PM Narendra Modi’s clarion call for self-reliance and his appeal to Indian consumers to buy local products added punch to the prevailing anti-China sentiments due to Beijing’s role in allegedly ‘aiding’ the global spread of COVID-19. Buttressed by transport minister Nitin Gadkari’s blunt public criticism of China, the PM’s call added ammunition to the arsenal of the right-wing opposed to large-scale imports of low-cost Chinese goods. Fresh policies and bold reforms indicate India’s ambitious plan to replace Chinese goods with Indian ones. In 2019, India imported almost $75 billion worth of goods and services from China, ranging from firecrackers and cheap idols of Hindu gods to hi-tech telecom equipment, besides the role of Chinese firms in the construction of mega infrastructure projects. A case in point is electrical equipment used in the power sector. Government agencies, including state-owned power utilities, consume 95 per cent of the imported equipment. China accounts for 30 per cent of the total imports
“China sells substandard and poor quality products due to India’s outdated public procurement system,” claims Sunil Misra, director general, Indian Electrical and Electronics Manufacturers Association (IEEMA). Experts contend that imports have rendered 40 per cent of the Indian capacity redundant. It was thus an opportune time for the government to intervene, and for the PM to urge people to buy local products. Many feel this is do-able in the current circumstances. “Import substitution is possible with the right policy and infrastructure support in the engineering and electronic segment, besides consumer durables,” says Anil Bhardwaj, secretary general, Federation of Indian Micro and Small & Medium Enterprises. Mohammed Saqib, secretary general, India-China Economic and Cultural Council, adds: “There are low-hanging fruits that Indian businesses can grab in the short term.” Saqib says imports of idols of Hindu gods, candles, toys, small household goods etc—valued at $15-20 billion a year—can be easily replaced by local goods.
Anti-China sentiments are not restricted to imports. In April, the government decided to vet FDI inflows from China. Investments in new projects, joint ventures and start-ups were denied the option to come through the automatic approval route. This implied they would be monitored to ascertain whether they constituted a strategic risk to the country. As a follow-up measure, India may soon restrict the flow of foreign portfolio investments from China to buy Indian stocks and equities.
Obviously, such moves come with their own set of risks. The curbs on Chinese imports may hike the prices of several products, which are more expensive to make in India. Chinese investments, both direct and through the Indian stock markets, can slow down, if not dry up. In the post-COVID scenario, when India wants to aggressively woo foreign investments, this may send the wrong signals to potential investors from other countries.
IEEMA’s Misra alleges that the dependence on Chinese imports is fraught with security risks. “Supply of intelligent electrical equipment from China is a national security risk for India as power is a critical infrastructure,” he says. “There can be problems related to malware and cyber attacks in such equipment. If India does not buy defence supplies from China, then it should not buy power equipment from there either.”
For years, similar dissent was voiced against the use of Chinese telecom equipment. Globally, there was talk about how they enabled the Chinese to keep a tab on every phone and mobile user. Now, these fears have extended to the digital space, including internet and social media. For example, there remains the possibility of dissemination of subtle messaging and misinformation through foreign-owned phone-based apps.
Indians, mostly children and youth, spent five billion hours last year on Tik Tok, which is owned by Chinese giant, ByteDance. The usage indicated a five-fold increase over the previous year. In the recent past, three Chinese tech companies have invested heavily in Indian start-ups—Alibaba Investments in 11 companies, including Big Basket, Zomato and Paytm Mall; Tencent Investments in 16, including Flipkart, Ola and Byju’s; and Shunwei Capital (an arm of mobile handset maker, Xiaomi) in seven, including Sharechat, Oye!Rickshaw and Hungama Digital.