Neighbouring Country = Banned | 2020
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Introduction
From the Silk Route to slogans of Hindi Chini Bhai Bhai, neighbours India and China have had close ties since the 2nd Century BC. The bilateral trade between the countries has flourished and seen momentous changes in its dynamics over the years. This relationship has seen its downfalls, too. There have been many wars, standoffs and attempts to improve ties. One of them is the nationwide ban on Chinese products.
Nationwide Ban on Chinese Products? Is that even possible?
India is not in a position to boycott Chinese products because of the vast imbalance of power between both countries. In the fiscal year 2018-19, the trade between India and China hit a massive $87.07 billion. That’s a significant number, but here’s where it gets interesting. India imported goods worth a whopping $70.32 billion from China, while our exports were a humble $16.75 billion. You do not need a calculator to see the maths does not quite add up. Regarding trade, India is in a weaker bargaining position due to its dependence on Chinese markets.
Moreover, China has blocked India’s entry into the Nuclear Suppliers Group (NSG). This international organisation deals with nuclear trade and has used its power to prevent India from having a permanent seat at the United Nations Security Council.
Despite widespread concerns about Pakistan’s involvement in supporting terrorism, China continues to support Pakistan. This connection complicates India’s efforts to build stronger ties with China. The nail in the coffin was the conflict between India and Pakistan in 2016, where China supported Pakistan against India. With all the factors adding up, a call arose to boycott Chinese products.
As per international laws, the World Trade Organization has rules for trade between the member nations. With both India and China being WTO members, it is nearly impossible for either government to stop altogether trading with the other country. As per the WTO Rules, countries cannot discriminate against their trading partners and use trade limits for reasons not allowed by the WTO, like protecting their industry or harming other countries. However, on the grounds of environmental protection, health and national security, trade limits can be imposed.
Moreover, China has blocked India’s entry into the Nuclear Suppliers Group (NSG). This international organisation deals with nuclear trade and has used its power to prevent India from having a permanent seat at the United Nations Security Council.
Despite widespread concerns about Pakistan’s involvement in supporting terrorism, China continues to support Pakistan. This connection complicates India’s efforts to build stronger ties with China. The nail in the coffin was the conflict between India and Pakistan in 2016, where China supported Pakistan against India. With all the factors adding up, a call arose to boycott Chinese products.
As per international laws, the World Trade Organization has rules for trade between the member nations. With both India and China being WTO members, it is nearly impossible for either government to stop altogether trading with the other country. As per the WTO Rules, countries cannot discriminate against their trading partners and use trade limits for reasons not allowed by the WTO, like protecting their industry or harming other countries. However, on the grounds of environmental protection, health and national security, trade limits can be imposed.
Is the blanket ban feasible?
The ban covers various sectors, from consumer electronics to pharmaceuticals, and affects imports and apps. This ban would provide an excellent impetus for domestic products and industry growth, especially in the MSME sector, which employs more than 110 million people. It would create an open field for innovation and opportunities for Indian products, aligning with the policies of Make in India and the eventual goal of Atmanirbhar Bharat. The ban would reduce the dependency on Chinese goods and change the power dynamics, resulting in colossal employment and savings in the forex reserves.
However, the ban would come with its repercussions as well. With India importing more from China than any other country in eight out of the top 10 categories by value, banning these imports from China would lead to a supply shortage and a rise in prices of even essential items.
The dragon may also fire back by banning Indian goods, hurting India’s exports and income. India will also face legal challenges in international forums like the WTO for violating its norms. China may also affect India’s participation and role in many regional initiatives like BRICS, AIIB, NDB, and RCEP, in which China is a key player. India has also been trying to access the Chinese market for its IT and pharma companies. But this may get stalled or cancelled due to the trade tensions between the countries.
India’s credibility as an investment hub will also decline and affect its FDI inflows. The trade ban will also harm the upstream and downstream industries and cost jobs.
However, the ban would come with its repercussions as well. With India importing more from China than any other country in eight out of the top 10 categories by value, banning these imports from China would lead to a supply shortage and a rise in prices of even essential items.
The dragon may also fire back by banning Indian goods, hurting India’s exports and income. India will also face legal challenges in international forums like the WTO for violating its norms. China may also affect India’s participation and role in many regional initiatives like BRICS, AIIB, NDB, and RCEP, in which China is a key player. India has also been trying to access the Chinese market for its IT and pharma companies. But this may get stalled or cancelled due to the trade tensions between the countries.
