On 12th May 2020, Prime Minister Narendra Modi announced the commencement of the ‘Atmanirbhar Bharat’ Campaign while announcing different economic packages to tackle India’s lockdown. According to Nirmala Sitaraman, the campaign does not intend to be protectionist in nature and in no way aims at cutting off from the rest of the world.
In theory, a self-reliant India looks towards playing a bigger role in the global economy.
As part of this initiative, numerous economic decisions have been carried out. For example, increasing foreign direct investment in the defence sector, a major boost in the possibility of private sector involvement in numerous sectors and the change in the definition of Micro, Small and Medium Enterprises (MSMEs). On one hand, the exponential growth in India’s personal protective equipment (PPE) sector, from not existing at all in March, to producing approximately 1,50,000 pieces a day by the beginning of May, can be considered as a great example of a self-reliant India. On the other hand, some are calling this campaign as a revamped and repacked version of the Make in India movement, which was hardly a success.
Also, owing to the violent face off on 15th June 2020 between the Indian Army and China’s People’s Liberation Army, there have been calls for India to boycott Chinese products and promote Atmanirbhar Bharat instead. The government in the previous week placed an interim ban on 59 Chinese apps. The recent developments suggest that the government has asked these 59 apps to answer some 80 odd questions. Any delay in answering these questions after 22nd July 2020, will result in a permanent ban issued by the government of India. Also, the Department of Telecom (DoT) has informed BSNL and MTNL to not use Chinese material in its up-gradation to 4G networks.
Besides this, the Boycott China campaign has also gained a lot of momentum on social media. Owing to the lack of responsibility in the COVID-19 situation, the troubles in Hong Kong, the act of aggression towards India and the United States of America, a lot of Indian activists are adding more and more fuel in the campaign. Be it Amul’s twitter fiasco where the company’s account got banned for 24 hours for sharing a poster related to ‘Atmanirbhar Bharat’ or Sonam Wangchuk’s viral video about why we need to stop using all Chinese products, it is safe to say that China is going to face a decline in its economy. Now, the question here is, how much will India and China suffer individually because of this campaign?
To answer that, first, we need to understand certain economic relations. These being India-China, India-World, and China-World.
India and its eastern neighbour have had trade relations since the early 1980s. A lot of different trade agreements were signed. For example, the Trade Agreement in 1984, the Bilateral Trade Relation in 1992 or the Double Taxation Agreement in 1994.
The following data provides a detailed insight into how the imports and exports have worked out between India and China in the past 20 years.
If we look at the statistics, the growth rate of imports first increased to 53.6% between 2001 and 2006 but then majorly declined to 28.8% between 2006 and 2011. It further decreased to 1.7% in the next five years. Naturally, India’s share in China’s imports was very small. However, in 2017, India’s export grew while imports from China faced a decline. According to the General Administration of Customs in China, India’s exports again grew by 15.26% in 2018-2019 and imports from China grew by 12.89% in the same period.
We can far better understand this economic relation if we look at the import penetration in both the countries by the other country.
The graph indicates that China’s import penetration in India has increased drastically in the last 10 years. Trade relations, ethically, should not favour any one country yet clearly, China is benefitting far more than India. Owing to these circumstances, India has a massive trade deficit with China.
This little analysis if understood thoroughly can give as a pretty decent understanding of what the India-China economic relationship looks like.
Now, to quickly understand what the economic relationship of these countries is with the world, the following data is provided.
60% of the world’s cut and polished diamonds, 6% of world’s steel production, 10% of cement production, 15% of sugar production, 20% of the world’s generic medicine supply by volume and 60% of world’s generic vaccine supply is contributed by India.
Meanwhile, China contributes to about 12.5% in global trade, 45% of the world’s steel production, 60% of the world’s cement production, 47% of the world’s smartphone production and 23% of the world’s industrial robot production.
These stats help us draw a comparison of where India and China lie in the global economy as compared to the rest of the world.
