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India’s Ban on China: A Rare Opportunity

Day in and day out, we receive messages to boycott Chinese products. News channels are talking about it all day. It started with Wangchuk’s video which went viral on social media. The implications of importing from China is injurious. India’s ban on China could be useful to us in many ways.

So many of us have consciously stopped buying Chinese products. My family business used to deal in Chinese electrical goods. We put a stop to it years ago. So many around me have been doing the same. My neighbour was ready to lose a sum of 20 lakh he paid in advance to a Chinese furniture brand. Yes, all of us have been patriotic. But are we being sensible and rational? Many have argued about globalization. Meaning, a lot of products that we use might have its parts manufactured in China but assembled elsewhere.

India has been raising the import duties since the last three budgets. This will give boost to local manufacturers to produce cheaper alternatives. Recently, India has been holding all shipments coming from China. As a part of anti-chinese movement, 150 Foxconn shipments containing smartphones and electronic parts are stuck in the ports of Chennai. This is a good move. It has resulted in Apple moving its manufacturing unit to India. Also, Apple saves almost USD 100-200 on import taxes. This in turn makes the iPhone cheaper.

The question is, can this be done for all products? The major problem is that India imports a hefty amount of raw materials from China. This includes more than 8,000 items and a total of INR 4,40,101 crore worth of imports. The important fact to note is that import from the USA amounted to INR 2,36,933 crore, which is way less compared to China. 60-70% of pharmaceutical ingredients for many common medicines like paracetamol are imported. Delaying clearance of such ingredients might not be the very best option. India has to step forward to make a replacement facility for such raw materials. Bajaj used INR 1,000 crore of Chinese components. But it also exported two and three wheelers worth INR 15,000 crore. This would not have been a bad thing, if Bajaj could have bought all the components from India.

The government also banned 59 Chinese apps. A lot of these apps had a huge consumer base in India. With the ban, the tech companies are likely to suffer a major setback. Apps, is one field where India can compete on a global level. Narendra Modi launched the “Let us code” campaign. It focuses on giving a boost to the Indian startup ecosystem to create alternative apps. Chingari, a TikTok alternative, has already seen 10M plus downloads. KagazScanner, a replacement to CamScanner saw 100k in only 24 hours. Inida’s ban on China is going to have major implications on Indian startup ecosystem.

It is really crucial for us to think at a global level and multi-dimensional level. And we must think about why we are where we are. China has attained domination in the world economy. Although it might be really hard to be the next China, it is not impossible.

We need a single free national market. The Goods and Services Tax has been trying to achieve this since 3 years, but in no vain. It has failed to meet objectives and suffered a lot of hiccups. Even after three years, it still remains in the process of evolution. And our apparatchiks are still stuck at changing rates of Popcorn.

India has climbed to 63rd rank among the 190 countries in the World Bank’s ease-of-doing-business ranking. But we still have ways to go. There are so many forms to fill and so many clearances to go through. India has to do much better in this aspect to allow the citizens to be able to manufacture ‘anything and everything’. Someone has well-spoken by saying, “we can make superb satellites, but can’t make a safe safety pin.”

A large number of startups in India have been funded by Chinese companies. Even if we have tighter rules over Chinese FDI, investments can still easily be routed to India from Hong Kong or investment hubs like the Cayman Islands. Establishing investment hubs within the country can also be another great opportunity for India. Our very own version of SharkTank!

Indians are everywhere. Be it any country, Indians are never rare. As a country with such a huge population, at home and abroad, we need to make use of the immense brain-power.

It is said that employees working for Chinese companies like Huawei and ByteDance get paid anywhere between 70-80k. And that too with an experience of a  year or two. In some professions and industries, even people with 10 years worth of experience aren’t paid as much. This is only possible because of the massive amount of sales the companies make.

The telecommunication industry of India has been underestimated. They contribute 6.5% to India’s GDP. They are not allowed input tax credit on telecom towers. Also, there is no refund of the accumulated Goods and Services Tax paid on spectrum charges. On the other hand, China recognizes this sector as its national ‘champion’. Telecom industries in India have to pay approx 30% in GST, license fee, spectrum usage charge and others. Companies have INR 50,000 crore stuck as input credit with the government until March, impacting the cash flows. The current pandemic has shown how crucial the industry is. Furthermore, Reliance JIO has hit a record high of USD 16 billion in FDI from giants like Facebook, Intel and many more. We need to make the utmost use of our crucial industries. 

India is facing a lot of adverse situations; the pandemic along with tensions with China. But as someone has rightly said “innovation comes from adversity”. The biggest example being the PPE-kit industry. India has moved on to become the world’s second largest manufacturer in just two months. The surprising fact is that it started from near-zero!

The current scenario, hence, is a rare opportunity for India to realize its potential and capitalize on the areas she is lacking.

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