Introduction
The unreasonably aggressive stance and transgression of Chinese troops across the LAC in Ladakh has triggered a motion across the country to boycott Chinese products. China emerged as a manufacturing hub of the world in 1990s and was able to pull out the bulk of its population above the subsistence level. In 1981, 88% of Chinese population earned $1.99 a day and now less than 1% population is below that level. China is a communist country, where the rights of people are incredibly suppressed and human resource is highly exploited in the name of providing service to the State.
Chinese companies receive huge support from the State to raise capital, are provided with land at negligible cost, availability of cheap electricity, water and labour, makes it possible to produce products at unimaginably low cost. Besides, the environment norms to set up industry have been further relaxed since 2015. Resultantly, rampant manufacturing units have mushroomed in designated areas. In fact, Hubei has been declared are the world’s most polluted province by the WHO. Moreover, China spends to the tune of $200 billion on Research and Development (R&D) every year. China is known to infringe upon patent laws with impunity and is aggressively competitive in business dealings.
Hence, China has become the global factory that produces a huge variety of reasonably high quality, cost effective products and has almost achieved a monopoly in the following:
- ·80-90% of primary chemicals used to make medicines across the globe.
- ·70-85% of global solar panels.
- ·75-90% of high speed rail systems.
- ·60-80% of agriculture machinery.
- ·40-50% of cargo ships.
Dependence of India on China
China is one of the largest trading partners’ of India. The total bilateral trade between India and China stood at $93 billion during the previous year.
India imported goods worth $75 billion from China (14-16% of total import) and exported just $18 billion (5% of total export) and hence, the trade deficit with China was to the tune of $56.8 billion during the year 2018-19.
India mostly exports products that require less efficient trade infrastructure, e.g. rice, cotton, diamonds, jewellery, yarn, garments, low end engineering products, generic medicines and petrochemicals.
Chinese exports to India rely strongly on manufactured items to meet the demand of fast expanding sectors like telecom and power, while India’s exports to China are characterised by the supply of raw materials called ‘primary’ or intermediate products.
The dependence of India on China for trade and commerce of the under mentioned products makes it exceedingly difficult for India to impulsively cut the umbilical cord of trade with China:
- India has the third largest pharmaceutical industry in the world. However, 90% of the life saving medicines and 75% of ingredients to produce bulk drugs come from China. The heat of the same was felt by the medicine manufacturers during the COVID-19 lockdown in India.
- Moreover, 80% of the medical equipment being used in hospitals is manufactured in China.
- Nearly 30% of the automobile components are made in China and any break in supply can severely affect automobile manufacture in India.
- India’s middle income group heavily depends on cheap consumer durables from China, 60% of electronic appliances and 66% of smartphone market have been captured by China. Xiomi, Vivo, Oppo are household names.
- Almost complete toy market has been occupied by Chinese products in India.
- Even small items like cycles that are manufactured in India have nearly 50% components coming from China.
- Diamond industry in India has a 30% stake of China.
- China is funding most key startups in India, like Flipkart, Ola, Paytm, Byjus, Zomato, Big-basket, Dream11, etc. China has invested $4 billion in these startups.
Exploring the Possibilities to Reduce Reliance on Chinese Products
Considering India’s heavy dependence on China for essential commodities it is evident that we cannot afford to simply ban Chinese products altogether.
However, the prevalent scenario must be taken as an opportunity to commence our journey towards self-reliance. COVID-19 must serve as a wakeup call for the Chemical industry and the national sentiments roused as a result of the border stand-off can be suitably used to help India to slowly wean off from the trap set by the dragon.
Here are some steps that may be considered to reduce dependence on Chinese products:
- Identify items that we can do without, e.g. India imports firecrackers to the tune of Rs. 1,500 crore, (most of it using false declarations in import documents), and other such Chinese made commodities that are non-essential and we Indians take a conscious decision of not using them.
- ·It is never good to put all the eggs in one basket. The bulk drug manufacturers must start exploring others avenues for importing ingredients, e.g. Taiwan, South Korea and the West. Similarly, government must show its direct indulgence to help various sectors to shift to other alternatives.
- ·Government must demonstrate credible steps to lure foreign and domestic investors to set up manufacturing in India. Unfortunately, the same is being given more of a lip service. Last year 56 companies relocated from China, 26 moved to Vietnam, 11 to Taiwan, 08 to Thailand, 02 to Indonesia and only 03 relocated to India.
- ·Curb “opportunistic takeovers/acquisitions of Indian companies by China, especially at this time when a financial crisis has been created due to COVID-19. Though, government has recently revised the FDI policy, a lot of investments by China is ‘hidden’, as it comes through Hong Kong, Singapore and Mauritius.
Conclusion
Banning Chinese products is easier said than done. If India does not import from China, we would either be left with expensive western alternative or sub-standard Indian substitute in most of the cases.
China, because of its effective mass production capacity is able to fill the gap between demand and supply in India. If we ban Chinese products it will obviously hurt the Indian middle income group the most. The question is, can we do it at this stage, when we are still grappling with the economic stress created by the Corona crisis?
Moreover, a huge amount of revenue is being generated through customs duty that comes into the state reserves by imposing antidumping duty or countervailing duty on specific goods imported from China. Thus banning import from China will result in a financial loss for the country.
India still needs to cover a lot of ground towards self sufficiency by way of investing in state-of-art R&D, capacity building and putting a cogent force behind campaigns like ‘Make in India’, ‘Skill India’, ‘Digital India’, ‘Start-up India’, etc.
India has to first reach a state of self sufficiency and create adequate wherewithal to manufacture indigenously to cater to the express needs of for our vast population before we take a call to out-rightly ban Chinese products.
Nonetheless, revolutions start with small steps and time has come for India to plan, prepare and commence a considered mass movement towards self-reliance.