India’s credibility as an investment hub will also decline and affect its FDI inflows. The trade ban will also harm the upstream and downstream industries and cost jobs.
How did the app ban affect Indian industries?
Besides trade, India has banned several Chinese apps in the country, citing national security and data privacy concerns. Under Section 69A of the IT Act, the Indian government is empowered to block public access to any information that is prejudicial to the sovereignty and integrity of India, defence of India, security of the state, and public order.
Some Indian startups that have struggled due to the app ban are Zomato, Swiggy, Ola, Oyo, Paytm, and others who have received funding from Chinese investors like Alibaba, Tencent, and Ant Group. Moreover, it has also disrupted the plans of some Indian startups looking to expand or enter the Chinese market, such as Ola, Zomato, and Byju’s. But this problem has a silver lining as well.The ban on apps would present an opportunity for Indian entrepreneurs to build apps and capture the void left by the app ban, such as TikTok, PUBG, and WeChat. India’s cyber security would be strengthened, and data theft and espionage by Chinese entities would be prevented. Local alternatives like ShareChat, Chingari, Koo, Ludo King, and others have emerged and have encouraged the Indian government and private sector to invest more in digital infrastructure and innovation, such as the Atmanirbhar Bharat app challenge, the Digital India initiative, and the Jio platforms. Apart from these, India also took actions like prohibiting the Chinese companies from the 5G trials and promoting Bulk Drug Parks and PLI Scheme.
Some Indian startups that have struggled due to the app ban are Zomato, Swiggy, Ola, Oyo, Paytm, and others who have received funding from Chinese investors like Alibaba, Tencent, and Ant Group. Moreover, it has also disrupted the plans of some Indian startups looking to expand or enter the Chinese market, such as Ola, Zomato, and Byju’s. But this problem has a silver lining as well.The ban on apps would present an opportunity for Indian entrepreneurs to build apps and capture the void left by the app ban, such as TikTok, PUBG, and WeChat. India’s cyber security would be strengthened, and data theft and espionage by Chinese entities would be prevented. Local alternatives like ShareChat, Chingari, Koo, Ludo King, and others have emerged and have encouraged the Indian government and private sector to invest more in digital infrastructure and innovation, such as the Atmanirbhar Bharat app challenge, the Digital India initiative, and the Jio platforms. Apart from these, India also took actions like prohibiting the Chinese companies from the 5G trials and promoting Bulk Drug Parks and PLI Scheme.
The Bottom Line
India’s firm stance may go a long way to counter Chinese dominance and increase regional influence. However, this requires a meticulous approach considering the possible retaliatory actions from the other end. By reducing the import dependency on China for Active Pharmaceutical Ingredients (API), through allocation of more than $2 billion in incentives for both private Indian enterprises and foreign players to kick off manufacturing 53 APIs, India is taking positive measures in the direction of self-sufficiency. The repercussions may extend to Indian start-ups operating in China or relying on Chinese funding. They might face disruptions, delays and heightened scrutiny.
. Despite increasing anti-China sentiments daily, India cannot afford a blanket ban and sever ties with its largest trading partner and significant import source.
Instead of a complete ban, India can look for diversification and strengthen its ties with other potential players like South Korea, the US and Japan. Moreover, quality control orders and anti-dumping and countervailing duties can be explored to ensure sustainable trade. A good step is the 3-month trial approval imposed for specific apps.
Widespread disparities and grievances exist on both sides; however, such a geopolitically sensitive issue must be dealt with with mutual respect and cooperation. India must be pragmatic while asserting its bold values and interests.
. Despite increasing anti-China sentiments daily, India cannot afford a blanket ban and sever ties with its largest trading partner and significant import source.
Instead of a complete ban, India can look for diversification and strengthen its ties with other potential players like South Korea, the US and Japan. Moreover, quality control orders and anti-dumping and countervailing duties can be explored to ensure sustainable trade. A good step is the 3-month trial approval imposed for specific apps.
Widespread disparities and grievances exist on both sides; however, such a geopolitically sensitive issue must be dealt with with mutual respect and cooperation. India must be pragmatic while asserting its bold values and interests.