BackOpinion | India's Kalidas moment: Are we hacking at a branch of the economy?
The anti-China sentiment should not completely blind us to the bargaining power that we could exploit to our possible advantage and get China to address our concerns
PremiumCalls for a boycott of “Chinese" goods are not new—we have seen these off and on whenever the border controversy surfaced, and during the 72-day Doklam standoff, in particular. The impact on consumption and purchasing behaviour has generally been short-lived. The business sector has always kept away from all such remonstrations, and the economic turbines continue to roll.
The Galwan clash has brought forth a qualitatively new emotive intensity, not just from the general public but also some traders associations and political worthies. There are calls for imposing trade sanctions, some state governments have put Chinese projects on hold; there are demands for greater scrutiny of investment, and calls to block Huawei’s bid for the 5G network.
So, here’s the bottom line: With unimpressive independent manufacturing capability, an immediate boycott of “Chinese" goods, or even a clampdown on Chinese investment, is akin to cutting off a branch of the tree that is the Indian economy with a super-fast electric saw. That too, at a time when this tree has been battling the wormwood of an economic slowdown for the last two years and when tiny struggling shoots are fighting blight of a lockdown due to the covid-19 pandemic. It brings to mind the well-known tale of the great poet Kalidas, before he overcame his limitations, hacking away at the branch on which he was sitting. Are we are witnessing the Kalidas moment in our long-suffering debate regarding Chinese economic presence in India?
The “Chinese" goods that the general populace picks and consumes—gimmicky gadgets, stationery items, Diwali lights, toys and TVs—are the affordable low-hanging fruit that makes their lives easier and more stylish. What is not visible, and which makes the Kalidas moment so poignant, is that the roots—critical, key sectors of the economy—are especially dependent on China.
So, while videos of TV sets from China being thrown from high rises and Chinese cell phones being battered with hammers capture views on social media, the big question is what are the alternatives that can be put in place within acceptable limits of public pain and time frames.
The casual calls for boycott do not appear to have a complete understanding of what it means to be the biggest importer of Chinese consumer goods. One is baffled by the easy assurance with which some notable political personalities, who should know better, add mindless fuel to the nationalist fires by asserting that this “will break the Chinese economy". In 2018-19, India exported a mere $16.7 billion worth of goods to China, while its import bill was $70.3 billion, positing a trade deficit of $53.6 billion. There is a blithe disregard for the structural mismatch between manufacturing strengths and industrial capacity of the two economies—and therefore, unsurprisingly, perceived by and large as a situation that works only to China’s advantage.
China is the largest source for tyres and sports equipment to pick a few from an extremely long list. We have a near total dependence for pharma raw materials. Cheap Chinese cellphones have captured 75% of the Indian market and have unarguably enabled a mass digital literacy leap. Minor though it may seem, more than $500 million comes in through Chinese tourism.
We know about the extensive economic linkages between China and top Indian corporates, the Adanis and Ambanis. Chinese investments in IT-based startups are particularly tricky, since these startups have Indian and other foreign shareholders, which makes it highly problematic to classify them as Chinese.
Then there is the issue of the global supply chains, which has complicated the matter of country of origin, and the foreign portfolio investors (FPI) with Chinese links. The knowledgeable ones tell us that keeping the Chinese out is easier said than done. Apart from first having to identify those among the thousands of FPIs where there is large Chinese presence, there will have to be near round-the-clock monitoring to ensure compliance. This could lead to a fresh set of complex governmental regulations, which may deter non-Chinese investors as well. The question is no longer whether we can do without China—the point is that this economic engagement has penetrated so deeply as to be almost inescapable.
China is the fastest growing source of FDI into India—it picked up pace with the Modi government—so attempts to “insulate", “disentangle" or that current most-favoured term, “decouple" will come with prohibitive costs. We will have to start all over in many sectors. It will push the Indian growth story back by half a decade at least at conservative estimates. The state will have to step in if this has to begin, starting from the huge investments required to replace the expected investments from China to supporting the labour-intensive sectors, and reformulating industrial policies.
It took enormous humiliation to jolt Kalidas into straining every sinew to acquire the necessary knowledge to reach the pinnacle of his literary fame. In a globalized world, economic interdependence may not qualify as humiliation, but the fact that the possessor of high levels of IT capability cannot match Chinese competitiveness in the manufacture of indigenous electronic chips, may. The calls for boycott will leave no more than a dent unless we have a sound strategy with clearly defined short, medium and long-term deliverables and rigorous systems of accountability in place.
Having said that, let us not lose sight of the fact that India is the big market in Asia, and losing it will undoubtedly be a setback to a post-covid China. This is leverage India must not discard in its nationalist outrage—the anti-China sentiment should not completely blind us to the bargaining power that we could exploit to our possible advantage and get China to address our concerns.
Alka Acharya, Professor, Centre for East Asian Studies, Jawaharlal Nehru University
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