A sustained and graded economic response to the recent Chinese conduct on the border is required for an amicable settlement. Analyse (200 Words)
Refer - The Indian Express
Enrich the answer from other sources, if the question demands.
IAS Parliament 4 years
KEY POINTS
· While diplomatic efforts continue to restore the status quo ante and military deployments have been strengthened to act as a deterrent, the use of military power to get them to move back is a depleting option.
· The bottom line that needs to become clear to China has to be that without a mutually satisfactory border settlement and a permanent end to these border incidents, it cannot be business as usual and the Indian market would start shrinking for them. The Chinese have competitive advantage and are integral to global supply chains.
· The initial focus should be on items which are still being made in India and where imports from China have been increasing. If the RBI were to undo the real exchange rate appreciation, it would be equivalent to an increase in import duties of about 10 per cent.
· Further, selective imposition of China-specific safeguard duties and use of non-tariff trade barriers should be enough in segments like electrical appliances to let Indian producers expand production and increase market share.
· The government should also facilitate the flow of finances for expansion and provide technical support for testing, improving quality and lowering costs of production. In critical areas where we are dependent on China for inputs, such as Active Pharmaceutical Ingredients, we need a vigorous approach to procure from elsewhere and have early production in India.
· The government could provide support for environmental compliance to bring down costs of production. This would create demand for domestic goods and services. The deindustrialisation that trade with China has been causing would get reversed. It would help in the recovery from the COVID-induced recession.
· Then there are critical products like solar panels and grid storage batteries. In these areas, private investment for manufacturing in India would be triggered by assured government procurement at a commercially viable price with full value-addition in India for five years from commencement of production.
· The bid process should provide for provision of land, infrastructure and cheap electricity to lower the cost of production. Repeated bids would create a competitive industrial structure. An early transition towards self-reliance would take place.
