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Can India boycott Chinese goods?

Introduction

Amidst the ongoing military standoff between China and India( 2020 China–India skirmishes)

Since May 5, 2020, when Prime Minister Modi, in his address to the Nation on May 12, 2020, started a ‘vocal for local’ campaign, soon after that, people started talking about boycotting Chinese goods. And launched various online attacks.

It is the need of the hour for Indian citizens and the Gov of India to push back the Chinese influence from the Indian market 

China’s growing presence in the world and its ambitious expansion policy will surely haunt its neighbors, and if India wants to protect its border and counter them, then we still have enough time. 

In this article, we will discuss some facts, challenges which lie ahead, advantages, and the steps taken by the government in countering China’s presence. 

The major question is

Is it really possible for India to boycott Chinese goods?

The answer is yes, but It is a known indisputable fact that Chinese products are less expensive than their Indian counterparts. Apart from this, the Chinese government also provides subsidies to its exporters.

Let us look at some of the facts and figures

India is one of the most important importers of Chinese goods and services within the world because India imports nearly seven times more from China than it exports. 

In the fiscal year, 2018-19 India’s exports to China were mere $16.7 billion, while imports were $70.3 billion, leaving a deficit of $53.6 billion.

China’s tech company and VC (Venture Capitalist) investments in India account for quite $3.6 billion.

Most Indian companies with Chinese investments are E-commerce retail service providers offering doorstep delivery for patrons,
with the planet grappled with COVID-19 pandemic and Indian government’s push towards online deliveries, the amount of job and financial losses just in case Chinese investors pull out of Indian companies is sizeable and can’t be ignored.

Share of Chinese products within the smartphone segment is 72%, Chinese brands dominate every price segment and are way ahead in R&D.

70% of India’s imports of, Active Pharmaceutical Ingredients (API), come from China, totaling $2.4 billion of India’s $3.56 billion in import spending for those products annually 

Shares of Chinese smart TVs account for 45 percent of the local market, and alternatives to Chinese smart TVs are 20-45 percent costlier.

Bilateral trade rose 1.6 percent year-on-year to $90.5 billion in 2019, consistent with Chinese customs data. China’s exports to India stood at $72.7 billion, up 2.1 percent yearly

India may be a large marketplace for Chinese goods, but it only accounts for 3% of China’s exports and adding up to $75 billion in 2019. 

India’s $17 billion in exports to China account for a much higher 5.3% of our total exports. Any trade war with China would hurt India too.

Challenges

India completely missed out on the ‘third industrial revolution’ comprising electronic goods, microprocessors, personal computers, mobile phones, and decentralized manufacturing and global value chains. Today, India is the world’s second-largest smartphone market. However, it doesn’t make any of those phones itself and manufactures only a little fraction of solar photovoltaic cells and modules currently used, with ambitious future targets.

R&D takes for a much longer period to justify the cash put in it hence the Government shows less interest in R&D expenditure.

In a nutshell, R&D is a future vision while our legislators are in a hurry to attain brownie points hence gives less priority to R&D.

As per the Economic Survey of India 2017-18, India’s spending on R&D is simply 0.6% of GDP vs. that of Israel 4.3%, South Korea 4.2%, US 2.8%, and China 2.1%. China’s total R&D spending is 20 times more than India’s.

Smartphone maker in India sells smartphones that are just purchased from China itself, only reassembled, re-branded, and patched with new software. A simple, cost-effective process, this is the most critical failure of the ‘Make in India’ initiative as most smartphone companies were just ‘assembling’ phones in India instead of ‘making’ them.

The core component required for creating a smartphone or almost any modern gadget is the processor that semiconductor technology, including its fabrication process, is required. This includes single crystal generation, chemical diffusion, metal deposition, surface metrology, nm lithography, etc.

If we manage to form all the components of a smartphone from the battery to the skeleton, the core of the smartphone won’t be made in India. The sole way to achieve that is to set up our semiconductor fabrication plant (FAB), which again isn’t something that straightforward.

