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Monday, Jun 22, 2020 16:45 [IST]

Last Update: Monday, Jun 22, 2020 11:01 [IST]

Catch 22

India is angry after bloody clash on June 15 between Indian and Chinese troops at Galwan. Across the country, there are calls to boycott Chinese products and halt bilateral trade, with people burning Chinese appliances and goods and a Union minister even wanting a ban on restaurants selling Chinese food. WhatsApp forwards are further stoking this sentiment. But will shutting the door on Chinese products benefit India?
Cutting trade ties with the world's second-largest economy will not be easy. The choices that consumers exercise are typically a mix of value calculations and emotional dispositions, and brands that put people off must suffer the consequences. With stakeholder approval, corporate customers and institutional buyers have the right to behave likewise. This is a market phenomenon. It also gels with Prime Minister Narendra Modi’s call for a self-reliant India at the ground level. When it comes to policy, however, the calculative aspect of what we buy should determine decisions. The government has reportedly asked state-run telecom firms to lay off Chinese equipment. Private players may soon be under pressure to follow suit. In the odd case, there are security concerns, too. For example, China’s Huawei, a 5G leader suspected of loading machines with spyware on behalf of its deep state, must not escape scrutiny. We cannot risk enabling espionage. Meanwhile, official curbs on assorted Chinese imports are said to be under contemplation. A rush to raise trade barriers indiscriminately would be inadvisable, though, for these are likely to prove disruptive in the short-term and could produce a self-goal in the long-term. If the country must wean itself off Chinese goods, we should calibrate such a shift by what serves our economic interests.
China is not a market economy, but a state-dominated one. This must duly be taken into consideration, given its record of “dumping" products in other markets at super-low prices. Now that Beijing has given up trying to shake off its non-market tag at the World Trade Organization, it has become easier for us to invoke “unfair trade" while erecting defensive barriers against some Chinese exports. In theory, dumped products are those that are produced in vast quantities to gain economies of scale for the surplus to be exported at prices below their cost of manufacture. In practice, Chinese costing has always been opaque, and so we need other tests to pinpoint dumping. China’s non-market status allows a wide range of proxy measures. A judicious use of these would clearly serve our cause well.
According to United Nations Conference on Trade and Development (UNCTAD) data for 2018, 15.3% of India’s imports are from China, and 5.1% of India’s exports go to China, Despite the huge trade imbalance, it is difficult to say whether Chinese imports harm India. On the other hand, as the world’s world’s ‘factory’, China is among the largest trade partners of almost all countries. India has only a small share in its exports and imports so its boycott will not hurt China much.
Turning the border dispute into a boycott of Chinese goods is thus unlikely to resolve the situation.  Moreover, the Indian economy is already set to contract in fiscal year 2020-2021 due to the coronavirus lockdown halting economic activity any trade war will only hurt India further.

Sikkim at a Glance

  • Area: 7096 Sq Kms
  • Capital: Gangtok
  • Altitude: 5,840 ft
  • Population: 6.10 Lakhs
  • Topography: Hilly terrain elevation from 600 to over 28,509 ft above sea level
  • Climate:
  • Summer: Min- 13°C - Max 21°C
  • Winter: Min- 0.48°C - Max 13°C
  • Rainfall: 325 cms per annum
  • Language Spoken: Nepali, Bhutia, Lepcha, Tibetan, English, Hindi