Following the recent clashes with Chinese troops in Ladakh, there has been a push in India to boycott goods from China completely.
Industry associations across sectors have been speaking up against it.
How dependent is India on Chinese imports?
China accounts for a sizable portion of India’s top imports, especially where intermediate products and raw materials are concerned.
It is the top exporter of products like electrical machinery, equipment and their parts, nuclear reactors, chemicals, fertilisers as well as vehicles, their parts and accessories.
In several cases, China’s contribution is much higher than the second-largest exporter countries of these products to India.
Several of these products are used by Indian manufacturers in the production of finished goods.
This thoroughly integrates China in India’s manufacturing supply chain.
However, India only accounts for a little over 2% of China’s total exports.
How could a blanket ban on Chinese imports hit India’s exports?
A blanket ban may not be feasible because of India’s dependence on China for crucial raw materials.
If China takes retaliatory measures, India would be affected more negatively.
There are strategic and key inputs that India uses from China due to which its exports are more competitive.
What are the alternatives in this situation?
The decision to boycott non-essential products made in China can be left to the individual.
Trade-related measures like raising duties on cheaper raw materials imported from China would be better than an outright embargo.
This would still allow access to crucial ingredients in the short-term.
India should build self-reliance or switch to alternate trade partners.
In the latter case, the costs of the raw materials from the alternate sources may be higher.
This cost may get passed on to consumers if the manufacturers cannot absorb them.
What is the way forward?
India needs to look into the totality of its trade with China and Hong Kong.
It must implement certain short- term to long-term plans to reduce its dependence on them.
“Atmanirbhar” focus of the government would build self-reliance in the ministries handhold industries.
India needs to reduce its import dependence in electronic and telecommunication sectors through a long-term focus on building self-reliance in manufacturing.
Import substitution manufacturing should attract interest subvention on credit, offsetting inland freight disadvantage besides equalization of import tariff from free trade areas.
Exporters could minimise their impact through strategies that involve a focus on other advanced and emerging markets.
