Jyoti Singh Rathore and Nihit Gupta
COVID-19 has badly impacted and continues to impact our economy. The pandemic has resulted in significant trade disruption, with trade activity coming to a near standstill.
The nature of impact has been such so that many countries, including India, are now thinking of how to reduce their dependency upon some trade partners, mainly China. For India, reducing dependency on China has another dimension — its bitter border dispute along the Line of Actual Control (LAC) where in a recent clash with the Chinese PLA at Galwan Valley, in eastern Ladakh, 20 Indian soldiers were killed. This has ignited questions about India’s dependence on China and Chinese products.
There have been calls (predominantly on social media channels) to boycott Chinese products. It is fair to talk about a boycotts only if it does not hurt our economy.
China’s share in India’s total imports is around 25-30 percent — put otherwise, more than quarter of India’s total imports are at present from China! Some parts of this constitute commodities wherein India does not have significant capacities, however, a majority of imports from China are due to unfair trade practices, such as dumping, and constitute low-end, non-essential goods. With low-priced imports, the Chinese have left no stone unturned to penetrate the Indian market. Chinese imports has been affecting many MSMEs, and have wiped off some such as toys, footwear, etc.
India can't deny the fact about its current dependency on China for many products such as medical equipment, pharmaceutical ingredients, APIs, chemicals, automobile components, technologically-advances goods, etc. Trade data reflect the figures. Chinese imports have influenced some of the major industrial sectors significantly, thereby creating market distortion.
In these sectors it is important for the government to change domestic and international policies, to attract investments; and, to protect these investments. While a well-balanced strategy shall slowly reduce China’s influence on the Indian market, we cannot wish away the products that have already flooded in Indian markets.
Looking at the current scenario, it seems unrealistic that India can do away with Chinese products overnight. Rather than the single track of boycott, India must look for multiple options. Industries and related associations are demanding for restricting Imports by imposing quantitative restrictions or imposing WTO-compliant tariff barriers on imports, such as border tax, anti-dumping duty, anti-subsidy/countervailing measures or simple import tariff.
The Government of India must listen to these demands, and at the same time implement its procurement strategies in consultations with the industry to ensure no deeper penetration of Chinese items. At the same time it has to be careful in making policy changes so as to not effect bilateral trade ties.
Prime Minister Narendra Modi emphasised on the idea of an “Aatmanirbhar Bharat” or a ‘Self-Reliant India’. The campaign ‘vocal for local’ will encourage ‘Made in India’ products, which in turn will help the local economy and even attract foreign direct investment. This will help the economy get back on its feet.
The standoff at the Galwan Valley has changed the mood of the nation towards China and Chinese products. The Swadeshi Jagran Manch, an affiliate of the Rashtriya Swayamsevak Sangh (RSS), has demanded a complete ban on Chinese goods and proposed a ban on Chinese companies participating in tendering processes in India. The Department for Promotion of Industry and Internal Trade is working on strategy to stop the import of non-essential, cheap and low-quality goods from China. The ministry of commerce and Industry is likely to fast-track measures to cut down on Chinese imports and a proposal will be presented soon. At present, India is probing around 35 cases of ‘dumping’ of goods from China, and the government has cancelled projects worth Rs 471 crore having Chinese investment in it.
Currently, China’s presence in the Indian market is huge, and we cannot — at least for the moment — completely boycott Chinese products. What is required are structural reforms and appropriate policy interventions across sectors. A strong strategy based on a well-researched policy is required — it will be a gradual process but with constant political and economic will India can become self-reliant, and Chinese products could even be a rarity in India.Jyoti Singh Rathore, Assistant Secretary General, Forum for Trade Remedies and Nihit Gupta, Joint Partner, TPM Consultants. Views are personal.