Following the bloody clashes at Galwan on 15th June’20 that saw India lose 20 of its brave soldiers, the Government has taken a series of measures and issued statements to send a clear message to China that, India is willing to impose economic costs on China for any unilateral attempts to alter the status-quo at the borders. To begin with, many shipments from China, began experiencing an unusual delay at customs which ironically, created quite some discomfort for domestic manufacturers of electronics, auto components, pharmaceuticals etc. at a time when the wheels of the economy had just begun to move following the Government’s implementation of Unlock 1.0. After receiving representations from various industry players the Government realized the futility of the move and has rightly tried to restore normalcy in custom operations. In addition, statements have been made and orders have been issued by the Ministry of Power restricting the imports of certain components from China in the power sector from China. The Government has also announced that it will move ahead with a series of tariff and non-tariff measures to both deal with China and also realize its vision of Atma Nirbhar Bharat. The recent notifications imposing import-licensing requirements for tyres and television sets are a testament to the Government’s seriousness towards controlling imports and ushering an Atma Nirbhar Bharat. Several news reports suggest that the Government has begun a process of reviewing India’s FTAs and its is considering ways and means to tighten checks and rules of origin to tackle imports in general with a particular focus on China. The latest salvo was fired by India on 23rd July’20 when new Public Procurement Orders were issued for dealing with Bidders from nations that share a land border with India. The provisions in this order have been designed to make it challenging for Chinese companies and discourage them in participating in Public contracts and projects at least in the short term.
However, the measure that grabbed the most attention and generated the most buzz on social media was the decision to ban 59 Chinese Apps. The buzz was expected as this decision impacts direct users/consumers of these Apps. Hash tags such a #BoyCottChina have been trending on social media and many netizens have boldly declared that they would henceforth boycott anything that is remotely even Chinese. The move has been lauded in some quarters for its sheer “suddenness” and its “unexpected and unpredictable nature.” Others have questioned the utility and efficacy of this measure stating that the ban is unlikely to achieve anything substantial considering that there are technological back doors that may still provide access to these Apps. While it is still early to decide if the App ban has hurt China or it will persuade China to disengage from Pangong Tso or other flashpoints, one can reasonably conclude that this measure is definitely high on symbolism. It is also indicative of the fact that the establishment is willing to leverage on market access to send across a strong message that China should not expect business as usual if it continues to resort to any unilateral actions to disturb the status quo on the India-China border. The measure, which saw short video app TikTok getting banned, has definitely ruffled a few feathers with the Chinese foreign office asking India to not take moves that are discriminatory to Chinese companies. Even the TikTok India head has repeatedly tried to assure the Government that TikTok India doesn’t share user data with its parent company based out of China.
Having said this, in the next few hours and possibly months it will be interesting to see how far our netizens live up to their social media promises of boycotting Chinese apps and Chinese goods (even if the Goods are manufactured by Chinese manufacturers in India). With respect to the app boycott one could argue that it may not have been entirely successful considering Government had to ban another 47 Apps, which were said to be the clones of the original 59 Apps. One could say that the first week of August’20 is likely to be the first big public test of #BoyCott China in the e-commerce arena. Both Flipkart and Amazon have their “Big Savings Day” and “Prime Day” sales windows from 06th to 10th August’20 where quite a few consumer electronics are likely to be on offer with reasonably generous discounts. It will be interesting to see how well Oneplus, VIVO, OPPO, Xiaomi products fare on these “ big sale” days and in the next few months. It would also be prudent to examine how well their competitors like Samsung, LG, Micromax etc. fare both in online and offline sales. With the Government recently announcing Unlock 3.0 after two months of easing of lockdown and the economy slowly opening up e-commerce sales metrics can be reasonably considered as a proxy indicator of the amount of demand in the economy.
While the performance of the above mentioned players would be known soon enough, it shouldn’t come as surprise that they have managed to hold their market share. While public sentiment and anti-China opinion has definitely been one of the reasons that caused VIVO to pull out of this year’s sponsorship of the IPL, it is likely that the competitive prices offered by Chinese manufacturers will definitely constrain netizens’ ability to follow on their promise to boycott Chinese goods. While this may not seem palatable to some from an optics point of view, this is not necessarily a bad thing because after all in a free open market, it is after all a consumers right to choose the most competitive product that she/he deems fit to serve her/his purpose. Add to this, many of these Chinese companies have set up their manufacturing plants in India that provide jobs to thousands of individuals.
The point to take home is that India needs to focus on getting competitive rather than solely relying on being protectionist. If India can get competitive, it can deliver world-class goods and services that won’t just cater to the domestic market but also cater to the global market. It needs to do that by focusing on its infrastructural and logistical deficits, skill deficits, infirmities in its laws related to land, labour and the power sector in a time-bound manner. Yes, the government has made progress on GST, IBC, Financial inclusion and Ease of Doing Business metrics, but now it needs to go full throttle ahead on the laggard areas of reform. Add to this it needs to focus on policy stability and ease of doing business both in letter and spirit. While many moves have been designed to target China, these moves can also spook potential investors from other nations who also deal with China and may have interests in Chinese firms.
While there are times when a situation demands more of rhetoric and less of action, one can say that right now this is a situation that demands more of action and less of rhetoric. This action needs to be sustained for a long time.