BOYCOTT CHINESE GOODS

“BAN TRADE WITH CHINA AND TEACH CHINA A LESSON” is the outrageous call all over the country. They killed 20 of our brave Jawans in a violent and dastard attack over  Eastern Ladakh’s Galwan Vally in the Himalayas. It was indeed a cowardice act by the Chinese Troops.

But is it a good move to ban trade with China or can India cut off all trade relations with China just like that?  It does not seem so. There are a number of reasons as listed below which are very crucial to ponder upon before India can go ahead and ban businesses with China.

SELF- SUFFICIENCY: Like any country, India also is not self sufficient. We are dependent upon the import from China. Our manufacturing activities contribute only 12% to the GDP. Auto and Pharma Industries need components and ingredients respectively from China. Chinese Import just does not comprise of finished goods but also the raw materials which are used to produce the final goods. Hence the ban will punish the Indian producers. We import computers, mobiles, toys, lights, fertilizers, chemicals and what not. Holi is celebrated in India but Gulal is imported from China. On the other hand exports to China are just ¼th of what we import from them.With an import of $65.1 billion and export of $16.6 billion, India recorded a trade deficit of $48.5 billion with China in FY20. Yes, India has trade deficits with most countries, so, why single out China? One can argue..

COST : Cheap labour availability in China enables them to produce goods at a much lower rate than India. They produce goods in larger quantities and hence get the benefits of “Economies of scale”. Bigger the volume produced lesser the cost. And also, Chinese Government provides subsidy to manufacturing sector, further reducing the cost. In India we can’t manufacture goods at the lower cost and hence look for cheaper imports from China. We are heavily dependent on Chinese goods as far as medicine, mobiles and vehicles are concerned. These goods will become costly if we do not import raw material from them.

MIDDLE CLASS THE MOST AFFECTED: Price sensitive middle class public of India will get hurt the most if trade is banned with China. Chinese air conditioners for example are the cheapest. It cannot be replaced by the less efficient Indian air conditioners or the costly Japanese ones.

FOREIGN INVESTMENTS: Foreign Investment will get impacted if India brings a blanket ban, overnight,  on Import from China. Investor confidence is the most important and crucial factor when we talk about foreign investments. If a nation is changing its foreign policies abruptly it will definitely shatter the investor’s confidence and they will choose to remain away from such a country. An uncertain policy environment is not good for any country wishing to attract foreign investments.

TIMING: As the Indian economy is not in good shape, banning all trades with China at this point of time is not a good Idea. According to a research published by WTO, global trade will fall by 18.5% due to  the Corona pandemic.

WILL IT REALLY HURT CHINA? We want to punish China because it killed our soldiers at the border.But whether this trade ban will really have any impact on China. China accounts for 5% of India’s exports and 14% of India’s Imports. China’s Imports are less than 1% from India and Export to India are just 3%. So on the face of it, it is much easier for China to replace India than India to replace China. Ofcourse, India would survive even if China does the same thing but at a huge cost to Indian consumers and businesses.

WTO: Both India and China are the signatories to the WTO (World Trade Organisation) Regulations. According to those rules “FREE TRADE REGIME” is mandatory. World Trade Organization has the principle of non-discrimination and consensus among G20 leaders and trade ministers “to realise a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment”.

ALREADY IMPORTED:  The Indian traders have already paid for the Chinese products. If these products are banned overnight, it will have a devastating effect on the Indian traders.

SO WHAT SHOULD BE DONE:

Everything begins with an intent and then intent becomes an action by working on it with passing of time. India now has an insignificant share in world trade.India must try to aggressively acquire a higher share of global trade by raising its competitiveness.

“If we really want to break our dependence on China, we need to create an enabling ecosystem in our country in which we cannot have labour laws that encourage informality and discourage size and scale” says CEO of Niti Aayog Amitabh Kant.

Because of WTO clause in place it’s not possible to impose a full ban, but Government of India can still ban some products on the basis of health and security issues. For example India has banned the import of mobiles from China that do not have IMEI NUMBER. Govt can also impose import duties like countervailing duty or anti-dumping duty which will hike the price of Chinese products and in turn enable the Indian manufacturer to face the competition. The reliance on China cannot be weaned away in one go. It has to be in phased manner and meticulous planning. More than 100 Chinese companies have a presence in India. Indian companies have also ventured into China. India has to build its ecosystem and provide the foreign investors the right platform. MAKE IN INDIA movement has to gain momentum. India can also attract IT projects, develope large scale apps and software due to the immense talent the country has. Now under the ATMANIRBHAR BHARAT campaign, setting up of new factories and companies should be promoted.

One of the actions taken by the Government is that DPIIT revised the foreign investment policy. With this revision, it will be difficult for the countries sharing border with India to invest in India.It will prevent China from taking control of the Indian Companies.

Hence a complete boycott of Chinese goods may not be in the interest of Indian traders and our economy.

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Qualification: CA in Job / Business
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Location: CHENNAI, Tamil Nadu, IN
Member Since: 27 Jun 2020 | Total Posts: 1

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