OREANDA-NEWS. October 20, 2014. India is finally cranking up the export engine but there is still a long way to go, especially to match China. The country isn’t even back to where it was at the beginning of independence in the late 1940s.

But it doesn’t follow that India could not at some point turn into a powerful trading nation. In fact, a window is gradually opening: China’s rising cost base means it is clearing the way for competitors to make inroads.

India has so far had the bigger export success higher up the value chain, for example, in pharmaceuticals and cars. But the real unleashing of its export prowess will come once it focuses on its growing comparative advantage – low labour costs.

Wages in India are well below those of other major East Asian economies. It ranks ahead of Vietnam and Pakistan, but in terms of size, only India has the depth and potential to pick up the baton from China as a mass producer of cheap exports.

But much more needs to be done to turn such an enticing prospect into reality. Less regulation, paved roads, a steadier energy supply and better ports, for instance – but also foreign direct investment. That’s how China kicked off its spectacular run: shipments started to soar once foreign manufacturers brought their know-how, capital and sales channels, and set up shop in specially designated export-processing zones.

So far, India hasn’t done too badly in attracting foreign direct investment, matching China’s progress. However, most of it is going into the domestic sector and doing little to lift exports.

Perhaps that is why India’s export performance has started to deviate from China’s at a similar stage of development. India’s ratio of exports to GDP against per capita income has started to lag. Lifting it further would require, in addition to all the proposed structural reforms, luring in more foreign producers – just as China did. Then, with a few tweaks ‘Made in India’ should show up on shelves near you.