Is India in the position to boycott Chinese products?
India-China trade and border disputes are always in the news. Amid this stand-off, Indian people threaten to boycott Chinese products. But is it feasible for India? We are publishing research on this matter which will clarify that whether India can boycott Chinese products or not?
India-China Trade volume:-
India’s trade with China was $87.07 billion in 2018-19. In this duration, Indian import from China was US$70.32 in 2018-19 while Indian export to China was just US$ 16.75. It means India’s trade deficit with China was $53.57 billion in 2018-19.
Chinese products imported in India:-
India imports mainly toys, lightings, electronics products, parts of computers, cars and motorcycles, milk products, fertilizers, antibiotics, and mobiles, etc.
Indian products exported to China:-
Agricultural products, cotton textiles, handicrafts products, raw lead, iron ore, steel, copper, telecom content, and other capital goods, etc. India exports 36% of its diamonds to China.
Why China's products are so Favourite in India:
The basic reason for the popularity of Chinese products in India is the low price of products. There are two basic reasons behind the low price of Chinese products-
1. The cost of production is China is low due to the availability of cheap labour force.
2.The manufacturing sector in China gets a subsidy from the government which reduces the cost of production of the goods.
3. Chinese manufacturers produce a huge quantity of the goods which reduces the cost of per unit(law of “Economies of scale” is applicable here)
Image source:Market Business News
The cost of production of Indian manufacturers is high due to costly raw material, the old technique of production, higher fixed cost. Due to the higher cost of production Indian products cannot compete with Chinese products in India and at the international level.
India’s dependence on China
In the financial year 2015-16, India's export to China was $ 3,833 million, which was only 3.59% of India's total exports. On the other hand, in the same period, India's import from China was $25,460 million, which was 15% of India's total imports. More interesting thing is that share of India’s total imports from China is increasing every year.
In the year 2010-11; China’s share in India’s total import was just 11.76% which rose to 15% in the year 2015-16.
India’s dependence on China in terms of medicines is a cause of concern for Indian policymakers. See the picture given below that how much Pharma ingredients are imported by India from China in the last 3 years.
Which Indian sector is most affected by China?
The toy industry of India is badly affected by cheap Chinese imports. The cost of Chinese toys is so low that any Indian company is unable to compete with China. Last year only 20% of the Indian toy market is captured by the Indian companies while the rest of the 80% market is captured by the Chinese and Italian companies.
According to a study by ASSOCHAM, 40% of Indian toy-making companies have been closed in the last 5 years and 20% are on the verge of closure.
China has broken the shoulders of the Indian electronic industry by dumping cheap electronic items (lightings used on the Diwali festival is the hot example of the same)
China-based vendors continue to strengthen their grip in the Indian Smartphone market. In the first quarter of 2017, China-based vendors captured 51.4 percent share of the smartphone shipments in India with 16.9 percent sequential growth and impressive 142.6 percent growth over the same period last year. In contrast, the share of homegrown vendors dropped to 13.5% in the Q1 2017 from 40.5 percent in Q1 2016.
(A shop in India filled with made in China products)
15 Interesting Facts and History about Pakistan Occupied Kashmir (POK)
Can India prevent the supply of Chinese products in the Indian Market?
The answer is no; because as per the rules made by the World Trade Organisation, it is not possible to impose a full ban on imports from any country even if there are no diplomatic, regional, and trade relations with that country.
But the government of India can ban some Chinese products on the basis of health and security issues. Commerce and Industry Minister replied in the Lok Sabha that the government of India had banned Chinese mobiles that don’t have an IMEI number. China has also banned Indian milk products on the basis of serious health issues.
What India can do to restrict the entry of Chinese products in the Indian Market?
India can impose an anti-dumping duty and countervailing duty on the cheap Chinese products like electronic items and toys. After the imposition of these two duties the prices of Chinese products increase in the Indian market, hence Indian manufacturers will have the chance to produce these products on Indian soil which will generate employment in India.
Impacts of the ban on Chinese products in India
It is a well-known fact that the Indian market is a price-sensitive market. Here a company has to keep the price low to penetrate the market. Indian consumers are more concerned about the price of the products not the quality of the products.
So if Chinese products are banned/boycotted in India, it can raise the inflation rate in India because Indian products are costlier as compare to Chinese products. The people of the lower-income groups in India will suffer a lot because they will not be able to purchase costly Indian products.
So before taking any decision of banning/boycotting of Chinese products; the government of India must remember that China sends just 2% of its total export to India while India sends 8% of its total export to China. Hence Government of India needs to make a rational decision not the emotional one on this matter.