The digital age has propelled the planet into consuming electronics at an unprecedented scale. The worldwide shipments of devices — PCs, tablets, and mobile phones — totaling 2.2 billion units in 2019. All of those gadgets require semiconductor chips to function, and it’s clear that economies with an outsized production of those chips have benefited the foremost in terms of enhancing their GDP. The US, Japan, Korea, China, Singapore, etc. are all large producers of semiconductor chips and even have a robust foothold in the worldwide economy.

One of the most critical hurdles in fixing fab manufacturing units is the indisputable fact that it requires massive investment. Additionally, to the high cost, running in billions of dollars, manufacturing even one chip requires many gallons of pure water, which can also be hard to seek out in India within the required quantities. An uninterrupted power supply is another major hurdle. The guts of the difficulty are that India remains not unto the par in terms of the essential infrastructure needed to pursue endeavors within the chip manufacturing space. There’s also constant price pressure from other global players, notably China, which is additionally building a homegrown chip program for the adoption of local semiconductors in 70% of its products by 2025.

Factories exiting China are choosing Vietnam and not India. The main reason is that the  Vietnamese government is committed to making a functional and attractive business environment for foreign investors, and continuously improving its legal framework and institutions associated with business and investment. The government has been working hard on restructuring the economy and its model for growth, also enhancing national competitiveness. While in India, we’ve just started the ‘Make in India’ program.

 Our cost of production for API is going to be higher, compared to the Chinese price, which would eventually hamper the export competitiveness of the products there is a dire need to match the costs offered by Chinese firms. For this, we’d like to take a position phenomenally high in API manufacturing so that the buyers of Chinese APIs move towards India

Alternatives 

 The customer is King. This means that buyers must stop using Chinese products. Sonam Wangchuk recently gave a call to boycott made in China software during a week, hardware during a year, finished and non-essential products during a year and essential commodities, raw materials, etc. in the coming years in a systematic way. 

We can also implement an import-substitution method in India to boycott Chinese products. This means that the products we import from China might be manufactured in India, but this is often impossible within the short run.

The Government of India must lower the rates at which the loans are issued to the Indian companies, a bit like China. In addition to the present, the government must provide infrastructure, services, etc. to prepare Indian companies to compete with China. India can boycott Made in China products but only if we do it in a systematic and planned way

India is ranked 63 among 190 economies within the ease of doing business, because of this companies does not think of setting up industries in India if this rank improves further, then the foreign investor will look to India, and this can create huge employments

While there has been substantial progress, India still lags in areas like enforcing contracts (163rd) and registering property (154th). It takes 58 days and costs on the average 7.8% of a property’s value to record it, more prolonged and at a higher price than among OECD high-income economies. And it takes 1,445 days for a corporation to resolve a billboard dispute through an area first-instance court, almost three times the typical time in OECD high-income economies.

India undoubtedly has missed the opportunity in many of these technologies during which the U.S, Europe, and China have established perhaps invincible leads. Yet self-reliant capabilities in electric and cell vehicles, electricity storage systems, solar cells and modules, aircraft including UAVs, AI, robotics and automation, biotech/pharma et al. are well accessible.

India must improve contract enforcement mechanisms and upgrade infrastructure to draw in companies looking to maneuver faraway from China and seeking other investment destinations, feel experts.

 The outbreak of COVID-19 has created unique opportunities for India, and therefore the country should do its best to draw the attention of foreign companies and investments because it would help in generating jobs, creating wealth and promoting ‘Make in India’

With the worldwide reliance on Chinese manufacturing bases exposed in the light of the global pandemic, Many countries are now watching alternate manufacturing sites to extend their supply chains, and India can lure this opportunity for its gain

Advantages 

Given India’s minimal labor costs, slowly reducing corporate taxes and relaxed bureaucratic red tape, India can pose itself to become a subsequent manufacturing hub,

India has the chance to emerge as the next global production hub because it offers an outsized internal market, quality labor at competitive rates, and a thriving private sector. India could further improve its competitiveness by focussing on harmonizing trade and FDI policy,” said Mohammad Athar, Partner -Economic Development and Infrastructure, PwC

Software and apps

The least Indian can do right now is to decrease the dependence on Chinese apps and software in the Indian market,

because china generates bulk amounts of revenue from the Indian market through these apps, Indians do have alternatives for these apps if they want they can boycott this software.

