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How will the ban on Chinese products impact India

 HOW WILL THE BAN ON CHINESE PRODUCTS AFFECT INDIA?

India mourning with casualties following the recent Indo-China border dispute over the Himalayan Galwan Valley, is not what it seems like. Below is an image that has surfaced over the internet showing soldiers armed against each other. However, this is a throwback picture of last year when the Indian forces sustained a casualty against the armed militants.

 

Nonetheless it prompted a massive outrage between the two nuclear-armed countries, India and China.

 In a frenzy, there began a mass protest by hurling Chinese television sets down the balconies, smashing mobile phones. A Union Minister called for a complete boycott of Chinese restaurants selling Indianized Chinese food with owners and chefs of Indian origin including the ingredients generated through Indian agriculture.

Kolkata: Youth Congress activists burn Chinese products during a protest against the killing of 20 Indian Army soldiers in Ladakh’s Galwan Valley by the Chinese People’s Liberation Army (PLA) troops, in Kolkata, Thursday, June 18, 2020. (PTI Photo/Ashok Bhaumik)(PTI18-06-2020_000152B)

People started taking initiatives by burning generic Chinese luxury goods which have been procured by them as evident through the following link https://youtu.be/3e7irVQG1wo.

 A group of protestors were caught burning the image of North Korean leader, Kim Jong-un mistaking him for the Chinese President Xi Jinping.

While there is stigmatization that operates in India around Chinese products to be synonymous with duplicate, inefficient and a cheap alternative for luxury items, it must also be remembered that China is the second largest contributor to the Indian economy after U.S.

The Indian government however has resorted to boycotting any form of trade with the idea to teach China a lesson. Waging a war when it cannot afford to, is the last step to be taken by China or India. Given the situation, India must work towards complete disengagement of the troupes. In these context MEA on India China Standoff and de-escalation: “We will not accept any unilateral attempts to change the LAC.Both sides are engaged thru military,diplomatic channels.Meeting of WMMC is also expected to be scheduled soon. Hope the Chinese side will work towards peace  ”

 For all the impulsive outrage that has invoked is quite natural yet India cannot afford complete resistance in terms of trade and following are five major reasons why:

1.Public perception: Trade deficit is an alarming sign

The idea that is resonating behind boycotting Chinese products is to hit them down with trade deficit assuming to blow a tremendous impact on the Chinese economy. This pre-conceived false notion ought to be addressed with immediate effect. India has trade deficit with 22 countries including China. List of other countries include France, Germany, Nigeria, South Africa, UAE, Qatar, Russia, South Korea, Japan, Vietnam, Indonesia to name a few. Similarly, if the top 25 countries with whom India trades is taken into consideration, it has recorded trade surpluses with economic giants like the U.S. Netherlands and the United Kingdom. Does it mean that India is better of than any of these countries? No, that is never the case. Trade deficit with China does not essentially convey that India is a weaker economy, the only fact is India has more buyers of Chinese goods compared to Chinese buyers.

It is a given statement that it is feasible for Indian customers to buy the Chinese product as a cheap alternative to Japanese or French or even the indigenous product. What essentially matters is that the Indian consumers and the Chinese producers both are in a win/win situation. It is this process that generates the trade. On the other hand, persistently running on trade deficits has its issues. The country’s foreign exchange reserves become questionable along with it also underlines the incapability to manufacture indigenous products. However, no country is entirely self-sufficient hence the concept of trading. It creates a framework to launch expertise in whatever the home country excels in and provides a steady process of exporting that good while importing the efficiency of the other.

Although, it is proven that consistent trade deficit brings in more benefits, taking into consideration the current economic scenario of the state, it cannot pose buying restrictions on Indian consumers as it will only adversely affect economic fluidity and India would stand to lose more.

2. India barely can afford an alternative

This is to say that China is the second largest trade partner to India after US and it reports a fair 12% of India’s imports across sectors including chemicals, automotive components, consumer electronics and pharmaceuticals. It is confirmed by Sudarshan Jain, the President of the Indian Pharmaceutical Alliance that almost 70% of intermediary needs for drug manufacture in India is facilitated and fulfilled by China. Even though India pledges to be “Atma Nirbhar” (self-reliant) at the moment it is still a distant dream.

India’s surge in the smartphone sector heavily thrives on phones manufactured by Oppo, Vivo, Xiaomi coming in a relatively cheaper price. Ban on these companies may not necessarily affect the tech giants but the underdogs in consumer electronics business will face the heat if they cannot import intermediary goods from China.

“We are not worried about finished goods. But most players across the globe import key components such as key compressors from China” says B.Thigarajan, managing director of Blue Star Limited, an Indian manufacturer of air-conditioners.

How will this affect India?

Well, the rich can easily afford an alternative that is relatively expensive but the middle class will either have to forgo the desire to own an air-conditioner or purchase a less-efficient model.

3. The Poor will suffer

Indian economy has already hit a rock bottom following the worldwide pandemic crisis. In any adverse circumstances, nightmare breaks upon the working and lower middle-class strata of the society. More often than not, it is the poor consumers who are the worst-hit in such kind of a trade ban comes into action.

The Indian government has restricted further trade collaborations with China. Now, Chinese goods are accessible at surprisingly cheap rates in India. Imposing a trade ban will not only shrink the consumer base but also increase the stakes of Indian retailers who have already placed pre-paid orders. This hit will turn out severe on the poorest retailers in proportion for the incapability to cope with a deep and unprecedented loss.

4. Indian Producers and Exporters will be penalised

While on one side there is truth in the statement that India pays a heavy price trading with China, it is also to be known that it hurts only the less-efficient producers. Chinese imports are not restricted to finished goods only for buyer’s consumption, several Indian business sectors rely on China for intermediate goods and raw materials which in turn contribute to the manufacture of the final product for the domestic market in India as well as for global exports.

 Lesser known fact, large proportion of Chinese imports include intermediate goods like electrical machinery, nuclear reactors, fertilizers, optical and photographic equipments, organic chemicals e.t.c. Indo-China business relations have deeply penetrated in the technological sector with companies like Zomato, Big Basket, Ola, Paytm.

“There have been more than 90 Chinese investments in Indian start-ups, most of them made over the last five years. Eighteen out thirty Indian unicorns [tech start-ups valued at over $1bn] have a Chinese investor”, according to Gateway House, a Mumbai-based think-tank.

Therefore, an umbrella ban on trading will hurt all the growing businesses in ventilation to survive in the current unfortunate socio-economic scenario.

5. Bust the myth: China will not shed a tear

India imports 14% of Chinese goods will the exports amount to only 5%. In $US value- India’s imports from China are just 3% of China’s total exports.

Looking at the facts above, what does common sense convey?

COUNTRIESIMPORT(LOSS%)EXPORT(LOSS%)
INDIA145
   
CHINA13

The above table underlines the possible consequences both countries will be recuperating with.

The Upshot

Impulsively shifting a border dispute gun to shoot the trading sector is a ridiculously childish measure the Indian government may resort to. Given the global economic status of both the countries, India will face the heat relatively more than China. ‘Atma Nirbhar’ [self-reliant] cannot certainly contribute to be immediately effective.

On a ground level, we the mass who are the maker or breaker of any institution that is a result of collected effort can work towards creating an empire that supports indigenous goods and modify the sale of low quality Chinese products irrespective of all possible time constraints

Reference links: https://indianexpress.com/article/explained/india-china-trade-ban-explained-6465949/

https://www.bbc.com/news/world-asia-india-53150898

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