‘MADE-IN-CHINA’ DAMPENER TO INDIA PLAN
Beijing’s edge stacks odds against Modi’s programme to expand manufacturing base
NEW DELHI
IN Mohit Gogia’s stationery and gift store in Noida, near India’s capital, the only decorative lights for sale ahead of last month’s festival of lights were Chinese made.
“India-made lights cost twice as much,” said Gogia, as shoppers snapped up supplies for the Diwali celebration. “Customers aren’t willing to pay that.”
Two-way trade statistics tell the tale. India’s deficit with China has ballooned ninefold over a decade to US$49 billion (RM207.34 billion) last year as China’s manufacturing edge stacks the odds against Prime Minister Narendra Modi’s threeyear-old “Make-in-India” programme.
The result: India’s current account deficit is worsening again, threatening the outlook for an economy already straining under the fallout of a snap ban on highvalue notes a year ago and a new sales tax.
Now — a century after freedom fighters in colonial India launched a movement against British goods — the backlash against Chinese products is ramping up.
Swadeshi Jagran Manch drew more than 100,000 onto the streets, here, on October 29 in a rally against the dominance of Chinese products.
“This is the biggest-ever gathering to fight the dominance of Chinese goods,” said Arun Ojha, national convener of Swadeshi Jagran Manch, in the hot, dusty protest site days ahead of the rally. “Our youth are losing jobs and we are becoming traders of Chinese products.”
“This flood of Chinese imports fits in very uncomfortably with the priority of the Modi government to expand India’s manufacturing base,” said Harsh Pant, professor of international relations at King’s College in London.
“This trade deficit is now becoming a major headache. Though this is not unique to India-China economic ties, this is a major concern for Indian policymakers now that economic restructuring is a priority for New Delhi.”
In the last 10 years, there had been a few episodes of rapid growth in India that led to rising external deficits and inflation and came to a halt because the government had to rein in demand in order to restore macroeconomic stability, said Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong.
“The imbalanced trade relationship reflects the fact that India’s manufacturing sector remains strongly underdeveloped,” said Kuijs. “Unless it is able to develop its manufacturing sector so that it can produce a large share of the growing demand for goods in its economy, India’s economic growth will be constrained by rising current account deficits and/or inflation and their consequences.”
Economically, India is losing out. Taiwanese electronics giant Foxconn Technology has reportedly delayed a plan to set up a three billion rupees (RM197 million) plant in Maharashtra because of a standoff between India and China in the Himalayas earlier this year.
China has a different perspective on the trade relationship.
The two nations could benefit from collaborating more, not less, said Wang Huiyao, director of the think-tank Centre for China and Globalisation and an adviser to China’s cabinet.
A boycott “doesn’t make any economic sense — it’s an irrational move”, he said. “China’s products and China’s experience can really benefit India.”
To be sure, Modi’s “Make-inIndia” push hasn’t been without success. Foreign direct investment rose to a record US$60 billion last financial year. But the programme didn’t translate into lower imports from China, nor did it give any major push to manufacturing.