Tiktok garnered $88.5 million in revenue, which was double the revenue earned within the Q3 of 2019 and 6 times more it received within the same quarter of 2018.

Some major Chinese apps which have a huge presence in the Indian market are

Maximum popular Chinese language apps among the top 100 in India

Social content structures: helo and share it

Amusement and quick video apps: TikTok, and kwai

Internet browser apps: UC browser and UC browser mini

Video and live streaming apps: live, bigo stay, and Vigo video

Software packages: beautyplus, xender, and cam scanner

Gaming apps and software program: pubg, conflict of kings, cell legends

E-trade packages: clubfactory, shein, and romwe

Government initiatives

Government has identified 12 sectors in which it can be a worldwide supplier these include — food processing; organic farming; iron; aluminum and copper; agrochemicals; electronics; industrial machinery; furniture; leather and shoes; auto parts; textiles; and coveralls, masks, sanitizers, and ventilators

The government made prior approval mandatory for all foreign investments from countries that share land borders with India to restrict “opportunistic takeovers of stakes” of Indian firms, a move that can restrict FDI from China.

Make in India’ recognizes ‘ease of doing business’ as the single most vital factor to market entrepreneurship. A variety of initiatives have already been undertaken to ease the business environment. The aim is to de-license and de-regulate the industry during the whole life cycle of a business.

New Infrastructure: Availability of recent and facilitating infrastructure may be a vital requirement for the expansion of the industry. The government intends to develop industrial corridors and smart cities to supply foundation-supported state-of-the-art technology with modern high-speed communication and integrated logistic arrangements.

Existing infrastructure to be strengthened through upgradation of infrastructure in industrial clusters. Innovation and research activities are supported through a fast-paced registration system, and accordingly, the foundation of the property Rights registration set-up has been upgraded. The needs of the industry’s skills are to be identified and, consequently, the workforce’s development to be pursued.

Make in India’ has identified 25 sectors in manufacturing, infrastructure, and repair activities, and detailed information is being shared through interactive web-portal and professionally developed brochures. FDI has been opened in Defence Production, Construction, and Railway infrastructure in a big way.

A 10,000 crore rupees fund is set-up by the government to supply funds to the startups as risk capital. The government is additionally giving a guarantee to the lenders to encourage banks and other financial institutions to provide risk capital.

Seven new Research Parks will be set up to provide facilities to startups in the R&D sector

Tax saving for investors

People investing their capital gains within the venture funds set up by the government will get an exemption from capital gains. It may help startups to draw in more investors.

The government has proposed to carry two startup fests annually both nationally and internationally to enable the various stakeholders of a startup to meet. This may provide substantial networking opportunities.

Recently India banned 59 Chinese apps in the national interest.

Conclusions

There is no doubt in India’s capabilities in countering Chinese presence. Still, India needs to be attentive and firm for the effects to take place. At the same time, the Indian government should flow some capital in the Indian market to make things easy for Indian manufacturers and retailers. 

If the Indian buyers instantly stop  buying Chinese goods then the retailers who have already imported goods from China will go in losses, so we have to look for that also 

Indian retailers need to stop importing Chinese goods and should look for Indian alternatives, and if they do not find one, then they must look for some other country alternatives. In the meantime, we can brace up for make in India initiatives and can project us as the leading manufacturer. 

Since the whole world is interdependent, one each other and one can not be entirely independent of any other major manufacturer country, and of course.

There are some WTO rules which barres any country from imposing higher import duties and completely stopping trade from any country which comes under it. 

So the Indian government has to make such a huge trade deficit null or negative, and we as responsible citizens can stop using Chinese applications right away and can slowly give up on Chinese hardware.

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