Now, once we’ve understood these relationships, let's understand why Chinese products are such a success in a massive market like India. The basic obvious reason for the popularity of Chinese products in India is the extremely cheap cost. Due to this, the wholesalers buy these products in bulk and then later sell these products for a higher price thus earning an enormous profit. Delhi alone has more than 50,000 retailers who offer these products. The city’s famous Sadar Bazar sells different products like watches, toys, electronics etc and all of them are created in China. This cheap cost of the product owes its nature to the massive availability of labour in China. The cost of production in India however, is high due to expensive raw material, old techniques of production and higher fixed costs. This leads to a higher value of production and therefore Indian goods can hardly compete with the Chinese products at the global level and even in India. Thus, a majority of traders and businessmen prefer Chinese stocks.
Traders are now coming forward and are saying that they are ready to boycott Chinese goods but under certain conditions. They say that the government should reduce excise duty and provide economic support to small scale manufacturing industries and give them incentives to boycott Chinese products.
All such analysis, statistics and predictions present in the public domain right now, point in the direction of a worsening economic situation for the country. It’s extremely subjective and debatable as to whether the whole ‘Boycott China Campaign’ and the Atmanirbhar Bharat’ initiative was a required step or not. But, considering we’re already on the path of expediting our resources to achieve the goal, its more than essential to understand and analyse on our end and then form educated opinions.
So, how can our government ensure that all advantages of this decision of moving towards a self-reliant India are exhausted and every drop of profit is collected? We assess this, in the following points.
The world is boycotting China in some or the other way right now. This is a brilliant and a very urgent opportunity for India to invite Foreign industries and balance its economy. The situation can attract firms and bring employment and technologies to our country. Indian companies are doing a good job in reviving the faltering economy and the crisis caused by the COVID-19 Virus. For example, Reliance Jio has signed a 5.7 billion dollar deal with Facebook in the past months.
The older Make in India movement is a very interesting and logical way to balance our economy. The campaign has not succeeded a lot but in principle, it covers 25 different sectors of the Indian Economy to ensure that companies are incentivised enough to manufacture their products in India and bring in investments into various manufacturing units.
Make in India initiative can increase the manufacturing sector’s rate of growth to 14% and enhance the industry’s share within the economy. On paper, it can create more than 100 million additional manufacturing jobs within the marketplace by 2022.
India’s relations with other countries is another avenue that can be used efficiently to bring in money to the country. India is the third-largest military expending country in the world, the fifth-largest global economy, and one of the most prominent armed force. India is a major regional power who also harnesses atomic energy. Many have termed India as a nascent global power and a possible superpower if the right economic, geopolitical and technical decisions are made.
India features as a growing international influence and a prominent voice in global affairs. At the government level and keeping in mind the boycott china campaign, a very sensible approach needs to be taken to ensure that no local industry faces unfair downfall because of the initiative. Regardless, some important industries that will most definitely get affected are telecom and technology. The government of India placed a blanket ban on all telecom equipment of Chinese origins. According to a source, India can replace China as a leading low cost, high technology telecom and technology equipment supplier, given that the country’s industry is provided with the right amount of government incentives and economic packages to compete with global players in the international market.
Besides this, the Railway PSUs have also decided to cancel its signalling contract with the Chinese firm – Beijing National Railway Research & Design Institute of Signal & Communication. The signed deal with this firm was for Rs. 471 Crore. Railway authorities were not at all satisfied with the Chinese company due to its working methods and secrecy in sharing information. The project however funded by the World Bank didn’t stop the Railway Authorities to address a letter to the international organisation requesting cancellation of the contract on grounds of incompetence.
It is evident that India will face massive difficulty in replacing Chinese products. Chinese production factories are an integral part of the global supply chain. There are certain products for which China is the only source. If India does stop import for the products which acquire a large proportion of overall imports, it will impact India’s industries at large. The prices will increase as the cost of production increases.
Every country has its specialisation in the manufacturing sector. It is difficult to boycott a particular country when advanced manufacturing and production processes are involved. In the past due to ‘Make in India’ campaign, several Chinese firms had started Indian operations. These companies will surely suffer in the scenario where a full boycott of Chinese products happens. This will, in turn, impact our country’s GDP negatively. Besides, even if India manages to boycott finished goods, it will be very difficult to boycott the import of raw materials.
Indigenous production is an extremely interesting and empowering step for India but given the current scenario, the feasibility of boycotting Chinese products and being Atmanirbhar is still a dream that is a long way from being achieved.
Comments