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Cutting economic ties with China isn’t easy

Subir Roy | Updated on June 24, 2020 Published on June 25, 2020

India must put in years of hard work before it is able to make products with the same efficiency and cost-effectiveness as China

As pressure groups like traders’ associations raise the pitch on boycotting Chinese goods and the government gets busy on creating the administrative environment to discourage Chinese imports, developments taking place range from the serious to the hilarious.

There is a chance that the Union Home Ministry will be overseeing buying bulletproof jackets for use by the ITBP and the Army, for which a key raw material (high-performance polyethylene) will be imported from China. It will be a supreme irony if the Indian forces engage with Chinese troops wearing jackets containing Chinese-made inputs.

On the funny side is the news that Chinese t-shirt exporters, who have a firm grip on the Indian market and are known for their prompt response to emerging themes, have already started putting out in the market items blazoned with slogans like ‘Boycott China’. Pictures of such garment with ‘Made in China’ tags have gone viral on social media. We have to assume that the manufacturers have weighed that their sin in being a prop for the anti-China mood in India will be undone by their patriotic act of being successful exporters.

Chinese penetration

For its part, the government has sought details from the industry on cheap imports and non-essential items like watches, wall clocks, hair cream, shampoo, cosmetics and some tobacco items. The government wants to begin with tax disadvantages, like an inverted duty structure that Indian manufacturers face.

A key area in which Chinese exporters have made deep inroads is sports goods. There is an endless list of what is imported from China: badminton and tennis racquets, tennis balls, shuttlecocks, gym equipment and every kind of sportswear. Over half of the sports goods imported into the country is from China.

Even when a non-Chinese brand like STIGA of Sweden and India’s own Stag is used, close inspection reveals that the item has been ‘Made in China’. Even when an item is made in India, it has inputs from China.

How did this situation come about? Chinese manufacturers are able to offer products of superior technology at attractive prices. Indian players say that government policy over the decades has led to the present situation. In order to successfully respond to the public demand and the government’s urge to cut down on imports from China, the Indian industry needs to do proper research and develop products by using the technology developed. This needs long-term planning and effort, and seeking to simply respond to the current fad will not help.

Indian capability

It is not as if the Indian industry is incapable of fighting the good fight. Take the case of the Bajaj group, the world’s fourth-largest two- and three-wheeler manufacturer. To get there, the group followed a three-fold vision — Western design, Japanese quality and Indian prices.

Indian two- and three-wheeler manufacturers have beaten China not just here but also in Africa. Chinese two- and three-wheeler manufacturers tried to enter the Indian market in the early 2000s in a big way, but were beaten on quality. A key decision by Bajaj decades ago was to pay engineers better salaries than the software industry, and get them to man a serious long-term R&D effort.

What is the policy or approach to follow? SN Subrahmanyan, MD of Larsen & Toubro, says one has to be realistic and practical. There are Chinese companies which have set up shop in India. From many points of view, Chinese goods are efficient and cost effective. If the country looks to China as an enemy, then it has to put in place policies and processes so that in four-five years, it can start making products with the same efficiency and cost effectiveness.

RC Bhargava, Chairman of Maruti Suzuki, India’s leading car manufacturer, has clearly stated that Chinese imports are necessary. This is particularly so for those who supply components, which are assembled to produce cars. If India hikes tariffs on Chinese imports — as there is talk of that — at the end of the day it will hurt Indian consumers through higher prices. Bhargava did not spell it out, but what will happen on the quality aspect is obvious.

Rathin Roy, Director of the National Institute of Public Finance and Policy, is quite forthright when he says that we are not buying Chinese goods out of any love for China. If you wish to reject cheap goods from China, you are going to become a more expensive country. The other alternative is to create and implement a programme to produce more cheaply in India what is currently imported from China. Indians have to grow up and do much more than assert in a fit of childish pique that they are going to boycott Chinese products. Indians have to put in the hard work to make in India what Indians want to consume and reduce dependence on the rest of the world.

The bottomline: Declaring even a partial economic disengagement with China is a serious matter, and a lot of homework needs to go into it for years so that it is successful.

The writer is a senior journalist

Published on June 25, 2020
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