From the past one month, India and china are facing-off each other in the form of the cold war. When Prime Minister Narendra Modi, in his address to the nation, gave a clarion call for an ‘Atmanirabhar Bharat’ last month, an undercover tirade seemed to have developed amongst the masses against the products that we import. This inflammatory exasperation was more specifically aimed towards our immediate neighbors, China– a country which has been accused of manufacturing and spreading the novel coronavirus which led the world under the blanket of a pandemic.
As we set our mind to start the boycotting Chinese product we need to understand the core work of how deeply China actually affects the world or in this case India?
Ground realities
Firstly, under the World Trade Organisation (WTO) rules — to which both India and China are signatories– so it means that neither of the countries can ban each other from importing or exporting. The WTO mandates a free trade regime. You cant call an embargo on, say, Chinese products for instance Mobile phone companies like Oppo, Xiaomi, etc because there are individuals, dealers, or whole-sellers, who import and resell them. Any country cant physically boycotts any other signatory country, they can, however, socially discourage consumers from buying Chinese products.
As trade figures suggest that India is the biggest importer of Chinese consumer goods. India imports almost seven times more from China than it exports to it. India has a huge trade deficit with China – its largest with any country. In 2018-19 India’s exports to China were mere $16.7 billion, while imports were $70.3 billion, leaving a trade deficit of $53.6 billion.
Now the question is when you a cheaper product with the same qualities but with lesser price or you have a branded product with a ripped off price tag who consumer will choose? It has been seen that The Indian middle class constitutes 300-350 million of the population and china knows all about the consumer need they make their product according to the countries population growth India has about 28% of its population to be a middle class their business thrives on the economics of Indian population.
India’s dependency on China:
In 2017-18, almost 60% of India’s import requirements of electrical and electronic equipment were met by China. In our smartphone industry, out of the five bestselling phone brands in India, four are Chinese – Xiaomi, Vivo, Realme, and Oppo. These four brands combined dominate over 60% of the smartphone market in India.
On the other hand, 30% of India’s automobile components are met from China and about 90% of the country’s toy market is occupied by Chinese products. Similarly, 50% of the demand in the country’s bicycle market is met by imports in which China has a large share. Thus, some of the key sectors of the Indian economy are critically dependent on China.
It needs to be acknowledged that China’s exports to India account for only 2% of its total exports, so even if Indians boycott all the goods imported from China, it will not make as big an impact on China. Data also suggests that China is India’s largest trading partner, but the trade is heavily skewed in favor of China. Thus initiating a trade war when Indian manufacturing ability is limited is not going to favor India.
Chinese goods make up 23% of India’s imports. In order of volume of trade that would be electronics, APIs ( active pharmaceutical ingredients), auto parts, furniture, and ‘sweatshop’ things like shoes and household items. we get about $3 to $ billion worth of APIs from China, and there’s no alternative to that. API manufacturing is a highly polluting industry and with our domestic pollution standards, we can’t make them here at a low cost. The government could place exorbitant tariffs on Chinese APIs in the hope that they will be manufactured here, but it will also have to be easy ongoing licenses. Talking about figures the Alibaba Group alone has strategic investments in Big Basket ($250 million), Paytm.com ($400 million), Paytm Mall ($150 million), Zomato ($200 million) and Snapdeal ($700 million). Tencent Holdings has an investment in Indian firms like Byju’s ($50 million), Dream11 ($150 million), Flipkart ($300 million), Hike Messenger ($150 million), Ola ($500 million) and Swiggy ($500 million). Additionally, these Chinese firms are not the sole owner of these platforms.
Trade data demonstrates that India exports less to China (mainly raw materials) and imports more (mainly electronics and other manufactured goods which are in high demand). Statistics reveal that India’s pharma sector has a critical dependence on Chinese imports used in drug manufacturing.
Why the previous attempts were a failure?
It is important to understand that calls for this kind of consumer boycott are hardly new or unique. History testifies that such attempts have been tried without much success many times. China itself tried to boycott all Japanese products in the early 1930s to protest against Japanese colonization. The rhetorical calls for boycott won’t buy us self-reliance or an Atmanirbhar Bharat. A pragmatic blueprint needs to be put in place. A mechanism for import substitution needs to be worked out, by creating such product alternatives that can compete both in quality and cost against Chinese products. Low R&D expenditure, especially from the private sector, is a key challenge facing the innovation ecosystem in India.
The Department of Science and Technology (DST) shows that while R&D expenditure in India tripled in the period from 2004-05 to 2014-15, its size as a percentage of GDP remained at 0.7%. This is very low compared to 2% and 1.2% spent by China (for 2015) and Brazil (for 2014), respectively. Countries like Israel spend as much as 4.3% of their GDP on R&D. This makes it imperative to think about resource allocation and invest in research and development, which in turn will equip our industries with the requisite technology and skill to fight this trade battle.
Why India’s previous attempts were a total failure here’s one example:
In China, 10-hour shifts are the norms; there is no overtime and workers receive incentives on per-piece production China’s productivity norms are very high, which is why the goods are so much cheaper. Two days before the first iPhone was to be launched globally, Steve Jobs decided he wanted to change the screen. With 4 hours to go, managers at Apple’s Chengdu factory woke up 20,000 workers, who were staying at dormitories in the middle of the night and gave them a cup of tea and a packet of biscuits, and set them to work. They worked non-stop for 48 hours and managed to change the screen in time for the launch. would India ever be able to do that?
While China may have the largest population, but they know how to grab an opportunity and make it more advantageous they have everything, skilled laborers, discipline, and most importantly unity among each other. Though it might take India another 10 years to even come in line with china’s, who knows one day India might become next but better replacement of China
