Can India Afford A Trade-War With China?

Not every war is fought with guns and bombs- while some are fought with words and some with covert military operations, this particular war between India along with its neighboring nations and China is being fought by boycotting the use of Chinese goods and services.

Indian PM MR. Narendra Modi with Chinese President Mr. Xi Jinping

When PM Narendra Modi addressed the nation amidst lockdown and extensively emphasized on ‘Atmanirbhar Bharat’, a way to become self-reliant by producing all goods locally rather than relying on imports, his motto was simple- if enough goods and services are produced internally within the country it would not only boost the economy but also increase employment during these tough times. He probably didn’t know that his words would lead to a nation-wide movement, led mostly by the netizens of the country, to boycott all things Chinese.

What followed next were a series of trending hashtags on Twitter #BoycottTiktok #BoycottChineseProducts, WhatsApp forwards so long no one cared to read them, Facebook walls being filled with posters similar to “Simon Go Back” and Google Play Store witnessing a decline in rating of Chinese apps. The trend caught up so much that there was even an Indian version of TikTok by the name Mitron.

China’s Hold on the Indian Market

India and China are among the fastest-growing economies of the world. While India is the biggest importer of Chinese consumer goods and imports almost seven times more from China than it exports to it. Also, India has huge trade deficit with China – its largest with any country. In 2018-19, India’s exports to China were mere $16.7 billion, while imports were $70.3 billion, leaving a trade deficit of $53.6 billion.

Register Now for ‘FREE’ | Last Date 14th June’20 till 4:00 PM

To register click on ‘Register Now’

  • China supplies 60% of all electrical and electronic equipment used by India
  • 4 out of the 5 best selling mobile phone brands in India- OPPO, Vivo, Xiaomi & RealMe- form 60% of the smartphone market of India
  • 30% of India’s automobile demands are met by China
  • 90% of the Indian toy market is dominated by China
  • 50% of India’s bicycles are imported from China
  • Chinese tech investments in Indian Startups amount to about $4 billion

The Alibaba Group has heavy and strategic investments in India- Big Basket ($250 million), ($400 million), Paytm Mall ($150 million), Zomato ($200 million) and Snapdeal ($700 million).

Another Chinese group, Tencent Holdings, has investment in Indian firms like Byju’s ($50 million), Dream11 ($150 million), Flipkart ($300 million), Hike Messenger ($150 million), Ola ($500 million) and Swiggy ($500 million).

Gateway House

India’s potential to manufacture hydroxychloroquine (HCQ), which was in a great demand recently as a possible cure for COVID-19, greatly depends on the Active Pharmaceutical Ingredients (APIs), or the raw materials used in the manufacture of these medicines or formulations. China is one of the leading producers and sellers of APIs.

Also Read  What Could Stimulate Demand? - Krishnan L, IFMR GSB

Impact on China

China’s exports to India account for only 2 per cent of its total exports. Simply put, even if India stops buying goods from China, it will have a minuscule impact on China’s economy. China is India’s largest trading partner, but the trade is heavily skewed in favor of China.

But as useless as this boycott may seem, it does serve some purpose-

One Belt One Road Scheme
  • China is emerging as a global power and it is trying to portray itself as a responsible economy. Any negative propaganda against China or any escalation in India-China conflict will harm China’s bid to portray itself as a progressive nation and not an authoritarian dictatorship. This portrayal helps China attract western countries and take into confidence smaller Asian and African countries for trade and investment.
  • Another aspect is that China’s dream to emerge as the biggest global power is best exemplified by its One Belt One Road (OBOR) initiative where it tried to present itself as a responsible global economic force which is willing to work for greater economic good of all. A trade war with India, its biggest neighbor, will not sit well with China’s image makeover.
  • China is looking to expand in newer markets for its manufactured goods and India provides one of the largest customer base specially in terms of electronic items. But sadly this isn’t the only market China is targeting. China has its eyes set on other Asian Countries, African Markets and even European Nations. Assuming China to be solely dependent on India as a market is not backed by any evidence.
Also Read  The Neighbors - India & China

However, the famous Ladakh-based innovator Sonam Wangchuk posted a video on YouTube explaining how the boycott of Chinese goods is beneficial for India and will help shake up the Chinese economy.

It is not the first time a country has tried to boycott another country. China itself tried to boycott all Japanese products in the early 1930s to protest against Japanese colonization. Similarly, US consumer forums tried to boycott French goods in 2003 to protest against France declining to send troops to Iraq post 9/11. Arab nations have also many a times boycotted Israeli and American products with regard to their stand on Palestine.

What these events have in common is that none of the boycotts were successful, and dissipated within a few weeks. The reason for failure is simple: economics defies all shackles perpetuated by emotions and isolationism. Although boycotting Chinese goods and services might seem like a good idea for a short-term, what the citizens need to realize is that such a step would create a ripple effect and have far-reaching consequences. Thus, initiating a trade war when Indian manufacturing ability is limited is not going to favor India.

Don't miss out!
Subscribe To R2F Digest

Receive weekly analysis on current affairs to keep yourself ahead of other

Invalid email address
Give it a try. You can unsubscribe at any time.
Copy link
Powered by Social Snap