India-Taiwan Economic Relations

The government of India recently launched the Digital India and Smart City initiatives in an effort to better connect the government and the people of India. According to the executive director of IBM India & South Asia, Rahul Sharma, technology multinationals have realized how important these programs are and are willing to make big investments. Taiwan is one of the many countries that has expressed interest in partnering with the Digital India and Smart City initiative in hopes of improving the quality of urban life in India.

Before the 1990s, India and Taiwan did not possess strong economic relations. While India and China had historically enjoyed strong ties, in the aftermath of the 1962 Sino-Indian war, strategic rivalry and suspicion arose between the two countries. Hence, India began to seek to develop better commercial and strategic cooperation with Taiwan. Still, it was not until the governments of the two countries decided to mutually establish representative offices in 1995 that the two countries truly began to develop economic relations. Although India still does not have diplomatic relations with Taiwan due to the “One-China” policy, the two countries maintain economic links. The creation of the India-Taipei Association (ITA) in Taipei has led to a flourishing economic relationship between the two countries.

Over the last eight years, the Indian and Taiwanese governments have launched efforts to increase bilateral trade, specifically in the fields of information technology, energy, telecommunication, and electronics. Taiwan and India have signed agreements in attempts to further encourage trade and investment. For example, in 2011, Taiwan and India signed the Taiwan-India Mutual Assistance in Customs Matter Agreement to easily facilitate the exchange of information, technology, and visits by customs officials. This agreement also calls for convenient and secure customs clearance for goods and persons moving between the two parties.

In recent years, Indian Prime Minister Narendra Modi has lauded Taiwan’s expertise in hardware and has said that with India’s strength in software, the relationship can be mutually beneficial. In March 2015, India’s Electronics and Semiconductor Association announced that it had signed a memorandum of understanding in an attempt to encourage partnership and investment between Indian and Taiwanese companies. There are currently more than 80 Taiwanese companies and entities in India. Major Taiwanese technology companies such as FoxConn, Sanyang Corporation, Gigabyte Technologies, etc have all established numerous manufacturing facilities in India. India expects increased Taiwanese investment due to its “Make in India” policy. This policy is a major new national program in India. It is designed to facilitate investment, foster innovation, and enhance skill development.

Various studies have shown that India’s electronic products have the potential to grow up to $400 billion. However, India only has the ability to produce 40% of the total demand. India is not able to produce electronic products to its full potential due to various different reasons. Vice-President Hamid Ansari stated that he believes that the most significant problem is the lack of focus in India’s technology. While speaking at the inauguration of the 17th National Children’s Science Congress, Ansari expressed that the lack of focus in India’s technology has led to deficient innovation over the past few years. Therefore, the country must depend heavily on foreign imports. In July 2015, FoxConn, a Taiwanese electronics contract manufacturing company, announced that it plans to build up to 12 new factories and employ as many as one million workers in India by 2020. According to FoxConn’s Vice President, Josh Fougler, the company is planning on investing $3.5 billion in India over the next couple of years.

Seeing as India is a major software exporter and Taiwan is one of the leaders in information technology, collaboration between the two countries would enhance their economic relationship greatly. Both countries will therefore be able to assist each other in further establishing themselves as powerful forces in the world.