In a clearly discernible, retaliatory move, the Government of India early July 2020 banned 59 Chinese apps and removed Chinese bidders/ contractors from all the surface transport projects. This move needs to be lauded wholeheartedly.
It is important for Indian citizen to understand that using a Chinese product or service is tantamount to denying fair opportunity to an Indian enterprise/competitor. It also has an adverse effect on the economy in terms of foreign exchange reserves, under-utilization of capacities and under-employment among others.
To say that the Chinese product is 5 to 10% cheaper than its Indian equivalent is a specious argument. There is no overlooking that the quality and life of these products are also compromised. In a cost-quality nation, Indian producers are faced with a piquant situation. Despite being cost-conscious, they also realise it is difficult to be commercially viable while competing with China with respect to prices. The plant capacity of the Chinese manufacturing units is 5 to 10 times that of the Indian manufacturers. The Chinese are also content with profit margins as low as 2 to 5 %.
Be Indian, Buy Indian
The government can adopt a two-pronged strategy on this. It can impose up to 10% special import duty on all Chinese products and services. This can be complemented with a sustained “Be Indian, Buy Indian” campaign to whip up mass sentiment. Over a period of time, this will encourage Indians to buy Indian products and services. The government has another strong measure to marginalise the Chinese. It can encourage Indian traders to import from Vietnam, Taiwan and Indonesia in case of shortages. These countries offer products at the same price level as the Chinese.
Boosting domestic manufacturing
The government must introduce a comprehensive promotion and protection package to boost domestic manufacturing of electronic products, pharmaceutical intermediates & active ingredients so that India does not have to depend on China. We are independent of China in other sectors except for the 5 to 10% cost disadvantage which can be countered by imposition of special imports duty up to 10% on Chinese imports as suggested above.
Role of media
Media, especially the social media can play a significant role in bringing about this mindset change. These platforms can make people aware about part-owned Chinese companies like Zomato, Ola, Oyo Flipkart, MakeMyTrip so Indians learn to use non-Chinese competitors like Uber, Reliance Fresh, Indian hotels, etc that offer scope for hard bargain. It’s time we take China head-on on commercial imports and steer clear from an ‘unmake India’ situation that threatens to emerge later if not sooner. The taming of the dragon has begun well. It should be a stepping stone for “Make in India.”
A check-list for the Govt.
1. Impose up to 10% special import duty on all Chinese products & services.
2. Identify services where Chinese companies/ individuals have equity stake and give promoters six-month time to reduce their stake to zero by arranging Indian citizens /body corporates to buy the stake in Indian rupees. Allow the Chinese promoters to take the money out by converting into US dollars at prevailing Rupee to Dollar conversion rate.
3. Devalue Indian currency by up to 10% (pt no. 1) to make our exports more profitable and imports more extensive.
4. Identify specific products for new capacities/capacity expansion as alternative to Chinese products and encourage MSMEs to invest. Let banks offer loans for such investments at interest rates at least 1% point lower than the prevailing interest rate.
5. Give income tax exemption on profits made out of Chinese import substitution based investments in manufacturing capacities.
6. Actively engage with Trade Commissions of Taiwan, South Korea, Vietnam and Indonesia to lead Indian traders into importing from these countries.