Amidst the COVID-19 outbreak in the country, the Prime Minister of India, in May, initiated a new ideology of an ‘Atmanirbhar Bharat’ - Self-Reliant India. Owing to the global stoppage of import and export of goods and services, every state in the world was facing a gradual fall of the international economy. Interpreting this issue as one where India could grow exponentially, Prime Minister Narendra Modi specified some fundamental economic concepts. He pressed the issue of revamping and strengthening the supply chain and engaging every stakeholder in India to the country’s ‘own’ supply chain. Mr Modi mentioned the inclusion of a logical and rational tax system, clear rules of law, competent human resources, a better and developed infrastructure and an exquisite financial system. He further emphasised on how its high time India plays a huge role in the global economy.
Paralely, almost after a month, in June, a brutal battle between the Indian and the Chinese soldiers erupted. 20 Indian Soldiers succumbed to their injuries which were caused by a fierce fistfight.
As a result of this act of aggression, a common notion developed in a lot of people’s mind to boycott Chinese goods and services as an act of solidarity towards the fallen soldiers. In times like these, the questions which might come to most of our minds are, ‘What economic relation does India and China share?’, ‘What triggers such a shift in mentality?’ ‘What will its implication on India’s economy and the global economy be like?’ or ‘Is the mentality of boycotting Chinese goods the right direction to go in?’ and so on.
Currently, China is India’s biggest trading partner after the U.S.A. The eastern country accounts for over 5% of India’s total exports and more than 14% of imports in the financial year 2019-2020. This means that India runs a huge trade deficit with China. The Chinese ship to our country various things like smartphones, electrical products, fertilisers, automotive parts, telecom equipment, chemicals, pharmaceutical ingredients and engineering goods among other things, according to the Ministry of Commerce. According to the latest reports, China has its hands dipped in a variety of Indian start-ups and have invested a whopping 4 billion dollars in around 18 start-ups across the country. Other than this, although India is one of the major exporters of finished pharmaceutical products and medicines to the world, two-thirds of Active Pharmaceutical Ingredients (APIs) which are used to make these medicines come from China.
All this information points towards the magnitude of dependence both the countries have on each other and indicate a significant catastrophe coming towards both the nations economically if de-escalation doesn’t happen.
With Mr Modi’s elaborate and pretty worded speech and the idea of a self-reliant India, he instilled a feeling of nationalism among the masses. Nationalism, in its essence, means that an individual is supporting of their nation and identifies with the interests of the country. The Chinese attack in Ladakh amplified this feeling.
The Indo-China clash has led the government to review rules and regulations on imports from Eastern neighbour. The Indian traders who were initially reluctant to boycott Chinese imports have now created a list of 3,000 items including toys, watches and other plastic products which can be easily replaced by local manufacturing.
But can India’s manufacturing sector speed up fast enough to ensure that no significant damage is done to the country’s already faltering economy?
The country’s manufacturing sector can cover up to 25% of total imports that used to come from China, according to a report laid out by Acuite, a rating agency. This would lead the country to a reduced bill on imports of over 8 billion dollars in a single year. Some experts even suggest that boycotting Chinese applications and devices might be more effective than boycotting physical items if we compare the value added by each product.
Now, although there have been no official statements made by the Government of India to boycott Chinese products blatantly, the same has been pretty evident through a lot of actions that the authorities have taken. E.g., the government-run Bureau of Indian Standards (BIS) is coming up with more onerous rules and regulations for around 400 products to ensure that these items are locally produced and not imported. Similarly, a lot of other stricter rules and tariffs on Chinese imports are expected soon. These actions, more often than not, subtly lead to another critical and prevalent ideology in our country right now. Economic Nationalism. This ideology favours state intervention over a free market mechanism. It brings with itself, policies such as internal control of the labour, the capital formation and the economy.
This shift in the mentality of any significant player in the global economy is bound to have geopolitical repercussions who’s magnitude and nature are decided by how big a change from their usual policy are we looking at.
So, how does this affect the geopolitical scenario? The flaming hot U.S – China tensions over trade, COVID-19 responsibility and autonomy of Hong-Kong added with tensions between the United Kingdom and China offer the ideal context to the story. A dire domestic economy and problems with our neighbours along the border accelerate the story towards a nerve-wracking climax. The business giants will use the concept of economic nationalism left right and centre and benefit from it. The goal of being self-reliant will be partially achieved with new restrictions on investments from any country sharing a border with India. Then by corporate lobbying and improved infrastructures, an improvement in India’s economic policies should be expected. Even then, for India, primarily because of the COVID crisis and a severe downturn in the economy, the consequences would remain grave. China, on the other hand, will be far less worried since India accounts for only around 3% of its exports.
“Self-reliance should be interpreted as making India more resilient in the coming years, rather than interpreting those words in its narrowest terms.” – says Mr Kaushik Das, chief India economist at Deutsche Bank AG.
Economic nationalism is probably not the right path towards building a self – reliant India. Instead, the policymakers should focus on finding a middle ground to ensure local manufacturing of goods and services while also ensuring that the import-export scale does not dip too much towards either side.
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