need to be able to export at competitive prices.

Moreover, officials must understand that they cannot pretend that China does not exist. Most of today's decentralized and disjointed supply chains are dominated by China. This makes it an arduous task to try to create a new supply chain that completely excludes Chinese companies and products. In the long run, to reduce dependence on China, countries must continue to contact China for a long time.

Apple understands this. This American enterprise has significantly increased its production and exports in India. This is possible because Apple has pushed its Chinese suppliers to set up factories in India. What about other enterprises? Indian officials continue to make their private sector reduce business dealings with China. Rejecting investment and technology from Chinese companies will only make it harder for India to replicate their success.

Sharma wrote that many other countries did not act like India. For example, Vietnamese officials realized that the road to economic independence depended on moving to the upper end of the China led value chain.

Vietnamese officials are not worried about importing from China, because in 2020, 61% of the intermediate products and services imported by Vietnam will be used for export, doubling the level of 2000. In India, the corresponding proportion is 26%. The Organization for Economic Cooperation and Development points out that this is almost the same level as India in 2008.

"Vietnam lives in the 21st century. India still lives in the 20th century," Sharma said. Although some recent changes in the rules concerning Chinese investment in India may mean that people are beginning to realize this problem, the new government must act faster to update its policies. Otherwise, it will be difficult to provide what angry voters want most. (Compiled by Zhu Jie and Li Qi)