India china border issues – how can India maintain balance between conflict & trade relations? is make in India a solution, even as raw materials are supplied by china

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Alibaba Group Jack ma once said, “If trade stops, the war begins”. In the current situation, it's the other way around “If war begins, trade stops”. India’s ancient friend, modern enemy “China” with its medieval mindset of expansionism, giving tough times ad mist pandemic. How India going to stop the rising power is what the world is looking forward to. What challenges are ahead to realize the self-reliance dream?

After the terrible incident of 20 soldiers beaten to death in Galwan valley, India woke up to the consciousness that it’s time to retaliate not with guns, but by stripping china off the trade with India. The recent banning of 59 apps by china is supposed to be the first action of this kind. China hardly buys anything in India, while India buys everything from China, which is 4 times the value of India’s exports to China. It is attributed mostly to china’s electronic sector with a huge market in India, whereas our country is still working on strengthening the electronic business.

While China is flexing its muscles, we should balance the conflict and trade? 18 Unicorn companies out of 30 companies have millions of dollars of Chinese investment. Paytm has been acquired outright. Chinese smartphones share 70% of the Indian smartphone market. More the 50% downloads of the app in India like TikTok , were developed by Chinese companies, Haewai was allowed to conduct 5g trials in India. The optic fiber sector, Electric vehicle sectors are dominated by Chinese presence. Is Made-in-India a solution?

 

After the launch of the Athma Nirbhar Bharat scheme and call for boycotting Chinese projects,swadeshi products are gaining popularity. From Reliance industries made in India 5g to mushrooming desi apps to PPE manufacturing, it is hoping for a swadeshi turn. Mukesh Ambani recently got investment worth 4.2 bn USD to its jio platform and is happy to introduce a slew of products in India. Desi apps are becoming popular after the ban. These apps were waiting for the opportunity to take a lead. PPE industry, which is almost not there in India, is booming in the wake of the Corona Crisis. This boycott of china and working on self-reliance may be a rhetoric move for time being. But, cutting down from china, is it plausible?

 

It needs to be acknowledged that China’s exports to India account for only 2% of its total exports, so even if Indians boycott all the goods imported from China, it will not make as big an impact on China. The range of goods that we import from China is massive: consumer durables such as electronic goods, smartphones, industrial goods, vehicles, solar cells, and essential pharmaceutical products including tuberculosis and leprosy drugs and antibiotics, among many others.

In such a situation, finding an alternative to Chinese imports remains a herculean task for the Indian industry, especially in the face of the cost competitiveness of Chinese imports. In fact, china is our strategic partner, where we are getting our raw material in very less cost. A mechanism for import substitution needs to be worked out, by creating such product alternatives that can compete both in quality and cost against Chinese products. Low R&D expenditure, especially from the private sector, is a key challenge facing the innovation ecosystem in India. Mere rhetorical call will not take us anywhere, we need clear blueprint.

R&D expenditure in India tripled in the last 15 years, but its size as a percentage of GDP remained at 0.7%. This is very low compared to 2% and 1.2% spent by China and Brazil (for 2014), respectively. Countries like Israel spend as much as 4.3% of their GDP on R&D. This makes it imperative to think about resource allocation and invest in research and development, which in turn will equip our industries with the requisite technology and skill to fight this trade battle. Secondly, the government must lower the rates at which loans are issued to Indian companies, just like China.

Moreover, the foreign direct investment (FDI) regime also needs to be further liberalized. India receives only 25% of the FDI that China gets and only 10% of what the US receives. An increase in the levels of FDI may provide the necessary nudge to our industrial sector to surge towards better productivity and efficiency. FDIs in food processing ,Tourism has good potential where investors are happy to invest.

Lastly, it would be extremely beneficial if we diversify our import basket, by importing our necessities from a host of other countries and lessening our dependence on China. All these steps, collectively, could take us closer to self-reliance.

 After World War 2, like Russia, China did not stick to an ideology to gain power, nor it did invested in military, whereas it worked on its economy for past few decades to become a raising super power. India should work on its economy, before getting into eye for an eye fight with its neighbours.

-Abirami.A