China is Asia’s largest economy with $13.6 trillion GDP, making it the second largest in the world after USA. China is India’s biggest trading partner after USA.
India has imported goods worth $62.4 billion from China during the last financial year (19-20). China is the source of around 14% of total Indian exports. Indian imports from China include chemicals, pharmaceuticals, electronics, machinery, automobiles, plastic items, iron and steel, medical instruments, fertilizers etc. India’s imports from China increased 45 times since the last two decades to reach over $70 billion in 2018-19, according to Invest India.
As the border disputes between these two neighboring countries because of the tensions on the LAC in Ladakh have given birth to the idea of boycotting imports from China, but is it even practically possible?
Indian medical industry is essentially hooked to Chinese imports in order to manufacture both medical instruments and medicines in India, 70% of India’s drug intermediary needs are fulfilled by China.
According to Invest India, there are roughly 800 Chinese companies within the domestic market and they have roughly 75 manufacturing facilities in India. Chinese investors have put an estimated $4 billion into 18 Indian unicorn startups approximately. Two-thirds of Indian startups have major investments from Chinese Venture Funds.
The trade relation between India and China is disproportionate, the trade deficit has increased over the past two decades from $1 billion to $60 billion which is a 60% rise.
Companies like Morris Garages (MG), a British motor company owned by the parent company SAIC (Shanghai Automotive Industry Corporation) is a big success in the Indian Automobile Market.
Where as, the Chinese brands like Xiaomi, Vivo and Oppo dominate the Indian smartphone market by a total of 72% share altogether, according to a report.
Mobile Applications like Tik-Tok, Share It, UC Browser, Vigo Video, Cam Scanner, PubG, Beauty plus, We-chat and many others that were banned this year had a huge following in India which showed an increase in app downloads between 2016 and 2018. Shopping apps like Shein, Romwe, Club Factory and Ali express had a huge consumer base in India before they got banned.
Indian Government recently banned a total of 267 apps in an order from the Indian Cyber Crime Co-ordination Center, Ministry of Home Affairs under Section 69A of the Information Technology Act.
The question here is WHY?
Why China’s products are so liked by Indians? The reason behind the popularity of Chinese products is mainly the low price and the reason behind that low price is low cost of production in China due to availability of cheap labor, subsidized rates from the government, mass production facility, easy grants and approvals, lenient licensing and 100% ownership given by the government of China.
With unavailability of the given conditions in the manufacturing industry of India, importing from China is much easier than taking the pain of producing on domestic grounds.
India can’t completely disrupt the imports from China as both the economies are intertwined, if the import drops the cost of imported goods can rise and lead to inflation, the local production will suffer because of the disruption in the supply of raw materials and Medical Industries can’t bear huge falls in production due to the shortages of raw materials and chemicals. As China is an export dependent economy and Indian economy is heavily dependent on Chinese imports. Despite of a constant economic disengagement with China, India is still a major contributor to China’s economy through its exports to India.
Statistically, the numbers portray that India can’t afford to boycott Chinese products and substitute it completely with ‘Make in India’ products in the short run. The major aim of the country and its government should be supporting domestic manufacturers and developing more domestic manufacturing industries to support its own campaign ‘Atma Nirbhar Bharat’.
The lack of adequate funding is the major issue that is a barrier for the Indian Manufacturing Industry. Supporting the start-ups with easier ways to access capital, registering property, enforcement of contracts, subsidized rates and granting licenses and permissions should be a priority of the government. Creating the ease of doing Business is also the only way to attract FDI in the manufacturing sector of the country.