Can boycotting Chinese products be an answer to a self-reliant India?
Author :- Advocate Siddharth Swain
Amidst the extraordinary situation of global pandemic covid-19, the nation is also distressed about the uncongenial relationship with the neighbour country, China especially after the violent combat between the armed forces of both the countries on 15th June, 2020. Ladakh, the valley of dreams has been a belligerent combat zone of late and the Ladakhis are agreeably raising anti-China sentiments.
There has been a national outrage and hustle among a large part of the population to boycott Chinese products. Lately, The Government of India has banned 59 Chinese applications stating privacy concerns but the government hasn’t explicitly announced a boycott of Chinese goods. However, according to reports, States and Public Sector Companies have been reportedly asked to suspend and abstain from issuing fresh contracts to the Chinese companies.
The matter of concern lies on the impact on the domestic industry if the Indian government announces such boycott of Chinese products nationwide. Descending by 15% in 2018 FY, the bilateral trade between both the countries have come to the trade figure of $84.32 billion as of 2019. China’s exports to India account for approximately 3 percent of its total exports, while imports account for a small 1%.
While India imported goods worth $ 68 billion from China, it exported goods to China worth $ 16.32 billion, posting a trade deficit of $ 51.68 billion. Out of the total import of $442 billion, India imported goods worth $62.3 billion from China during April-February FY20, according to the Department of Commerce. In the event of a trade suspension, China would suffer a blow of up to 3% of its exports and less than 1% of its imports, while the Indian export basket would be reduced by 5% and imports by 14%.
Our Import cart from China comprises of capital and intermediate products like power plants, electronic products, organic chemicals and pharmaceuticals, nuclear machinery, metro rails, cars and motorcycles parts mobile phones, plastics and engineering goods. Intermediate products are crucial components used in the manufacture of other final goods in the country, either for local consumption or for export.
The sudden move to suspend trade between China and India will have a catastrophic effect on supply chains, leading to disruptions to production and a consequent loss in terms of local consumption as well as employment.
India’s booming smartphone sector also heavily relies on cheap Chinese phones made by Xiaomi, Realme, Oppo, Vivo, and others with the major share of about 70% of the local market. Indian brands like Lava, Karbonn, and Micromax are, at best, marginal players on the lower end of the market smartphone.
For example, Chinese money has penetrated the tech sector in India, with companies like Alibaba and Tencent strategically injecting billions of dollars into emerging Indian startup companies like Zomato, Paytm, Big Basket and Ola. This has led the Chinese giants to “integrate” deeply into the ecosystem and socio-economic technology of India. These revered Unicorns (having valuation of $1 billion) and others like Practo, ShareChat, Meesho and Car Dekho are Unicorns in the making, if terminated, shall not only choke venture capital funding for new startups, but also dent confidence of foreign investors who primarily look at policy stability and an investment friendly climate in the host countries before channelizing their investments.
Taking account of contract enforceability between two countries, it is estimated that many Chinese companies and investors are waiting to invest between $ 12-15 billion in approved infrastructure projects in India, either directly or through a joint venture with Indian companies.
Any move to cancel these joint venture agreements will darken the prospect of implementing contracts in India and stifle and halt projects of national strategic importance.
Focussing on access to technology and capital, there is a great gap in physical infrastructure and access to the latest technology in our country. India is estimated to spend $ 1.4 trillion between 2019-2023 to achieve the Sustainable development objectives.
These large fund requirements are generally met with loans from multilateral institutions such as the World Bank, the Asian Development Bank, the Brix Bank, and special purpose vehicles for foreign governments. From a viewpoint, total Chinese investments in India is expected to cross a mammoth $26 billion accounting future projects (approved and unapproved projects).
Remedy/ Way out: Can India be self-reliant?
Based on the stated facts, one can conclude with a claim that there is no short-term response to address the trade imbalance facing China. India can be supported under both tariff and non-tariff barriers such as anti-dumping duties, anti-ship fees, and protection fees to curb Chinese imports and promote domestic industrial growth.
Reasonably, the differential tariff structure can be positioned based on the strategic importance of each professional products in China’s total import basket. But it is appropriate to mention here that it will be difficult to separate imports and tariffs and that these measures may prove fatal and detrimental. For instance, if custom duties on imported products is increased making the imports expensive, it might be that the companies will switch to domestic suppliers.
But those suppliers will are bound to have higher costs otherwise, companies would not be importing in the first place. Consequently higher cost of self-reliance will ultimately be payable by the Indian consumers.
Wanting the country to be self-reliant and also wanting the manufactures to be a part of global supply chains of big companies and compete globally is somewhat contradictory.
This is because companies need to compete globally in order to be a part of the global supply chains and advocating self-reliance and producing for only domestic economy will not serve the purpose other than being an isolationist. All things considered in this covid-19 pandemic phase, the domestic manufacturing units are at a halt and lacking the necessary pace to meet the global competitiveness.
Above all, it should be noted that there is an urgent need for structural reforms in India, including labour, education, the financial sector, restoration of administrative models and an ascent in the R&D investment which would serve as a healthy environment for domestic manufacturers to be more competitive.
