On the 23rd of November 2020, Chinese state media, The Global Times, published an article headlined “India isolates itself from regional growth opportunities”. In the article, China essentially claimed that Indian traders are finding it difficult to shun Chinese products because of the low quality of locally manufactured products.
At the very outset of the propaganda article, Global Times says, “China showed a relatively resilient pace, with its share increasing in India’s total imports during recent months despite the COVID-19 pandemic and India’s constant undermining of bilateral ties. According to India’s Department of Commerce, Chinese products took 18.3 percent of its total imports from April to September, up from 14.6 percent in the same period last year, contrary to the Modi administration’s intention to reduce reliance on its largest trading partner and be self-reliant”.
However, this assertion is factually incorrect on various counts. China’s share of imports is 11.8% between April-September 2020 versus 10.5% during the same period last year, said sources within the government. Furthermore, overall imports from China have fallen by 24.5% while Indian exports to China have increased by 26.3% during the same period.
GT further claimed in the propaganda article, “Indian traders and manufacturers are struggling to end reliance on Chinese goods, partly thanks to a lack of high-quality, locally made alternatives.” That appears inconsistent with developments on the ground. The Confederation of All India Traders announced a boycott of a host of Chinese goods but that did not affect them adversely at all.
During Diwali, the CAIT recorded sales to the tune of Rs. 72,000 crores, up by 10.8% compared to the previous year. At the same time, China was estimated to have suffered a loss of Rs. 40,000 crores. Thus, we see Indian traders recording a significant increase in sales despite an organised boycott of Chinese goods.
Of course, the Diwali developments are consistent with the reports that have been coming in since September. It was reported in September that India’s trade with Hong Kong and China had fallen by over 7% in fiscal year 2020, the steepest fall since FY13. Import substitution of electronics such as TVs, refrigerators, smartphones and washing machines resulted in a drop of $1.5 billion in Chinese imports.
Thus, China’s terrible handling of the pandemic combined with its aggressive military posturing has affected the ties between the two countries. Following the clash between India and China at Galwan, the Indian Government has made a deliberate effort towards curtailing the influence of China in the Indian economy. However, there was a trend in motion even prior to this. FY20 was the first time ever that trade with mainland China declined for two consecutive years.
Trade deficit between the India and mainland China has been on the decline as well. In 2017-18, it had hit a high of $63 billion but it is now under the $50 billion mark for the first time in five years. The monthly trade deficit shows a similar trend. In March, it was at $1.816 billion, the lowest ever since December 2010 when it stood at $183.7 million.
There’s a clear pattern here that is only likely to be exacerbated further going forward. Indicative of the fact, in FY19, Indian trade volume with the USA surpassed that with China. Between April-September 2020, Chinese imports have continued to fall.
A combination of government policy and popular demand to boycott Chinese goods, the impact was clearly profoundly felt during Diwali sales which went up by a significant margin despite a boycott of Chinese goods. With sustained effort over a period of time, the impact will be even more profoundly felt in the days to come.
Apart from banning Chinese apps, the Union Government also gave the call for ‘Atmanirbhar Bharat’ and initiated the ‘Vocal for Local’ campaign with an eye towards boosting domestic industries and also on denting Chinese imports. At the same time, the people of the country, roused by nationalist fervour, were also determined to boycott Chinese goods.
Praveen Khandelwal, national secretary general, CAIT, told Business Today in September, “Our target is by December 2021, we should reduce imports from China by upto Rs 100,000 crore ($13.3 billion),” before adding, “The Indian consumer does not want to buy Chinese goods anymore. He is concerned with the spread of the virus and its impact on the Indian economy as also with the transgressions by the Chinese army on our border. We support them in this cause and will encourage them to buy local products.”
China, quite obviously, is desperate to avoid such a scenario and therefore, it is resorting to what it does best, bullying. Despite its claims to the contrary, it’s clear that Indian traders and citizens are more than willing to endure hardships and pay more in the relative short-term in order to move away from Chinese products in the long-term.
China recognizes that it is not a knee jerk response due to its handling of the pandemic but a conscious policy approach that the Indian government is extremely unlikely to sway away from. The Galwan Valley clash further cemented the resolve of the Indian populace that had turned resolutely against China since the advent of the Coronavirus pandemic. Under such a scenario, with the significant threat of losing space in the Indian market, China has decided to settle for impotent rage channelled through its government mouthpieces.