Indian Must Ensure Reduction Of Trade Ties With China By 30% In First Phase
India’s recently accelerating ATMANIRVAR slogan has now been directed towards China thanks to the Galwan Faceoff. So apart from military standoff now the new battlefield has spilled to economic areas. Both of these coupled with the fallout of the deadly Wuhan virus pandemic, will naturally cause bilateral trade to plunge more than 30 percent this year. This in fact should be the overall Indian aim.
With rapidly rising uncertainties in bilateral relations, all Chinese investments in India deserve increased comprehensive reassessment and Indian partners should be fully cautious toward the risk of any tie up with China.
Following the recent deadly border clash between China and India, there is increased awareness among Indians regarding the duplicity that China has been following all these years since 1962. Indians of all hues have in fact even started a campaign to boycott Chinese products by Indians, without even waiting for a Government response on the subject. The Indian ports have reportedly put extra customs checks on cargoes from China since June 22, including massive components and parts needed by India-based producers, as well as products of Apple, Cisco and Dell.
Luckily even before the Galwan intrusion by China, India had announced enhanced scrutiny of foreign investments, as a measure to prevent acquisitions by Foreign firms. This will be a big help now in preventing any Chinese intrusive action within the Indian Economy.
Echoing the US’ decoupling efforts, India is welcoming and is ready to receive industrial relocations from China. The infrastructure for both hardware and software facilities are being accelerated for this to take place seamlessly.
Though swift cutting of economic links with China is not easy. This will be done in phases.
In the first phase bilateral trade between China and India is likely to drop one third on a yearly basis in 2020, and could even be reduced by 50 percent.
China and India had developed close economic ties in the past years, with both sides maintaining comparative advantages in certain sectors like auto manufacturing, telecommunications and pharmaceuticals.
Though without giving any thought to Chinese duplicity many Indian industries had become over dependent on Chinese components. Now It would take India some efforts to find a substitute, either by shoring up its own industries or inviting investment from other countries. So these things may have to wait for phase 2.
Although the two countries have seen expanding economic cooperation in previous years, India has also complained of its trade deficit with China. Rather than asking China instead of narrowing the deficit, became more critical of India and asked it to reflect on its own industrial competitiveness.
Indian consumers prefer cost-efficient products but not at the cost of their self respect.. For instance, Chinese smartphones maintain higher comparative advantages than Indian domestic products but Indians can do without them.
With a large population and underdeveloped medical system, it is critical for India to both contain the viral spread and also ensure economic growth. India has solemnly resolved to do this.
China and India can maintain economic complementarity but only if China respects Indian Sovereignty. The latest commander-level border talks have set the tone for easing their border tensions, it is expected that now China will all steps to permanently demarcate the LAC.
Thereafter there should negotiation to settle the Indo Tibetan border once for all. Then only bilateral economic cooperation will return to normal and regain growth momentum in the long run.