How India China Conflict Will Bring A Halt To The World Economy, May Even Put It On Standstill

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India-China’s border conflict!

India and China border conflict started from the dispute that happened at Galwan valley on 15th and 16th June 2020. 43 Chines soldiers and 20 Indian soldiers lost their lives in the no weapon battle that happened in the valley.

The dispute started when Chinese soldiers entered the Indian border side and started fighting with the Indian soldiers. After the conflict happened, the India-China tensions increased. There were many high-level meetings happened that included brigadier, chiefs, and other prominent army people who were present in the meetings, but no solution came out. 

The boycott China movement: Say no to Chinese products!

After this, the Indian government banned 69 apps that include, TikTok.Shein, Shareit, Club Factory, and more. The Boycott of China was initiated by the Indian public and supported by the government immediately after the Galwan valley conflict. There were campaigns launched by the Indian government to support the boycott china movement and affect Chinese trades. The government boycotted Chinese COVID testing kits, ventilators, and other pharmaceuticals products to support the boycott China movement.

Foreign countries are welcome to set up their operational units in India.

The Prime Minister of India invited many countries to set up their manufacturing and operational units in India who have moved out of China due to the widespread of the Chinese virus COVID-19.

Inviting foreign companies to set up their business units in India will encourage new employment opportunities in the country. They will bring new technology and improve the overall economy of the country. Moreover, many foreign companies like Apple Inc, Samsung, and others are looking forward to establishing their operational units in India. India is a significant consumer market with a vast population and can increase the sales of products and services of these abroad based companies.

Several campaigns were launched to support the boycott China movement and affect Chinese trades.

Prime Minister Narendra Modi launched campaigns like Vocal for Local, Make In India, and Aatma Nirbhar Bharat to create trade tensions in China. These campaigns have indeed affected chines markets and businesses.

The campaigns and initiatives are as follows:

The Aatmanirbhar Bharat Movement

Aatmanirbhar Bharat is the concept introduced by the Prime Minister of India, Narendra Modi, of developing India into a self-dependant country. The first remark of the movement appeared in the form of the ‘Atmanirbhar Bharata Abhiyan’ or ‘Self-Reliant India Mission’ during the resolution of the pandemic COVID-19 related stimulus package on 12 May 2020. 

The Aatma Nibhar Bharat movement does not purpose to be protectionist in nature but to make India self-sufficient and independent. As the Finance Minister Nirmala Sitharaman explained, “self-reliant India does not mean cutting off Indian market and business from rest of the globe but making India capable enough to be self-reliant.”

The law and Information Technology Minister, Ravi Shankar Prasad, said that self-dependant does “not mean separating away from the rest of the world. Foreign direct investment is encouraged, and advanced technology is welcomed in Aatmanirbhar Bharat that represents to be a more significant and more significant part of the whole world’s economy.

Make in India: Let’s make in India.

Make in India was started by the BJP Government on 25 September 2014 to encourage abroad based companies to manufacture their products and services in India and incentivize with dedicated investments in the production. 

The policy approach was to develop a favorable environment for investments, establish modern and dynamic infrastructure, and cherish new sectors for foreign capital. The mission targeted 25 economic sectors for employment generation and skill improvement, and planned “to transform India into a global manufacturing and design hub.”

“Make in India” had three main objectives: 

(a) To promote the industrial sector’s extension rate to 12-14% per year.

(b) To manufacture 100 million extra construction employment in the economy until the upcoming year 2022.

(c) To affirm that the manufacturing sector’s contribution to GDP is boosted to 25% by 2022 and later updated to 2025.

Vocal for Local

Vocal for local movement encourages the public to use Indian products, and manufacturers focus on using raw materials from India, and no Chinese products and services are imported. A few weeks back, Prime Minister Narendra Modi encouraged the toymaker to produce locally made toys and stop using Chinese manufactured toys.

