What Trade Relations India Shares With China
'Made in China' label has over the years catapulted into every possible industry operating in India. This includes the well-known consumer durables comprising electronic goods, textile and garment industry, toys, medicines, car components but also encompasses the Indian digital sector consisting of applications, OTT platforms, e-commerce companies, and consumer fashion accessories, etc.
Bilateral Investment
China-India bilateral trade is a much-debated topic in recent times due to multitude of factors ranging from challenges due to import dependency in some sectors to the business opportunities as the global supply chain potentially shifts from China to the rest of the world including India. To put it in perspective, China is India’s one of the leading trade partners and constitutes 9 percent of India’s total export and 18 percent of total merchandise imports. Chinese investments in India between January-September 2019 were to the tune of US$0.19 billion and Cumulative Chinese investment in India till the end of September 2019 amounted to US$5.08 billion. Cumulative Indian investment in China until September 2019 is US$ 0.92 billion. However, these figures do not capture investment routed through third countries like Singapore, Hong Kong, etc. especially in sectors such as start-ups, etc. which has seen significant growth in Chinese investment.
Why 'Boycott Chinese Products' Movement is difficult in India?
1. Understanding the trade deficit
Amid India's limited production capabilities, China has emerged as the biggest exporter of consumer products. The trade deficit between the two countries is considered to be the largest among global trading partners with India importing seven times more than it exports to China. In 2018-19, India's exports to China were mere $16.7 billion, while imports were $70.3 billion, leaving a trade deficit of $53.6 billion.
Data suggests that China's exports to India account for nearly 2-4 per cent of its total exports which it can afford to export to other countries, substituting India, and that would potentially not hurt China's economy.
The task of mass-boycotting of Chinese products is feasible only when India has a substitute source that can match the cost and bulk-availability of Chinese products.
2. China is one of India's key trading partners
According to an India Today report, India's largest imports from China include electronics ($20 billion), nuclear reactors and machinery ($10.5 billion), chemicals ($6 billion) and steel ($2.3 billion).
Chinese firms have established a strong foothold in the Indian smartphone market. The four big companies dominating nearly 60 per cent of the industry are China-based brands – Xiaomi, Vivo, Realme and Oppo. The country's toy industry has also been penetrated by Chinese products On the other hand, 30% of India's automobile components demands are met by China. Additionally, the products made by Indian companies contain components that come from China or use Chinese machinery to make them. Thus, some of the key industries of the Indian economy are either partially or wholly dependent on China.
3. Private Indian companies with Chinese investment
As per the Gateway House Report, 2020 Chinese tech investors have put an estimated $4 billion into Indian start-ups. Over a period of five years ending March 2020, 18 of India's 30 unicorns are now Chinese-funded. Indian companies like Big Basket, Byju's, Flipkart, Hike (messaging platform), Ola, Oyo, Paytm, Policy Bazaar, Snapdeal, Swiggy, Zomato, Udaan etc are vested with Chinese interests in varying degrees. According to the report, Indian Venture Capitalists (VC) or financiers although wealthy individuals/ families are not in a position to make $100-million commitments needed to finance start-ups through their early losses.
4. China's dominance in the Indian digital market
Apps with Chinese investments constituted a substantial 50% of top app downloads (both iOS and G Play combined) which includes web browsers, data sharing, and social media apps as per the Gateway house report. TikTok, the video app, has 200 million subscribers and has overtaken YouTube in India. Alibaba, Tencent, and ByteDance rival the U.S. penetration of Facebook, Amazon, and Google in India.
Sources:
https://thelogicalindian.com/news/boycott-chinese-products-india-china-standoff-21744
https://www.eoibeijing.gov.in/economic-and-trade-relation.php
