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Last Updated : Mar 14, 2019 05:03 PM IST | Source: Moneycontrol.com

What will be the impact of India's boycott of Chinese goods?

If India chooses to boycott Chinese products, it may affect the imports of capital goods, machinery and electrical, chemicals, as well as intermediate and consumer goods.

Anupa Kujur @AnupaSagarKujur
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After China blocked UN's move to designate Jaish-e-Mohammad (JeM) chief Masood Azhar as a global terrorist, another wave of boycotting Chinese products surfaced in India.

China's move to put a technical hold on the proposal was despite the terrorist outfit claiming responsibility for Pulwama terror attack where 40 CRPF jawans were killed. Angry Indians took to Twitter to talk about China's absolute lack of empathy and disregard for India's safety using the hashtag — .

Read: #BoycottChineseProducts trends on Twitter as China blocks UN move to list Masood Azhar global terrorist

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While a number of social media users agree that boycotting Chinese goods would be the best way to send across a message to China, what will be the impact of an Indian boycott of Chinese goods?

In 2017, the India-China bilateral trade reached a historic high of $84.44 billion, up 18 percent year-on-year (YoY), according to World Integrated Trade Solution data. This was notwithstanding bilateral tensions over a host of issues including the Doklam standoff, the China-Pakistan Economic Corridor, and Beijing blocking India's entry into the Nuclear Suppliers Group (NSG).

While bilateral trade reached a new landmark, the trade deficit continues to remain high. India's trade deficit with China was a huge $63 billion in 2017-18, which was more than a third of the country's total trade deficit, according to Commerce Ministry data. The country's exports to China stood at $13.3 billion and imports from the country at $76.38 billion in 2017-18.

Read: India-China bilateral trade hits historic high of $84 bn in 2017

In 2017, India's trade deficit with China was $51.75 billion, registering a growth of 8.55 percent YoY.

Acknowledging the need to take steps to check the deficit, China signed three export protocols — on rice, fishmeal and tobacco — to allow imports of the three items.

If India chooses to boycott Chinese products, it may affect the imports of capital goods, machinery and electrical, chemicals, as well as intermediate and consumer goods. These imports are important for industries in India to manufacture goods, medicines as well as gadgets.

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"India is considerable dependent on China for many of the finished products such as gadgets. If India boycotts Chinese products, it will considerably impact the country," said Biswajit Dhar, Professor and Head of the Centre for WTO Studies at the Indian Institute of Foreign Trade.

With raw materials being exported to China, the neighbouring country is able to manufacture and export its goods at such low prices owing to subsidies and support from the government. Boycotting Chinese goods would mean fewer cheap goods for consumers in India. A reduction in the imports of cheaper capital goods would also push up production costs, making products costlier, thereby, affecting the consumers.

Since India also imports a high number of electrical products, it would impact the prices of electrical gadgets and smartphones. Chinese companies such as Xiaomi, Oppo, Vivo and OnePlus nearly control 51 percent of India's over $8 billion smartphone market.

Even in the power sector, India is heavily dependent on China when it comes to achieving its renewable energy target. India's import dependence for meeting its solar equipment demand was over 90 percent in past three financial years, Power and New & Renewable Energy Minister R K Singh said in a written reply to the Lok Sabha last year. A majority of these imports were from China.

The value of solar cells/photovoltaic cells whether or not assembled in module/panel, imported from China jumped to $3.41 billion in 2017-18 from $596.73 million in 2013-14, the minister informed.

In 2018-19, China supplied over 80 percent of the antibiotics imported by India and well above 60 percent of electronic products and components. Thus, some of the key sectors of the Indian economy are critically dependent on China.

Even though the percentage of imports from India to China remains low, it would impact China in the long run. In 2017, India became the 24th largest exporter to China. If India chooses to boycott, it would impact China's entry into a large market such as India, but the intensity of impact would be felt more at home.

"If India decides to boycott Chinese products, it will not make any economic sense given the kind of dependency that we have," Dhar said.

Latest trade data, however, shows that India's bilateral trade deficit with China has shrunk this year, according to a report by The Hindu BusinessLine. In the first nine months of 2018-19, India's exports to China have grown by an impressive 34 percent (as against less than 10 percent overall), while imports from its northern neighbour have declined by nearly 4.5 percent (as against an increase of 14 percent overall).

The decline was mostly due to the increased exports of petroleum products to China. Reliance Industries' aromatic production capacities over the past couple of years have found its way into the export market with China emerging as one of the major destinations, according to the report.

Even though it may indicate a reversal in the rising trend in the trade deficit, there remains a significant area of concern - the absence of adequate manufacturing facilities.

A number of these sectors would be affected if India decides to boycott Chinese products. To be able to boycott Chinese goods, India needs to reduce its trade deficit with China and strengthen its manufacturing sector to be able to produce goods back home, providing cheaper products to customers.

(Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd)

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First Published on Mar 14, 2019 05:02 pm
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