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Day 11 – Q 3. Is boycotting Chinese products a viable strategy to counter Chinese aggression? Critically examine. 

  • IASbaba
  • June 22, 2020
  • 0
GS 3, Indian Economy, TLP-UPSC Mains Answer Writing
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3. Is boycotting Chinese products a viable strategy to counter Chinese aggression? Critically examine. 

क्या चीनी आक्रामकता का मुकाबला करने के लिए चीनी उत्पादों का बहिष्कार एक व्यावहारिक रणनीति है? समालोचनात्मक जांच करें।

Demand of the question:

It expects students to write critical analysis about the viability of the strategy of boycotting Chinese product to counter Chinese aggression.

Introduction:

After Prime Minister Narendra Modi’s call for ‘atmanirbharta’ gave self-reliance the status of a national mission, the outrage has been particularly pronounced on social media, with hash tags like Boycott China trending on Twitter. Engineer Sonam Wangchuk’s initiative on micro blogging site has been quite successful. Recent violent face-off in the Galwan valley intensified the strategy of boycotting Chinese product further.  

Body:

Rationale of boycott Chinese goods and services:

  • Pandemic of COVID-19: Given the source of coronovirus in China and its mishandling of outbreak in earlier phase has increased animosity of world towards China and demands for reparations has been increased. 
  • Violent face-off on the border: Latest scuffle between soldiers of Indian army and People’s liberation army in the Galwan valley which led to death of 20 Indian soldiers has angered the common sentiments of Indian population.
  • Predatory pricing: China has adopted the ruse of manufacturing goods at such low prices that industries in other countries are unable to compete. Keeping a tab on what is in demand in the market and delivering it in large numbers quickly and cheaply has become China’s forte.
  • Wide trade deficit: India’s trade deficit with China stood at $51.68 billion between January-November 2019. Bridging this trade gap alone is a matter of concern. 
  • Comparatively Lesser Investment: Of all FDI inflows to India, Chinese investments have only been 0.52 percent since 2000. The biggest increase has been in the acquisition of shares in existing businesses, including pharmaceuticals companies—a source of concern during corona virus-related medical supply chain fears. Chinese investment has also been directed toward technology start-ups. According to a study, 18 out of 30 Indian “unicorn” companies have significant Chinese investment. E.g. Paytm, Ola, Flipcart. 
  • Data Security: China’s increasing stakes in Indian start-ups and other technology companies also raise major concerns over the protection of intellectual property rights, data privacy, and national security. E.g. Alibaba is the single largest shareholder in Paytm, which handles the daily financial transactions of millions of Indians. 
  • Global concerns: India isn’t the only country concerned about the Chinese government’s influence over private technology companies’ foreign activities. E.g. opposition to Huawei in US and EU. 
  • Given the world wide wave of protectionism, India should focus on building its own supply chain and occupying its domestic market.
  • Indian government has shown its intent by scrutinising Chinese investment. According to the Indian Ministry of Commerce, tighter restrictions on Chinese investment became necessary in order to prevent “opportunistic takeovers” of Indian companies.

However, there are concerns voiced by commentators that boycott china might hurt India more. 

  • Globalisation: We live in a world which, despite many recent setbacks to globalization, is inextricably interlinked, with the supply chains of companies spanning various geographies. 
  • Complex nature of sourcing: Products made by Indian firms contain components that come from China or use Chinese machinery to make them. Small and medium businesses, the focus of attention currently for their fragility in the face of pandemic-induced lockdowns, extensively use low-cost Chinese machinery and capital goods, besides trading in many finished products from that country. 
  • Large Indian companies like Dr. Reddy’s Laboratories, Mahindra & Mahindra and Sundram Fasteners have manufacturing units in China that cater to markets abroad as well as in India. In several segments, the fate of an entire industry could be in jeopardy if its China links are severed. 
  • Vital capital needs of Indian industry and start ups: Commentators have also pointed out how any such call to boycott Chinese goods sits uncomfortably with the billions of dollars of Chinese investment in local start-ups that are routinely held up as role models of Indian ingenuity.
  • More loss to Indian exports in reciprocal action: India is a large market for Chinese goods, accounting for 3% of China’s exports and adding up to $75 billion in 2019. But here’s the thing: India’s $17 billion of exports to China account for a much-higher 5.3% of our total exports. Any trade war with China would hurt India, too.

Though, it is also debatable how much effect a politically-motivated boycott can have.

  • India’s aspiration of global power from regional power: One global power cannot have regressive restrictive trade practices against other. Such policies or initiatives might hurt India’s economic development by loosing market of large country like china. 
  • Sustainable development: India is heavily dependent on China when it comes to achieving its renewable energy target. India’s import dependence for meeting its solar equipment demand was over 90 percent in past three financial years, Power and New & Renewable Energy Ministry said in a written reply to the Lok Sabha last year. India is third largest economy in the world on the basis of purchasing power parity, there should not be trade boycott between first and third largest economy for the sake of sustainable development of world.
  • Middle income trap concerns: Free trade and open economy has helped India in rapid progress of Economy from around $296 billion in 1989 to around $2.80 trillion in 2019. India is still in need of globalisation to come out of middle income trap.  
  • Compromised quality: Excessive protection of domestic firms might reduce competitiveness of Indian product in international market and would create another foreign exchange crisis. 

Conclusion:

Many times clamour for boycott is due to geopolitical reasons however diplomatic and military rivalry can go on with continuation of trade outside strategic domain exemplified in flourished trade between US-China. Instead of boycotting Chinese goods, we should negotiate with Beijing to open China’s market further to Indian services as well as more finished goods without compromising on territorial integrity and sovereignty. 

 

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