Beyond Boycott China, India’s Atmanirbhar Dream Rests On Smart Reforms Driving Domestic Production

Harking back to the British era, when India’s nationalist movement called for a boycott on English goods, it seems like we are heading back to the past. Amidst the backdrop of the violent face-off between Indian and Chinese troops in Ladakh’s Galwan valley, which saw the death of 20 Indian soldiers, calls for Boycotting China have only grown louder. But can we really afford to boycott China? And when we talk about boycotting China, do we mean to boycott Chinese goods, or snap entire bilateral ties with the country?

What about our unicorns?

The top startups in India, which include names such as Paytm, Zomato, Swiggy, Udaan, BigBasket, LensKart, CarDekho, and many others, count Chinese investors among their largest backers. In fact, according to reports, Chinese investors have pumped in $3.9 billion in 2019, up from $2 billion in 2018. In the process, they have surpassed USA to emerge as the biggest backers of the country’s digital economy. Not just that, a think tank named Gateway House had earlier this year reported that Chinese technology investors have put in an estimated $4 billion into Indian startups. According to the same report, 18 of India’s 30 unicorns are now Chinese-funded. Apart from Paytm, Ola, BigBasket, some of the other Indian tech companies that have Chinese investors include Byju’s, MakeMyTrip, Zomato and Swiggy.

If we decided to snap ties with China, what happens to these investments? And if the Chinese investors were to withdraw their money from these firms, who would replace this funding? Not just that, these startups also employ a big chunk of India’s population. What happens to them?

The import-export conundrum

The Confederation of All India Traders (CAIT), comprising of almost 60 million merchants across India has recently launched a ‘Indian Goods – Our Pride’ campaign. The idea behind this is to boycott Chinese products and escalate the Make in India slogan. In the process, CAIT finalized a list of 500 broad categories and 3,000 products that can be made in India by Indians. Their aim is that by December 2021, imports of Chinese products worth $13 billion will be substituted by local ones.

However, this $13 billion constitutes less than a fifth of our total imports from China, which added up to roughly $70 billion in 2018-19.

Here’s a look at some key import-export data for Indian and China in the period 2018-19, from the Export-Import Data Bank –

Export- Rs. 1.17 lakh crore. This is what India earned from China, which constituted 5.08% export share in India’s total exports.

On the other hand, Import – Rs. 4.92 lakh crore. This is what China earns from India, and it constitutes 13.69% import share in India’s total imports.

The total trade between the country adds up to Rs. 6.09 lakh crore, with trade balance with China adding up to Rs. (negative) 3.74 lakh crore, which means import is higher than export.

How then do we become ‘Atma-Nirbhar’? There seems to be no way that we can completely rid ourselves of imports from China. Not to forget the huge cross-border investment inflows between the countries.

How do we Make in India?

India imports not just consumer goods from China, but also industrial goods that are crucial for key manufacturing sectors. Moreover, more than 100 Chinese firms have a presence in India. Chinese state-owned companies have bagged huge projects here. Some of these include Sinosteel, Shougang International, Baoshan Iron & Steel, Sany Heavy Industry, Chongqing Lifan Industry, China Dongfang International, and Sino Hydro Corporation. In telecom especially, three Chinese firms namely Xiaomi, Vivo and OPPO have a 50% share of the mobile handset market. China sells us some very crucial machinery that adds to domestic manufacturing and exports.

For example, in the auto components segment, that has a market size of Rs. 43.1 lakh crore, the share of Chinese products is 26% (that’s a quarter!). The possibility of substitution is tough too, as alternatives domestically or globally are currently hard to find. Or take the case of solar power, a key pursuit of India in pushing renewable energy to the fore. Did you know that the share of Chinese products in this market is a whopping 90%? And no, there is no substitution either, since domestic manufacturing is weak and other options are much more expensive. Similarly, the share of China in steel products is close to 20%, while its share in pharma is 60%!

What is the way to an atma-nirbhar country, then?

Knee-jerk reaction is definitely not the answer; the need of the hour is to align Chinese companies with existing policies of the government, such as Make in India. We shouldn’t kick them out, but rather align more and more companies similarly. This will ensure that Chinese companies continue to set up bigger bases in our country. The other crucial requirement is the need for a more transparent and proactive bureaucracy, which can gradually cut our dependence on China. This can only be done in a reform-oriented manner. So, what if China sells us crucial machinery? We can start replacing them gradually over the next 5-10 years.

In fact, according to some estimates, a third of Chinese imports constitute low-tech goods that were either made earlier by Indians, or are still being made but in smaller quantities. If government policies push for the resurgence of local companies to build these again, it can not only reduce our dependency on the Chinese, but also provide a much-needed fillip for the battered MSME segment. Following which, the overall manufacturing sector will also get a boost, and fulfill the Make in India slogan. We need a steady motivation drive and robust policy measures to help smaller and bigger Indian firms to grow local sales and make Indians competitive, and ultimately more self-reliant.

Pranshu Sikka is the CEO and Founder of The Pivotals, India’s first Business Worries Outsourcing firm with expertise in stakeholder engagement. He has been a strategic communication consultant with over a decade of experience. (The opinions expressed here are personal)

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