CAN INDIA AFFORD TO BOYCOTT CHINA’S PRODUCTS?

The clash between the Indian and Chinese soldiers in the Galwan Valley was the first clash between the two Asian giants since 1975 that involved fatalities . The nationalistic sentiments have been on high on both sides of the border. This resulted in a clarion call for the boycott of Chinese goods in India.

The twitter in India was trending with various versions of hashtags like #boycottchina , #GoChina and #GoChineseGo. People hurled their Chinese television sets out the window. In the national capital of Delhi, Chinese goods were torched , and so were the effigies of the Chinese President Xi Jinping.

The Government of India never bluntly announced the boycott of Chinese goods but the political dispensation found this time to reiterate the importance of Atma Nirbhar Bharat and simultaneously criticize Chinese arrogance and their profound lack of respect for India’s territorial integrity. The Public Sector Undertakings (PSUs) were by all accounts directed to desist the issuing of new contracts to Chinese companies. The Government also asked the ecommerce companies to display the country of origin in all the products they sell , emphasizing their need to create a self-reliant India.

The bilateral trade between the two countries which had already slumped down by 15% since 2018 is expected to further slow down as India seriously considers tariffs and anti-dumping duties on Chinese goods at the same time searching for China’s alternatives.

The importance of China?

After the United States of America (USA), China is India’s largest trading partner. With the USA, India has a trade surplus. But with China, we have a whooping trade deficit of about $50 billion . What is not good for India however is that it’s important sectors like chemicals, pharmaceuticals, automotive components, consumer electronics and mobiles fulfill 12% of its import needs from China.

According to Sudarshan Jain, the President of the Indian Pharmaceutical Alliance, around 70% of India’s drug intermediaries are fulfilled by Chinese imports.

Although India has announced the policy of Atmanirbhar Bharat, it takes time to push domestic manufacturing and build local supply chains.

India’s profitable mobile sector has huge Chinese players in the form of Oppo, Xiaomi, Vivo. The present feasible access to smartphones which have actually pushed the cause of Digital India Campaign by the Indian Government. It will be difficult to wean off such dependency because as of now, the Indian alternatives are not very competitive. Moreover, if we take’ boycott China’ at its face value then it’s not possible to fully realise it. China has integrated itself into the global supply chains and has established itself as the factory of the world. Even for domestic Indian manufacturing of smartphones to happen, imports from China would be required. In essence, it would be extremely difficult to produce a Chinese-free mobile in india as of now.

BlueStar Limited in India manufactures air purifiers, air conditioners and water coolers. Its managing director B. Thiagrajan insists that the worry is not about finished products but the intermediary components required to achieve that finished product. Many countries in the world import compressors from China. Indian companies have now been spoilt and this dependency on Chinese imports will only be reduced over a period of time.

Many Indian unicorns are funded by China

A unicorn refers to a technology based startup which is valued at over $1 bn. Indian unicorns like Zomato, Ola, Paytm, Big Basket have Chinese companies like Alibaba and Tencent that inject billions of dollars in India as they fund them. Thus, they deeply entrench themselves in the socio-economic and technological fabric of our society.

Gateway House, a Mumbai based think tank states that more than 90 Chinese investments have been made in Indian startups. At least 18 out of 30 Indian unicorns have a Chinese investor. Although the foreign direct investment (FDI) that China has in India is about $6.2 bn and might seem not very significant, a problem comes when one has to restrict the possible monopolies that can be created by giants like Alibaba. These are kinds of investments that have an ‘outsized impact’.

To curtail this, India did amend its FDI rules to prevent hostile takeovers of Indian companies in the post COVID scenario. Although China accused India of breaching the WTO principles but there is no mechanism in WTO where a breach can be questioned upon if the parties involved have a serious trust deficit , are under conflict and cite national security as their reasons.

The $50 bn trade deficit has been a sore point in India-China’s bilateral relations as India demands fair access to the Chinese market and tries to cut down or find alternative channels for its imports. This seemed like a distant or rather a non-existent future so the time is ripe for India to jump the bandwagon for Atma Nirbhar Bharat.

Is self-reliance the answer?

An article in Global Times saw the call for self-reliant India as anti-China in nature, insisting that creating a public opinion against China would be counter-productive to India’s urgent need for economic recovery and that nationalistic sentiments should not dictate economic policy.

But the fact of the matter is that over the years Indian industries have become dependent on Chinese imports which is unhealthy. The rating agency Acuité has stated that India can domestically produce at least 25% of the imports it makes from China, reducing a bill of around $8 bn annually in the process. For example in the handicraft sector, $431 million was imported from China when these needs could have been locally fulfilled.

However in terms of value addition, the think tank Gateway House agrees that it’s better to ban Chinese apps like Tik Tok and many others than ban China’s goods. Moreover, Prime Minister Modi quit the app Weibo .

Such bans would actually hurt China because it could significantly narrow a top growth market for Chinese technology firms. Beijing based ByteDance , the creator of Tik Tok has found a huge market when it comes to India accounting for $611 mn downloads or 30% of its total downloads. Slashing off new users and restricting older ones as they try to install updates would create a significant dent in the company’s revenue. It also sets a global precedent. Talks of initiating similar bans are rampant in the USA and Australia. This is a damper on China’s ambition to enter and reign the social media sector currently championed by the USA.

All in all it is high-time India becomes self-reliant. The glaring gaps in our supply chain are evident. If we aspire to be a $5 trillion economy in the next half decade, these issues need to be addressed. When needed, India beautifully rose to the occasion to manufacture lakhs of personal protective equipment (PPE) gear and became an exporter from an importer. The goal is to have the same drive in other avenues without a pandemic or a fatal border clash hanging over our heads.