CAN INDIA AFFORD TO BOYCOTT CHINESE PRODUCTS?

The India- China clash over border issues has been in news since the past few years.

As per the latest news India and China have engaged in a serious war that commenced in May 2020. The main cause of military standoff this time is Indian road construction in the Galwan River valley. The latest news in Hindi has a complete report on how aggressive attacks, face-off, and encounters along the Sino- Indian border resulted in the death of 20 Indian soldiers on June 15-16.

In response to the deaths, the Indian government told its citizens to boycott Chinese products. Residents in Ahmedabad threw their Chinese TV sets from the balcony, while traders in Delhi burned Chinese goods to protest. An Indian Central Minister even called out a ban on selling Chinese food in restaurants- which, by the way, is not “Chinese” exactly but an Indian version of Chinese food. Nevertheless, the primary question in all finance news is that ‘can India afford to boycott Chinese products?’ So let’s dig in to know the reality.

The Indian government has not clearly announced a boycott but yes, according to the latest news, the government did order all state and public sector companies not to issue any new contract to Chinese companies. The Indian Railway, hence, canceled a signaling project given to a Chinese company in 2016.

The current finance news reported that bilateral trade between India and China has been down by 15% since the 2018 financial year. With increasing enmity between the two nations, this percentage shall hike as the Indian government has imposed extra tariff and anti-dumping duties on Chinese imports.

That said, it’s not easy to boycott Chinese products entirely and the reasons pertain to:

IS THERE AN ALTERNATIVE TO CHINA?

China is India’s second-largest trading partner after the U.S+ China s responsible for nearly 12% of Indian imports related to sectors like chemicals, automotive component, consumer electronic and pharmaceuticals+ China rules the Indian smartphone sector, Oppo and Xiaomi are the chief examples+ much of the intermediary goods needed in the manufacture of Indian electronics come from China. The latest news in Hindi tells how Indian electronic makers fear loss with a halt on Chinese intermediary goods.

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

He further added that setting up local supply chains is a time taking process with very few alternatives.

CHINESE FUNDING

Recent finance news depicts how Chinese money has become a dominant part of the Indian economy. China rules the Indian technology sector by investing billions of money in Indian start-ups such as Zomato, Paytm, Ola, and Big Basket.

Amit Bhandari, an analyst at Gateway House, said that “there have been more than 90 Chinese investments in Indian startups, most of them made over the last five years. Eighteen out of 30 Indian unicorns (tech startups valued at over $1bn) have a Chinese investor.”  

The Indian government has already amended its FDI to save Indian companies from being taken over. This has given it some hope for self-reliance

CAN INDIA ADOPT SELF RELIANCE AS A SOLUTION?

Talking about self-reliance, the famous rating agency Acute` reported that the Indian manufacturing sector can at least substitute for 25% of imports from China.

However, Mr. Bhandari of Gateway House says that “boycotting popular Chinese apps such as TikTok might be more effective than boycotting physical goods in terms of value-added because there are multiple alternatives.”

Well, then it seems from the above facts that to boycott Chinese products is not an easy task. The Indian economy must have a strong backup before finalizing this decision.