The first and easy step that the Government of India has taken in line with the boycott China sentiment is – banning 59 Chinese apps in India. The Centre banned popular apps by invoking the national security clause in the IT Act. Apps like TikTok, SHAREit, UC Browser, Shein, Club Factory, WeChat, and Beauty Plus will no longer be available in India due to privacy concerns and a direct ‘threat to sovereignty and integrity’. On June 29, 2020, India’s Ministry of Electronics and Information Technology issued an interim order, to all relevant intermediaries, including the app owners, those that facilitate access to the app (App Stores), and internet service providers and telecom network advising them of the directive that came into force with immediate effect. Now that the apps are banned the more urgent and serious question is ‘what next‘? Because if India, insists to continue targeting Chinese imports and investments in India, is the country sufficiently ready with alternatives? Is India prepared to risk its economic development by initiating Step 2 and Step 3 in India-China relations?
Step 2: Imports from China
China contributes about 13.7% of India’s total imports. During the period April 2019-February 2020, India imported goods worth USD 62.4 billion from China. It’s not a great dependency but can affect industries in mainly consumer electronics, automotive, and chemical sectors.
Here are the major products India imports from China –
- Automotive parts
- Electronics products and components
- Nuclear machinery
- Plastic items
- Organic chemicals
- Iron and steel
- Medical Equipment and pharma ingredients
- Sports goods
Step 3: Chinese funding in India
In the initial three years of the Modi government from 2014 to 2017, Chinese investment in India increased to USD 8 billion from a low of USD 1.6 billion in 2014. Besides providing raw materials and finished products to India, Chinese companies have also taken the route of Foreign Direct Investment (FDI) to invest in Indian companies. Chinese investment giants like Alibaba Group, Tencent, Steadview Capital, and Didi Chuxing have invested over USD 3500 million in only 18 of the 30 companies in India. These 18 companies include names like Bigbasket, Zomato, Snapdeal, Flipkart, Swiggy, Delhivery, Ola, Byju’s, Make my trip, Ibibo, Paytm, and Policy Bazaar.
CAIT calls to boycott 3,000 Chinese products
Recently the Confederation of All India Traders (CAIT) called upon its members to boycott Chinese goods. They aim to reduce the import of Chinese finished goods by USD 13 billion by December 2021. They listed 450 broad categories that have over 3,000 products which include cosmetics, bags, toys, furniture, footwear and watches. CAIT is urging the Indian traders to discontinue the imports of these Chinese items.
After banning Chinese apps in India
The border disputes, the Galwan incident, and the banning of 59 Chinese apps have put a strain on the bilateral trade between India and China. Banning items like cosmetics, toys and footwear may not hugely impact the Indian economy but raw materials and components can disrupt the smooth flow in manufacturing. So, what are the consequences India will have to face if Chinese imports and investments get disrupted?
- Delay in the manufacture of automobiles if imports of auto components get interrupted. China supplies items like brake systems, drive transmission, steering, and interiors to Indian carmakers.
- From transmission apparatus for radars to electrical transformers, the electrical industry will suffer. In 2019, this electrical machinery industry imported 34% of goods from China.
- Delay in building infrastructure as the Centre relies on Chinese companies to participate in tenders floated by the government to secure contracts.
- Adverse effect on the demand-supply ratio in items like mobiles which are not sufficiently produced ingenuously.
- Inaccessibility in sourcing ingredients for pharmaceutical drugs called APIs (Active pharmaceutical ingredients) could limit production capacity and result in an overall increase in the cost of medicines.
- A weakening of India’s nuclear program if it is unable to import nuclear reactors, boilers etc. In 2019, India imported USD 13.87 billion worth of nuclear supplies from China.
- With a reduced supply of plant nutrients like urea, and daimmonium phosphate required to make fertilizers, crops and farmers will be at a direct loss.
- The unavailability of large quantities of cheap raw materials and components on a regular basis can cause inflation in the country.
- Most Indian start-ups will meet an early end on account of non-funding available in India.
A long term solution
It’s time to think of long term consequences that may arise by banning Chinese apps in India. By breaking TV sets, mobiles and other Chinese products to prove you are a nationalist may not be prudent in a world that thrives on co-dependency today. Europe and USA are no longer world industries and Russia, Africa and Australia hardly contribute. This means we have to turn to China for good quality products that are manufactured faster, cheaper, in wholesale. However, after the coronavirus that originated in China, the world is looking at reducing its dependency on China and even moving factories to Vietnam, Thailand, etc. At this hour, it is going to be a tough decision for India to balance national politics, the nation’s safety, and economic growth. We know Prime Minister Narendra Modi will take the right decision on whether India should /should not initiate Step 2 and Step 3 to distance its neighboring country China, beyond just geographical boundaries. Till then India let’s boost the ‘Make in India’ movement than ‘Break in India’ movement.