From “ Hindu-Chini Bhai Bhai” to “Hindu –Chini Bye Bye” , the shift in slogan speaks volumes about the patchy relationship that India and China have shared since it’s (India) independence. Panchsheel Treaty of 1954 was the first step by India to establish a peaceful accord with China. Sadly, expiry of the agreement was marked by Sino-Indo war of 1962 which dented the relationship between the two. The war was followed by sabotage in 1975 by Chinese army which claimed lives of our 4 solders. This further weakened the relations with our Asian neighbor. And now, Doklam standoff in 2017 and the recent Galwan valley skirmish that witnessed martyring of 20 soldiers has stirred anguish in citizens of India. These face offs and wars apart from raising tensions at border have strained our economic relations too.
People holding placard reading “Boycott Chinese Goods and Apps” is the new scenario that the country is witnessing recently. This also comes amidst of announcement by our honorable Prime Minister Shri Narendra Modi envisioning to transform India into “Atamanirbhar Bharat”. However the current situation demands a pragmatic answer rather than a knee-jerk and jingoistic retort if we really want to realize our dream of becoming Atamanirbhar.
Before blatantly ostracizing the Chinese goods it is imperative to understand the present India-China trade structure. It is very important to look at our dependence on China and its goods so that a well thought plan can be put in place. Let’s have a look at the figures!!!
Trade figures suggest that India is the 4th largest importer of Chinese goods amongst other importers. Also, India clocked trade deficit of $56.8 billion in 2019 with its imports from China increasing by 2.1{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} and exports falling by 0.2{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503}, an official from China’s General Administration of Custom (GAC) said. Further a sectored breakup shows that out of respective imports; 20{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} of auto components, 70{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} of electronic components come from china. Similarly 40{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} of consumer durables, 70{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} of API and 40{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} of leather Goods are imported from china. India’s trade statistics with china underscore that it’s import dependency for raw materials and critical components (Auto, Durables, Capital Goods) is skewed.
As far as Chinese investments are concerned the figures are even more discouraging. Chinese investors have pumped in over $5 billion in Indian startup ecosystem so far. Some of the top investors includes names such as Ant Financial, Tencent , Shunwei Capital amongst others. Ant Financial alone has invested about $2.7 billion in India across seven companies including Paytm. On one hand Tencent has been backing unicorns such as Flipkart, Shunwei capital has been doing rounds of capital in food delivery giant Zomato amongst others. So it will not be wrong to assert that Indian startups are puffed up with Chinese money which itself is not good sign for our economy.
Acknowledging our dependence on China, if abrupt blanket ban on imports is announced Indian economy might have to face a trade war like situation. Further, it will result in disruption in supply chain since we have yet not developed in house manufacturing capability nor do we have an alternative cheap source to cater our present needs. As most of our industries depend on the imports for raw material, intermediate or finished products, from china they will suffer delay in their production.
Not only this, since Chinese goods are well-known for their cheap prices and due to lack of in house capacity to substitute them, a ban on them will append cost of production. This will heave the price of final product which will ultimately damp the demand for indigenously produced goods, since people are habitual of buying cheap Chinese goods. This might also make our exports uncompetitive and hence hitting our foreign exchange reserves. Consequently, our economy which is already starving of demand will face brunt of an impulsive decision rather than gaining from it.
So should we give up our mission of becoming ‘Atamanirbhar ’?? Certainly not. An assay to draft a sound and comprehensive policy will serve our purpose.
Firstly, instead of outrighlty banning Chinese goods, measures such as anti dumping duty should be enforced with more aggression. As highlighted by 145th report of Parliamentary Standing Committee on Commerce, anti dumping duty framework suffers lax in implementation. It also suggested that certain unscrupulous elements are able to circumvent the goods put under anti dumping duty framework by misclassification of goods. So solidifying our legal framework will be the first step towards realization of our dream.
Secondly, to cultivate innovation in any country and in any sector R&D is vital. Despite of the fact that India’s expenditure on R&D has tripled in the period 2004-05 to 2014-15, its size as a percentage of GDP remained at 0.7{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503}. This is very low as compared to the countries such as Israel that spends 4.3{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} of its GDP in R&D. Hence to equip our industries with requisite modern technology and skill set we have to increase our expenditure in R&D.
Let us look at one of the sectors where owing to lack of investment, Indian Corporates have been losing out to Chinese brands.
India ostensibly as a market for smart phone has great potential which is yet to be explored. This as a matter of fact can be substantiated by existence of Chinese brands such as Xiomi, Redmi, Oppo and Vivo that are reaping the benefits of ever growing Indian smartphone user base. With recent data providing that India had 502.2 million users of smartphone as of December 2019, the arena has thrown open, competition for Indian players.
The story is similar for other sectors too, such as Pharma (API), Solar Power, Textile, Consumer (Bicycle) etc. To become self reliant there is dire need of fortifying our domestic industries, especially those which are subject to cheap imports from china. On one hand these sectors demand huge investments but at the same time there is exponential increase in the risk appetite of companies venturing into them. Hence expecting the private sector to solely assume the responsibility will not be a practical proposition. So for making them (sectors) conducive for investment measures such as; Capital Subsidies, Tax benefits, PPP arrangements, Flagship schemes akin to “Make in India”, single window clearance system etc. needs to be undertaken.
Recent development that has taken place is indeed very encouraging. Imposing ban on the Chinese app “Tik-Tok”, which is the most downloaded app in India amongst 58 other applications, has demonstrated that the executive is determined to take every single step that is pertinent to our mission.
The vision of becoming Atamanirbhar will only materialize if concrete steps in this direction are taken. It is to be understood that without developing a strong in house manufacturing capabilities first, this dream is nothing but a mirage. The mission will take years of incessant and persistent efforts by the regulator and our industries but yet it can be turned into reality. A baby step in this direction is the need of the hour as there is a long way to go. At last, sensing the emotional turmoil in the country and for the long term benefit of our economy it will be correct to say “Hindu-Chini Bye Bye”.