Economy

Is India really in a position to boycott Chinese products?? --- A whole lot of complications that come its way

After the recent India-China standoff in the Galwan valley, Indian Foreign Minister S. Jaishankar told his Chinese counterparts that the bilateral relations will be changed forever due to this violent clash that took many lives.

Is India really in a position to boycott Chinese products?? --- A whole lot of complications that come its way
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This remark was not only important from India and China’s point of view but the whole world as two countries account for around 40% of the world’s population and more than 14 trillion dollars of GDP. India and China are also in the list of top three countries in GDP in Purchasing Power Parity (PPP) terms. 

Although the best efforts are being taken, many fear that they won’t be fruitful. From India’s perspective, war is not a favourable situation, although it must be sought if it is the only choice left. In his visit to Russia, Defence Minister Rajnath Singh pressed for early delivery of S400 Missile Defence System and also held talks for spare parts of MiG 29 and SU-30MKI.

From an economic point of view, India is more dependent on China than Chinese dependence on India. India and China trade was at $88 Billion as of March 2019 which is largely favourable to the Chinese side as India suffers a $59.3 Billion of trade deficit. The major imports from China are electronics items of which only smartphones account for $16 Billion as per the International Data Centre (IDC). India’s 73% smartphone market is managed by Chinese smartphone manufacturers with Xiaomi being the leader with almost 30% of the market share. 

This has mainly to do with low-income levels in India and the high cost of the American and South Korean smartphones. The average “boycott China activist” on Twitter uses more Chinese products than a daily wage earner or an average Indian. 

India also imports auto components from China at a large scale due to which when Boycott China trend started gaining popularity, companies like Maruti and Bajaj said banning or increasing tariffs on Chinese products will only hurt the industry and consumer both due to increase in the price of vehicles. 

India’s pharma sector, which accounted for more than $19 Billion of exports in 2018-19, is highly dependent on the Chinese Active Pharmaceutical Ingredients (API) for the manufacturing of their medicines. Even the HCQ drug, which India exported at a very large scale, was made from APIs imported from China. Almost 70% of APIs in India are imported from China. The Indian government has recently decided to allow a package of ₹10000 Crore to API manufacturing sector to boost production but it will take more than 3 years to show any positive effect on API import. 

India’s total monthly trade deficit in May 2020 lowered to $3.15 Billion which is mainly due to lockdown and travel restrictions in place all across the world and not due to sudden manufacturing boost. 

China has recently warned India to not indulge itself into the USA-China trade war as it will only have unfavourable consequences for the nation. 

Chinese exports to India accounts for 3% of their total exports and it accounts for 14% of India’s total imports. And also India’s total exports to China are only 5% of total Indian exports. 

The Indian government has taken several steps to counter these dependences on China. The Government of India is planning to introduce tariffs on almost 300 Chinese products worth $10 Billion. Clearance time for the Chinese goods from ports has increased in recent times.

Although the customs department has not disclosed any reasons, experts believe that this could be because of specific intelligence inputs. 

The question here is, are we really in a position to ban China, even if we ignore all the WTO guidelines and regulations? Please share your views in the comment section.

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