INDIA'S RETALIATION AGAINST CHINA

The absence of trade with China will have a huge impact on both China and India combined. But, India's harm would be comparatively more as compared to China since, India comes out as being excessively dependent on China for manufactured inputs used in various industries. China contributes to approximately 23% of India's imports and not just this, raw materials, auto components, pharmaceutical products, leather imports are a part of the several products consumed by India. Even though, India provides China with a lot of business where Indians act as consumers to the Chinese brands like Xiaomi, Huawei, Oppo and many other Chinese apps. But doesn't this make us more hooked to the chinese technology and products? How does a ban on Chinese products make us more self sufficient?

INDIA'S BAN ON CHINESE INVESTMENTS

Let's talk figures first,

Chinese investments in India amount for 40% in Automobile industry, 17% in Metallurgical industry, 7% in Power,  5% in Construction and 4 % in services. China among other investors provide an impetus to many Indian unicorns i.e. Ola, Byju's, Vedantu, Paytm, Swiggy and many more, which amounts to $8 bn investment. With India banning Chinese investments in the majority of the industries, these unicorns will be left stranded. Although India had its own reasons to do that i.e. to prevent Chinese takeover of major Indian firms as they were growing weak during the period of Covid-19. Due to shortage of revenue sources and steadily growing expenditures of some firms, this could've meant a takeover of many firms. So, we can say that this move did not come out of nowhere. As to the majority of the people wondering, how does the weakness of our firms lead to Chinese power over them? Let me explain. When Chinese investors/companies keep increasing their stake in Indian firms in return for greater investments, slowly and steadily the stake increases to more than 50% causing a takeover which makes Chinese firm a parent company and the Indian firm a subsidiary.

EVERY ACTION HAS A REACTION

Photo by Nick Morrison on Unsplash

With Chinese army reaction on the India-China  border, India was bound to retaliate through other  measures. Ban over the Chinese mobile applications  didn't come as a surprise after that. But, this meant a  loss of livelihood for many Indians as they were the ones bearing the brunt of it (case of TikTok). TikTok ban saw widespread hue and cry in India as many people resorted to the platform during the lockdown period to gain more followers and showing their talent and thus getting monetary benefit from it. This also caused Trump to consider banning the Chinese application. These applications got banned because of the concern of sensitive data of Indian users being at stake which is not an unnecessary concern considering how the ties of some Chinese companies are directly related to the communist government.

INDIA'S DEPENDENCY ON CHINA

Recently, it was seen that the Chinese imports were piling up in the shipment agency's warehouses due to the delayed customs clearance and thorough checking was being done before getting a nod from the authorities concerned. The trade has slowed down due to all of the above reasons. This can damage the supply chain to a great extent till the time we don't have a planned solution to the production inefficiencies in India, which China has been able to ace that quick. China started early researching 5G technology and is now the leader in this race. These weeks have seen Indian population burning and throwing away Chinese products as a sign of protest against it. 

Now, considering the fact that India's policy actions show signs of retaliation, we have to set some things straight. India's labor laws are not as flexible compared to China. Lack of skilled labor is another disadvantage that India suffers. There is a reason why China's labor managed to pull off a screen update just 2 days before the launch of the first IPhone, as Steve Jobs wanted a screen change. That couldn't have happened in India for sure. We import major pharmaceutical products such as Oximeters which are majorly being used at the time of Covid and many basic chemicals. An initial slowdown in China caused a supply shock in many industries, some of them depended for their exports and some were suffering because of lower prices in China, For eg. consumer durables industry which suffered because of slowdown in the supply of input materials. Therefore, it's not just India that is dependent on China but the entire world, as it takes care after the world production and manufacturing of input material and several products. Another reason why China is able to produce on such a sizeable scale is it's ignorant environment laws letting it produce frantically which made the country a leader in terms of pollution as well. Everything has a cost to it.

HOW CURRENT RETALIATION IS FUTILE

India will have to scale up its production process which will take years to come to track. The ban will also cause a boom in domestic prices because we won't be able to take the advantage of economies of scale (i.e. cost saving due to increased production) initially. Thus, better policy planning and research development is needed to improve the Indian economic condition. Until then, all these tit for tat moves would be futile and considered hypocritical.