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Last Updated : Jul 25, 2020 10:21 AM IST | Source: Moneycontrol.com

A trade war with China would hurt India more

Given the size and nature of trade, waging a trade war against China by boycotting its goods to avenge a border dispute is an idea that would likely hurt Indian interests far more than Chinese

Representative image
Representative image

As tensions between India and China escalated over the military standoff in Ladakh, we witnessed an acceleration of a fast developing sentiment — an anti-China stance.

Calls to boycott Chinese products and halt trade with China, were witnessed around the country, with people burning Chinese appliances and a Union minister even demanding that Chinese restaurants be banned to teach our eastern neighbour a lesson.

That China regularly engages in unfair trade practices, like dumping and usage of subsidies or export restrictions on industrial inputs to out price competitors, is a fact well known. However, it is also true that waging a trade war against China by boycotting its goods to avenge a border dispute is an idea that would likely hurt Indian interests far more than Chinese, given the size and nature of trade. Undertaking it at a time when India faces its sharpest GDP contraction in decades would also be ill-timed and equivalent to practicing self-harm.

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Too Big To Boycott

Boycotting Chinese goods doesn’t make sense for many reasons — one of the biggest being the skewed nature of trade between the two countries. China is India's largest trade partner, while India doesn't even figure in the top 10 of China's trade partners by total volume.

India also has a huge trade deficit with China — it’s 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.

These figures shows just how dependent India is on Chinese goods. A large-scale boycott will hurt Indian businesses at a time when they are struggling to survive, and also affect India’s ability to manufacture finished goods.

Beyond finished products, there are hundreds of products that we use on a daily basis that are made by Indian companies, but require Chinese inputs.

An overwhelming proportion of Chinese imports, in fact, are in the form of intermediate goods such as electrical machinery, nuclear reactors, fertilisers, organic chemicals, pharmaceuticals, etc — critical to Indian production needs.

Our smartphone industry is dominated by Chinese brands — with four of the five best-selling phones (Xiaomi, Vivo, Realme and Oppo) hailing from China. In 2017-18, almost 60 percent of India’s import requirements of electrical and electronic equipment was met by China.

The point is that Chinese products and brands are so well-entrenched in our daily lives that it is impossible to boycott them — at least for the time being.

Chinese Money In Indian Startups

The same is true for Chinese investments in India, which has seen a steady rise over the course of the last two decades. According to Brookings India, Chinese investments in India amounted to $1.6 billion till 2014 — an amount that grew almost five fold to $8 billion by 2017.

The Chinese have also made big equity acquisitions in Indian companies, with Chinese tech investors having already put an estimated $4 billion in Indian startups. Hundreds of Indian startups, from PayTM to Flipkart, from Swiggy to Ola and from Byju’s to Gaana, have got investments from Chinese finance companies such as Alibaba and Tencent.

Given this, talk of boycotting Chinese trade also involves the larger risk of jeopardising India’s own investments and its startup ecosystem.

Swadeshi Economics

An argument put forth by supporters of Swadeshi economics is that boycotting Chinese products would boost domestic production, since the presumption there is that more people, who would have otherwise bought Chinese products, would buy local-made products.

There is a problem with this line of thought—people do not buy Chinese products because they are forced to — they opt for Chinese products because it is good value for money. Chinese products pack more bang for their buck, and is priced keeping in mind the sensitivity of the Indian consumer. Also, let’s not forget — look around and how many ‘Made in India’ products/brands/services are there that spring to our mind? The spirit behind advocating swadeshi economics can be understood, and needs to be rooted for—however, without a detailed roadmap, it will remain an aspiration.

This is not to say that India shouldn’t be protecting its own interests. Instead of imposing a blanket ban, what is needed is a greater strategic push to correct the bilateral trade skew as it stands today. India also needs to prop up its crumbling infrastructure, and fix its complicated regulatory regime, to become globally competitive.

Instead of pandering to jingoism, India would do well to set its own house in order, if it wants to be in a position to say a firm ‘no’ to China. In the present economic state, boycotting Chinese goods, unfortunately, makes little sense.

Shikha Sharma is a New-Delhi-based independent journalist and photographer. Twitter: @ShikhaSharma304. Views are personal.
First Published on Jun 25, 2020 11:05 am
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