‘Take actions on trade with China on selective basis’

Last week, the calls for regulating flow of goods and investments from China grew louder following clashes between Indian and Chinese troops in Ladakh, where 20 Indian soldiers were killed. Some industry leaders have, however, cautioned against angry or emotional responses.

The Swadeshi Jagran Manch (SJM) has appealed to the government to bar Chinese companies from participating in tenders floated by the government and exhorted the people to boycott Chinese products as a tribute to the soldiers. A Union minister said the government would soon announce regulations to block imports of cheap, sub-standard goods from China, while people should themselves boycott products shipped from the hostile neighbour. The Confederation of All India Traders has called for boycott of the Chinese goods.

A senior official said the government would bar Chinese companies from providing any telecom equipment to staterun telecom companies and might also prohibit private mobile phone operators from using gear coming from China. The telecom department may keep the Chinese vendors out of a 4G telecom equipment tender floated by state-run telecom companies.

On Thursday, the Railways cancelled a large contract with a Chinese company. More such actions are being contemplated.

Striking a different note, Confederation of Indian Industry president said whether to use the Chinese origin goods should be the decision of the consumer alone. The chief of a leading automobile manufacturing company said it was not easy to develop alternative supply sources in a short period. The head of a motorcycle manufacturing company wondered if it would be fair to abandon the Chinese suppliers who have been supplying quality products for several years now. Apparently, the industry leaders do not want any restrictions on inputs, especially components, required for manufacturing final products.

India imports about $70 billion worth of goods from China, mostly manufactured goods. That is about 2.8 per cent of China’s $2.5 trillion exports but equal to around one-fifth of our manufacturing output. Chinese companies have also invested in manufacturing, services, and financial sectors besides many fledgling startups in India. India’s exports to China are about $15 billion.

The Ladakh faceoffs come at a time when India is registering over 10,000 confirmed Covid-19 cases every day over the past few weeks. The rating agency Fitch has downgraded India. The fuel prices for consumers are going up. The state of finances of the government or businesses is not too clear.

The economic activity has picked up somewhat since the government started easing restrictions from stringent lockdown imposed towards the end of March. With most businesses limping back to normalcy, employment figures have gone up. With many countries in the western hemisphere also opening up, the exports have picked up somewhat from their lowest levels in April.

At this stage, it is necessary to keep the supply chain functioning undisturbed to help our economy revive. For now, it is better to fight with China on the diplomatic and military fronts and not let our focus shift from containing the Covid-19 and its ill effects. So, any retaliatory action on the trade, investment or commercial front should be taken selectively and after due thought, minimally hurting our own interests.