Walking the India-Taiwan economic corridor

India’s ‘Look East’ policy established in 1991 revived the geography’s ties with Taiwan. Since then, total foreign trade has grown by an average 10 per cent annually to $US8.5 billion in 2023. India is now Taiwan’s 16^th largest trading partner.

"Many Taiwanese groups are already expanding their offshore presence and are doubling down on India as a strategic destination.”

Taiwan’s economy produces a wide range of sought-after goods, from shoes to semiconductors. Its annual trade surplus with India in March 2024 was around $US4 billion, centred largely on essential capital goods like machinery and sophisticated consumer electronics. Taiwanese businesses have long viewed India as a lucrative destination and ‘Made in Taiwan’ products are viewed as strong and reliable.

India will need more investment in machinery and technology if it is to meet its ambition to become the world’s third-largest economy by 2030. India’s burgeoning middle class will demand more high-quality consumer goods.

Taiwan is in the box seat to proactively meet those needs and can become a strategic partner to supporting India’s ascension to a global economic powerhouse.

Mutually advantageous

As India strives to move up the global value chain especially in technology-intensive sectors like chipmaking and electronics, a deeper economic partnership with an advanced economy like Taiwan would be mutually advantageous. The latter’s cutting-edge expertise could help bridge technical gaps in the former’s economic development.

In return, India offers inexpensive labour, rapidly developing technology, policy-linked production incentives and improving business conditions. This lays the foundations for Taiwanese manufacturers looking at new shores for expansion.

In 2023, the Taiwanese government established a Taipei Economic and Cultural Center (TECC) in Mumbai aimed at promoting bilateral relations with India in various sectors.

In February, the TECC said collective investments from 228 Taiwanese companies in India was about $US4.5 billion, resulting in the creation of 170,000 jobs. These figures may grow as foreign direct investment (FDI) into India from Taiwan is less than 1 per cent.

Many Taiwanese groups are already expanding their offshore presence and doubling down on India as a strategic destination. In February, technology group Hon Precision Industry, also known as Foxconn, announced plans invest an additional $US1.6 billion in India.

In 2023,Taiwanese footwear maker Pou Chen unveiled plans to spend $US281million setting up a manufacturing facility in India’s Tamil Nadu. For Taiwan, India’s global human capital footprint is an untapped asset.

According to a 2022 report by the Indian Ministry for External Affairs, around 1.3 million Indian students are studying abroad. Of these, more than 2,200 were studying in Taiwan, less than 3 per cent of its total foreign student population.

Given the impact of Indian students in the United States, Canada and Australia, Taiwan’s economy could benefit greatly from India’s vast and growing appetite for higher education.

Complexities

Still, there are complexities in the operating environment that need to be addressed for this India-Taiwan economic corridor to flourish. In addition to India’s central government, the 28 Indian states have their own economic ambitions and legislative powers.

These powers cover vital issues like labour laws which, if simplified, could pave the way for more seamless foreign investment at a greater pace.

Additionally, emerging climate and energy-related risks amid ambitious net-zero targets also present challenges. Most Taiwanese multinationals have supply chains involving the US and European parties, many of which have tight timelines for adopting renewable energy sources.

It’s undeniable India has taken impressive steps forward and is committed to improving its business and export markets. Deeper reforms, like a harmonisation of labour laws, will create an increasingly attractive environment for the international business community.

There are stories of success. ANZ has seen foreign investors fast track their penetration of the market in India, especially in the IT hardware industry, by tapping local regulatory and financial expertise or executing joint ventures backed by due diligence.

Ultimately, the India-Taiwan relationship holds immense promise across trade, investment and human-capital exchange. Strengthening this partnership will require concerted efforts and proactive measures from both sides if it is to realise its full potential.

Rufus Pinto is Country Head India & David Leong is CEO Taiwan at ANZ

This article originally appeared on ANZ Institutional