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Day 24 – Q 3. Boycott of Chinese goods is knee-jerk reaction. India must boost manufacturing, cut reliance on China. Critically comment. 

  • IASbaba
  • July 7, 2020
  • 0
GS 3, Sci & Technology, TLP-UPSC Mains Answer Writing
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3. Boycott of Chinese goods is knee-jerk reaction. India must boost manufacturing, cut reliance on China. Critically comment. 

चीनी सामानों का बहिष्कार एक आकस्मिक प्रतिक्रिया है। भारत को विनिर्माण को बढ़ावा देना चाहिए, चीन पर निर्भरता में कटौती करनी चाहिए। समालोचनात्मक टिप्पणी करें।

Demand of the question:

It expects student to write about pros and cons of the Nationwide call given by various organisations, civil society groups & people to boycott Chinese goods. The question also expects student to analyse both aspects of whether India should boost manufacturing and cut reliance on China or not.

Introduction:

A Nationwide call has been given by various organisations, civil society groups & people to boycott Chinese goods due to the escalated tensions at the Line of Actual Control- Galwan Valley, followed by a border clash between the Indian and Chinese troops which resulted in casualties of 20 Indian soldiers

Body: 

India’s trade relation with China:

  • To begin with, boycotting Chinese products is easier said than done.
  • India is dependent on China for a wide array of goods, ranging from electronics to fertilisers.
  • Any attempt to reduce imports from China through tariffs or other non-tariff barriers, will raise prices for Indian consumers i.e. we need to pay more for smart TV, mobile phones, car, air-conditioner.
  • India also imports capital goods and intermediate products from China, such restrictions will affect domestic manufacturing competitiveness, and thus further erode the country’s export competitiveness. Moreover, in the short-run, ensuring uninterrupted alternative supplies may not be a feasible option.
  • There is also the issue of Chinese investment in the Indian start-up space to contend with. Companies like Alibaba and Tencent have invested in “unicorns” such as Zomato, Paytm, Ola cabs and others. 
  • Two-way trade was worth $88 billion in the fiscal year to March 2019, with a deficit of $53.5 billion in China’s favour, India’s widest with any country.

Impact on India:

  • If imposed, a large-scale boycott will hurt Indian businesses at a time when they are struggling to cope with the effects of COVID-19 pandemic.  
  • Additionally, even a slight increase in duties would raise the cost of import for vendors, which would eventually result in hiked prices for the consumers. 
  • As per reports, 75 percent of the smart phones sold in India are made by Chinese companies. 
  • At least 45 percent of consumer durables imported to India come from China. The sector is estimated to be around Rs 763 billion. AC, refrigerators and televisions lead the pack.
  • Most of the times, the poorest consumers are the worst-hit in a trade ban because they are the most price-sensitive.

Though the sudden outrage to boycott Chinese goods seems Knee-jerk reaction but

it has some postulates too:

  • The sudden outrage to boycott Chinese goods has played a role in bringing together Indians on the International stage during the ongoing COVID-19.
  • Boycott will definitely hurt Chinese businesses, threaten their survival during this crisis.
  • Boycott will also send a strong message to China that having a favourable trade deficit doesn’t mean that China can act aggressively on any front of the border and try to expand its territory.
  • Boycott of Chinese goods will also send a message to the Chinese government that they will now have to handle the war like situations on the border, in health sector and in the economic sector too.

But considering the whole scenario in the short run boycotting Chinese goods seems a knee-jerk reaction and hence We need to adopt a sustainable approach to boost manufacturing and cut reliance on China. 

Ways to Boost to Manufacturing sector:

  • Prime Minister Narendra Modi called to build a self-reliant India     (Aatm-Nirbhar Bharat), citing its experience in managing local demand without having to rely on imports in a major way during the lockdown.
  • India’s exports to China grew from $16.5 to $16.95 billion in 2019 while imports declined from $73.8 billion to $68.2 billion in 2019.
  • India’s share in the global exports of manufactured products remains around 2% which is far less than 18% share of China. Hence, we need to formulate policies which will boost manufacturing sector in India.
  • This is not to deny the need to build up domestic capabilities, across sectors through the initiatives such as Make in India, App innovation challenge.
  • While making sure that the Indian a manufacturing sector is growing also acquiring heights in new fields is also important through initiatives such as Smart India Hackathon etc.
  • Prioritising Made-in-India products on the Government e-Marketplace (GeM), an Amazon-style procurement portal can prove to be effective. 
  • Also MSME needs to be boosted by financing them through schemes like MUDRA yojna so that import of intermediate products can be reduced. 
  • The long-term objective should be to push through long-pending legislation that aims to address the structural bottlenecks that continue to plague and hinder domestic competitiveness.

Conclusion:

It is to be understood that that turning a border dispute into a trade war is unlikely to solve the border dispute. But, it doesn’t mean that India should put aside its pride and act like a soft state. Hence, Boosting manufacturing sector beside avoiding a knee jerk reaction till the time we get Self reliant seems to be the profitable way forward.

 

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