In fact, due to the increasing border tensions between India and China, Chinese mobile company Vivo planned to set back from the title sponsorship of IPL 2020 on a friendly note. Now, Dream11 is sponsoring IPL 2020. Like Surya, various Indian brands started promoting its made in India title through promotions and advertising to support vocal for local.

The Indian government took the Pangong lake conflict and its actions.

The meetings were conducted to solve the border tensions between India and China, but no solution comes out. Meanwhile, Chinese troops “carried out intriguing military movements to switch the status quo” near Pangong Tso lake on 29th and 30th August, but Indian soldiers blocked them. According to sources, this took place on the south bank of the Pangong Tso that is of enormous significance as it is a new area. A Brigade Commander-level meeting was on at Chushul to defuse tension, the government officials stated.

After the Pangong lake conflict, the government of India banned Pubg and more 47 Chinese apps in the country. PUBG Mobile has recorded a worldwide revenue gain of $1.3 billion (roughly Rs 9,731 crore) at the beginning of this year, declaring its lifetime collection to $3 billion (approximately Rs 22,457 crore) with the maximum number of downloads in India that stands at the top with 175 million downloads. There was a colossal business setup behind Pubg that got affected. The Pubg has a vast market in India that got ended entirely due to the bank. Not Pubg, but the apps related to Pubg also suffered its business due to the ban.

PUBG Mobile has been banned in a similar way that the game will be removed from the Google Play and Apple IOS stores, but the smartphone users who earlier have the game downloaded might be capable of accessing the game unless the Government of India allows a command to shut down the Indian servers. Chances of a remote removal of the game from smartphones across the nation seem very uncertain. 

India and China’s conflict is going to affect the world’s economy.

The ban on the various apps and trade restrictions has indeed affected Chinese markets. Now the question comes about how India and China’s border and trade restrictions will affect the world’s economy.

Various companies have their manufacturing units in China and print Made in China on their labels. So those products and services will lose the Indian market. 

India has 135.26 million population. If a company uses made in China productions, then it will directly lose the 135.26 million substantial Indian market to sell and trade. And trade plays a vital part in the economy.

The conflicts between the nuclear-armed force will take everything seriously as India has directly tried to affect the Chinese economy and market by inviting foreign investments and abroad companies to set up there operational units in India and get a vast consumer market.

There are many advantages of setting up operational units if foreign-based companies like:

  • Cheap labor
  • Qualified and educated candidates
  • Affordable land
  • Huge consumer market and more

But then a problem will arise that China only prefers to have it’s own manufactured products and do not consume maximum foreign-made products. China is a great manufacturing hub. They manufacture almost everything. They are manufacturing everything, starting from threads and wools, automobile and phone spare parts, toys and cosmetics, and everything. They are self-dependent for almost everything. And of course, now they have envy in their minds against India and have accepted India as a competitor so they won’t allow products and services that are made in India.

Let’s dive deep more in understanding the whole issue!

As tensions increase at the border between India and China, what is more, concerning is the economic collapse out of the rivalry relationship between the two nuclear-armed countries. This is because the economic relationship between the two neighbors is too profound to be overlooked. 

China and the United States are the most comprehensive two trading partners of India. While Indian exports to the US outnumber the country’s imports, the same is not dependable when it comes to China. And hence, to become friends-turned-foes with India would have business consequences in China, too.

India’s top trading partner

For the period between April 2019 and February this year, China estimated 11.8 percent of India’s total imports. However, India’s total exports to the nation was a small 3 percent. Apparently, we buy more from China than we sell. This trade deficit with China is also a significant contributor to India’s overall trade deficit, which is one of the world’s most significant trade deficits between the two countries.

China’s deficit reached $3.3 billion in February, a 13 percent increase from the year-ago period. This is even as India’s overall trade deficit persisted low from a year ago at $9.8 billion.

