Wanted a Great Wall of India was the banner headline for a cover story for the Sunday broadsheet I was working with in the year 2000 – as cheaper Chinese imports swamped the domestic markets. A large section of the Indian industry into manufacturing was beginning to get hit badly in the domestic market.
Two decades later, it is more of a retreat for the Indian manufacturing sector as its share in domestic market is under threat and its dependence on China for components increased. For example, in an Indian branded toaster or a mixer juicer sold in the market, chances are some of its key components are from China.
If we take consumer durables, toys, and household goods, Indian markets are flooded with Chinese goods.
Say in Manipur, these goods enter from Moreh town that trades largely with Myanmar. Of course, many Indian traders import goods from China and supply them to retailers across all states.
What to speak of electronic and electrical goods, even Indian “handicrafts’ are landing from China.Yes, we can find a little bit of China in our lives, from the moment we get up to the time we go to bed.
Were we Indians unpatriotic in allowing the Chinese to swamp our markets?
Well, as consumers, the choice was clear – price was the prime motivator in purchase decisions. Liberalisation initiated in 1991 and opening of the country meant the domestic industry was exposed to tough competition, and later sadly found wanting in some aspects.
Progressively, the Chinese entered several sectors after capturing the markets of low end and middle level manufacturing and then graduating onto cornering mega infrastructure projects as well.
Many Chinese companies entered India and many Indian start-ups have funding from Chinese companies. Chinese brands have become household names in India.
But all this did not prevent the outburst of fiercely nationalistic fervour, and rightly so, against the Chinese incursions into Indian territory and more important, the killing of 20 unarmed Indian soldiers and the manner of their killing made the blood of every Indian boil. And this only added momentum to the RSS backed campaign to boycott Chinese goods.
But can India really delink and decouple from Chinese when it comes to manufacturing because of the supply lines originating from China, is the question that begs to be answered. Also, replacing the Chinese goods, is easier said than done.
Let’s look at India’s imports from China, which stood at $65 billion in 2019-20. India largely exports raw materials and intermediate goods and imports finished products from China. India’s dependence on intermediaries in pharmaceuticals is a cause for worry. First, this needs to change if we want Indian manufacturing to get stronger and make things in India, as at present Indian manufacturing is dependent on Chinese supplies.
Consumers goods too have inundated India, which can easily be described as non-essential imports from China. In case of critical needs, like humidifiers, which are being utilised in the COVID-19 battle, China is the main source. Also, for medical masks, liquid soap we look at China. What needs to be done is to strategize and prioritise how to lessen dependency on China, going forward.
As things stand now, other than cancelling a few projects handed down to Chinese companies and making bonfire of goods from that country it would become a trifle difficult to really banish these from our lives.
What we need is a well-thought-out strategy to make this emotional national outburst count – hit the Chinese where it hurts – on the economic front as well. Yes, India has rejected two Chinese companies’ bids on development of Delhi-Mumbai expressway that entailed a cost of Rs. 800 crore each that were being bid by Jiangxi Construction Engineering Corp. Then Indian Railway is terminating a ¹ 471 crore signalling contract of Chinese firm.
This action needs to be followed up by ramping up manufacturing capabilities and capacities, so that both productivity and cost of production comes down and Indian goods are cheaper comparative to Chinese imports in the domestic market. As it will become nearly impossible in today’s globalised world to banish Chinese imports altogether given the multilateral agreements India has entered since liberalisation in the1990s.
Today’s stress on self-reliance – Atmanirbharata — as during the Indian freedom struggle to weaken the British economic might is of course the way forward. But we do need to be a bit realistic at the ground realities.
China has over the past two decades captured Indian markets and flooded it with a wide range of consumer goods, including electronic and electric consumer durables. For any customer, price is a key determining factor. The Indian industry discovered to its horror, since the late 90s and early 2000s, that Chinese imports were smashing them in the Indian market place. No amount of domestic industry campaign against quality of the Chinese goods cut any ice with Indian customers. Many had by then felt cheated by the Indian industry that they felt was overcharging.
Few domestic players have been able to withstand the Chinese and are beating them in the domestic and the world market. A leading motorcycle manufacturer, Bajaj, is a case in point. The Bajaj paid higher salaries for fresh minds, spent hugely on R&D, design and marketing to beat the Chinese.
But domestic industry appears to have collectively failed in Research and Development and instead on imported supply chains and technologies for their own survival in domestic market.
Now, let us take a look at our dependence on China in different sectors, an indicative list only. In the smartphone market, China enjoys a share of 72 percent, in telecom equipment 25 percent, smart televisions 45 percent, internet apps 66 percent, solar power 90 percent, steel 18-20 percent, pharma 60 percent.
The government hit out at China by banning 59 Chinese apps, sending out a strong signal. But, at a time like this, the key MSME sector in India is not in the best of its health.
After a series of successive shocks, it is barely staying afloat. The Covid19 pandemic and consequent lockdown became the final straw. The MSMEs, comprising 63.4 million units and contributing 30 percent to GDP and 33 per cent to manufacturing output are down. The need to help out MSMEs is paramount, as they account for nearly half of India’s exports.
The Modi government package for MSMEs is a welcome step, but a lot needs to be done to strengthen it. Improvement in service delivery mechanism of the government, players on the ground indicate needs a drastic overhaul and efficiency.
The government could plan to turn India into a global manufacturing hub, all along the Peninsular India that gives the country shipping access to all parts of the world.
Lakshmana Venkat Kuchi is a senior journalist tracking social, economic, and political changes across the country. He was associated with Press Trust of India, The Hindu, Sunday Observer and Hindustan Times. He can be reached on vlak[email protected]