GST reforms, swadeshi economics and the challenge from China’s trade tactics

(Sanghnomics is a weekly column that tracks down and demystifies the economic world view of Rashtriya Swayamsevak Sangh (RSS) and organisations inspired by its ideology.)

Amidst the ongoing tariff tussle with the United States, the recent GST reforms carried out by the Modi government have been welcomed by proponents of the ‘Swadeshi’ economics. However, they have once again flagged the threat posed to Indian markets by China’s tendency to dump cheap goods in the Indian market.
The Swadeshi Jagaran Manch (SJM), an organisation inspired by the Rashtriya Swayamsevak Sangh (RSS) and a strong advocate of the ‘swadeshi’ model of development, mentioned in an official statement that countries like China are dumping goods to kill Indian manufacturing, and these GST reforms will go a long way in countering this.

Tariffs and Dumping

According to a Crisil ratings report April this year, in wake of the increased US tariffs on Chinese goods, the top Chinese exports to the US, including electronics, machinery and textiles, are particularly vulnerable to dumping and their influx into the Indian market could impact domestic industries. The Indian government has since imposed anti-dumping duties on a number of  Chinese products.

China has been known for using unfair trade practices, as it heavily subsidises its manufacturers and then dumps its goods at much cheaper rates in other countries, with India being no exception.
According to World Trade Organization (WTO) data, investigations against unfair Chinese imports peaked, with around 200 complaints filed against China by aggrieved nations at the WTO. This included 37 complaints filed by India. Meanwhile, after the Trump tariffs on various countries came into effect, the general consensus among policymakers in India has been that there could be increased dumping of merchandise from various countries into India.

In fact, it was reported in April this year that the Indian government has set up a high-level inter-ministerial committee for greater surveillance of imports to India. The committee is said to be headed by the Commerce Secretary and also includes officials from the Director General of Foreign Trade (DGFT), Central Board of Indirect Taxes and Customs (CBIC), and the Department for Promotion of Industry and Internal Trade (DPIIT).

China’s Economic Statecraft

Most countries, especially democracies, view trade primarily as a tool to generate revenue for faster GDP growth. However, China uses it as a ‘sword’ to destroy the local industries of other nations and make them dependent on China. The Belt and Road Initiative is a classic manifestation of this economic statecraft that has gained momentum over the last two decades. We must not forget that China uses both dumping and export deniability as a double-edged sword against other countries.

China weaves its trade policy into a grand strategy for increasing its political influence by locking in control over strategic sectors. Xin Jiaying, a researcher at the Institute of Public Policy, South China University of Technology, says, “Export controls have therefore emerged as a critical complement to China’s economic statecraft, demonstrating the capacity to impose substantial costs on targeted actors while influencing global markets and supply chains.”

He adds, “The imperative to demonstrate resolve and send clear signals has encouraged China to formalise targeted penalties against those challenging its core interests.”

Xin sums it up: “China’s export restrictions on drones, gallium, germanium, and other critical resources have begun to ripple through global markets and supply chains. The introduction of more stringent export controls on rare earths in April and EV-related battery technologies in July—sectors in which China maintains market dominance—sends a clear signal of Beijing’s willingness and ability to leverage economic interdependence for strategic purposes.”

The US-based New York Post reported earlier this year: “Since 2023, China has implemented export controls on at least 16 critical minerals as part of what (Washington) DC insiders and other experts describe as a highly targeted campaign aimed at disrupting US defence and tech supply chains. In the case of the seven heavy rare earth metals most recently targeted with new licensing rules, China controls as much as 99% of global processing capacity.”

Given the current environment, where US–India trade relations are not at their best, we might be tempted to say that it is the US’ problem—let them deal with it. But the fact of the matter is that every major country needs rare earth materials for developing and using critical technology.

In the context of China’s economic statecraft vis-à-vis India, one of the recent examples has been cited in a research report (Feb 2025) by the Observer Research Foundation (ORF): “On 10 January 2025, reports emerged that China had barred Chinese employees from travelling to Foxconn’s iPhone factories in India, while those already stationed there were being recalled. Additionally, shipments of specialised manufacturing equipment for making iPhones bound for India were halted, with Chinese authorities refusing to approve their export. These restrictions on Chinese manpower and equipment exports were designed to hinder Apple’s plan to manufacture the latest iPhone 17 in India and launch it there in 2025. By disrupting the supply chain, China aims to pressure Apple to reconsider its gradual transfer of operations away from China, particularly to India.”

It is important to understand that this is not merely about the tariff war with the US; it is also about safeguarding India’s economic interests from the onslaught of Chinese economic statecraft. A ‘swadeshi’ economic model based on India’s inherent strengths could definitely help meet this challenge.

Earlier Sanghnomics columns can be read here.

(Arun Anand has authored two books on the RSS. His X handle is @ArunAnandLive.)

Views are personal, and do not represent the stand of this publication.