However, the bilateral trade has decreased drastically over the last two months due to both the pandemic and the rising unfriendly vibes between the countries. Earlier, on Tuesday, the Confederation of All India Traders (CAIT) published a list of 500 categories of products imported from China that it said could be interchanged with products made in India. CAIT is deciding to draw down the imports from China to $13 billion by December 2021 from $70 billion in 2018-19. It said it intends to execute so by replacing a list of goods imported from China with local goods.

What India imports from China?

Imports of India from China increased from 13.7 percent in 20-18-19 to 14.1 percent in 2019-20. India’s primary imports from the neighboring country include engineering goods, pharmaceuticals, electronics, and automobile parts. At a total worth of over $18 billion, electronic imports reached a quarter of the total imports in February. 

Nuclear reactors, machinery, and parts included another major part of the imports at $12 billion. 

 What India exports to China?

India’s exports to China increased from 5.1 percent in 2018-19 to 5.3 percent in 2019-20 until February. Mineral oils, mineral fuels, and Organic chemicals, ores, slag and ash, and other industrial products include India’s exports to the nation. 

Despite the total amount of India’s exports rising by almost half between 2010 and 2019, the amount going to China shortened 14 percent across the period, developing a trade deficit that’s fueling India’s nationalistic change.

Chinese FDI to India

As per a Brookings India report, the total amount of current and projected Chinese investment in India had passed $26 billion that is approximately Rs 1,98,000 crore. According to reports, the China-based companies are also raising up their investments in Indian companies, which also include startups.

The numbers certainly show India’s heavy dependence on Chinese imports, and any interruption of trade links between the two nuclear-armed nations will mainly hit Indian businesses and markets. 

It is no secret that India is the largest market for Chinese businesses outside their own nation. According to the Gateway House research, that Chinese investors had invested some $4 billion into Indian tech startups after 2015.

Alibaba, for example, has been funded in Indian e-commerce companies, including digital wallet Paytm, Snapdeal, and food delivery platform Zomato.

Tencent, meanwhile, has supported the ride-hailing app and Ola Indian messaging company Hike. Gateway House observed that more than half of India’s 30 unicorns and private firms value more than $1 billion and comprises Chinese investors.

Meanwhile, India improved its FDI policy in April early after the People’s Bank of China determined to up its stake in India’s HDFC bank to above 1 percent. As per the tweak, neighboring countries can invest in Indian firms only after receiving the Centre’s consent for the same.

China retaliated, saying India’s new policy violated WTO’s principle of non-discrimination and is against the common trend of free trade. 

And Huawei is yet in the running to develop 5G networks in India’s fast-growing internet economy, notwithstanding a US-led campaign against the Chinese company. The Indian government has already begun thinking about changing the latest telecom tenders to produce a body blow to Huawei. According to various reports, more such proposals will arise. 

China’s Xiaomi heads the India smartphone market with a 30 percent market share that is followed by Vivo, Realme, Samsung, and Oppo.

To be sure, various huge Chinese companies crossing handsets, electronic devices, and internet firms are intensely invested in India’s consumer market where a fast-growing middle-class and an aspirational young consumer base has served propel the growth for companies such as Xiaomi Corp, BBK Electronics that holds brands such as Vivo, Oppo, among others; apart from electronics goods company TCL. India’s development as the most significant overseas market for Chinese mobile phone companies is one of the most significant improvements in China’s relations with India over the last five years. According to IDC, the Indian sales of those head Chinese smartphone brands calculated more than $16 billion in 2019.

The Chinese smartphone producers have already developed factories and build employment opportunities in India. Interestingly, these smartphone makers have adopted Prime Minister Narendra Modi’s “Make in India” program. Xiaomi regionally manufactures 95 percent of the phones it markets in India. And hence, any conflicting decisions pushing Chinese businesses to close shop in India will continue to the burgeoning unemployment rates in India. 

While it is generally perceived that India might be most affected economically in case of a dispute with China, the latter, too, will lose a notable and perhaps, one of the most undoubtedly accessible markets. Hence, China will reach as much to lose as India. 

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