Swadeshi solution to safeguard borders
October 23, 2020
Intelligence agencies have repeatedly warned the Indian govt. of the possible emergence of China as an economic and defence power in the world. — Anish Gupta
The outbreak of Covid-19 and the subsequent Chinese aggression on border has revived the debate on economic sovereignty. Various international and Indian intelligence agencies havetime and again warned the Indian government of the possible emergence of China as an economic and defense power in the world. China has been consistently successful in putting India in trouble by turning all its friendly neighbors into a hostile one. Chinese aggression is a manifestation of its economic strength, which it has gathered in the last 30 years by exploiting the provisions of WTO through all unfair means. Chinese success has been at the cost of other countries especially the developing nations like India. On the contrary, the same provisions of WTO resulted in increasing trade deficit of India particularly with China. Incidentally trade with China is mainly of those commodities which were already being produced in India. It has impacted Indian industries especially the manufacturing ones whose capacity to provide employment per unit of investment is highest among all sectors.
A report of the parliamentary committee in 2018 on the ‘Impact of Chinese Goods in Indian industry’ found that Chinese goods are causing unfair trade disruption in a very organized way through dumping, under valuation and smuggling by taking advantage of mismanagement in the Indian state. The figures related to dumping shows that China has been very notorious in such activities. The investigations of anti-dumping initiated by Directorate General of Anti-Dumping & Allied Duties (DGAD) during 1994-2017shows that approximately 57% products belonged to China. A definitive anti-dumping duty is imposed on the products where the case of dumping is proved. The figures show that till 2018, out of all products on which definitive dumping was imposed, approximately 71% were from China alone. This is despite the fact that a lot of domestic firms do not file application to initiate anti-dumping and other trade defense measures against Chinese firms due to its high expenses and complexities in collecting evidences from China. The absence of democratic system and non-transparent judiciary and bureaucracy has helped the Chinese government to directly or indirectly facilitate all such unfair practices.
Further, the committee has found that apart from dumping, China is flooding Indian market with smuggling by taking advantage of the fault lines in Indian politics and corrupt government officials. In the year 2016-17, around 1300 cases of smuggling were reported and the value of seized smuggled goods was 1024 crores. If the value of seized smuggled goods is that high one can imagine the value of successfully smuggled goods given the fact that India shares an approximately 3500 kilometer border with China.
Though the impact of flooding of Chinese goods in Indian market has not been estimated in a holistic way, but industry specific data on anti-dumping, smuggling, job loss, closures, etc, can at least provide a hint of gravity of the situation. Unfortunately, China has mostly impacted those MSMEs which are labor intensive i.e. textile, solar panel, toys, firecracker, bicycle, etc. According to an estimated data Chinese imports of man-made fabrics have resulted in 35% closure of power looms in Surat and Bhiwandi. Another estimate shows that due to Chinese dumping of solar panels, domestic industries have lost almost 2 lakh jobs. Similarly, in the case of bicycle, despite India being second largest producer of bicycles in the world, its imports of Chinese bicycles have increased rapidly and China shares almost 2/3 of India’s bicycle imports. The situation in toys market is more dangerous as Chinese products are almost 85-90% of the total volume of Indian toys industries. Similar kind of trends can be seen in firecracker industry.
The other industry, which is very important especially from the point of view of pandemic like covid-19 is pharmaceutical. Unfortunately, it is one of those most affected industries whose importance has been felt most during this pandemic. Despite being one of the largest exporters of drugs, the most raw materials for Active Pharmaceutical Ingredients (APIs) and Key Standing Materials (KSMs) are imported from China. In the case of some lifesaving drugs this dependence on China is as high as 90%. Moreover, in the case of APIs used in the formulation of national list of essential medicine, this dependence is as high as 75%. This high dependence is the result of our tendency to import raw material from the cheapest source which has ultimately resulted in the destruction of our domestic capacity to produce APIs. China took advantage of this dependence and raised the prices of these APIs up to 1200 percent during 2016-18, which has negatively impacted Indian exports. As a result, with the outbreak of covid-19, India found it very difficult to produce medicines at home especially when all imports and exports were affected due to suspension of transport services at various places.
China,on the one hand, has become economic power by destroying most of the Indian industries, and, on the other, it is showing its might on the border. Interestingly, it hasn’t happened all of a sudden, but it was a long term ploy of China, which was regularly warned by many political and defense analysts all over the world. Despite the awareness of possible Chinese threats, almost all previous regimes were clueless to deal with the situationanddid very little. Thepriority was to save their governments rather than strengthening the defense of the country.
Many social groups and academicians have cautioned that Indian industries would not be able to compete Chinese firmsdue to lack of level playing field. Whereas Chinese firms have advantage of state’s patronage, Indian firms pay an illegal toll to our own corrupt bureaucrats to run business smoothly. If this situation continued, it will lead to another economic crisis. That is why a lot of nationalist forces have suggested full boycott of Chinese goods and apps as the only solution to show China its place.
Though, government of India has taken some good steps by banning more than hundred Chinese apps due to serious security threats posed by them. However, government restrictions alone cannot bring good results until every individual do their might to boycott Chinese products since every drop of water makes the mighty ocean.
Anish Gupta is masters in economics from University of British Columbia, Canada and Ph.D. from JNU, New Delhi. He teaches economic at Delhi University. He has written several articles in The Pioneer, Swarajya, The Hindu, Indian Express, DainikJagran and Lokmarg.