Monday , February 19 2018

Should We Boycott Chinese Products in India?

Should We Boycott Chinese Products in India?

With the political scenario in India stirred up on Pakistan front after the Uri attacks and India’s reply in form of surgical strikes, there is a new breeze taking shape of a typhoon. A section of Indian political stage is now rising voice against China. The demand is plain and simple – boycotting all Chinese products in India.

Should We Boycott Chinese Products in India

Keeping in mind the Chinese attempts of infiltrating Indian borders and showing parts of India as parts of China, it sounds like a good demand. India should not forget that China is arming and supporting the terrorist state Pakistan. China is playing a dual game of nice guy in world stage and back-biting country in Asian stage. Despite knowing that Pakistan has no political, moral or logical claim even on the Pakistan Occupied Kashmir, China is still building the CPEC (China Pakistan Economic Corridor) that will run all the way up to Pakistan Occupied Kashmir.

And how about China preventing India from becoming a member of NSG or Nuclear Suppliers Group and demanding that India should become a member of the group only if Pakistan is given a membership of the group? Doesn’t that clearly showcase that China is not only deterring India from becoming an NSG member but is also trying to give Pakistan access to nuclear material which would be disastrous for the entire world.

Forget India! Not even United States of America wants to play along with China because of its infringing and expansionist policies that are threatening the global peace. So, the question we are asking today is, ‘should we boycott Chinese products?’ Let us find out…

Moral aspect of the argument

If we talk of the moral aspect, the simple answer to this question is that YES, we should boycott Chinese products. Chinese products are destroying our small and medium scale companies. It is an undeniable fact that the MSME or the micro, small and medium enterprises in India employ more than 11 crore people.

Unfortunately with import of Chinese products the MSMEs in India are suffering a lot. This is primarily because of the increasing trade deficits. It means that India’s imports from China are increasing but India’s exports to China are decreasing at a steady rate. It is because of this, MSMEs are unable to sell their manufactured products to Indians. They are running at a loss and often shutting down or downsizing their employee base.

A true Indian will always want to ensure that Indian companies to flourish and hence, demanding a boycott of Chinese products looks logical. Also, considering the Chinese aggression into Indian turfs and her continuous support to terrorist state Pakistan clearly dictates that India should ban and boycott Chinese products.

Economic aspect of the argument

If we are to shift our focus from moral grounds and take a look at the economic aspects, the clear answer we get is, NO, we should not boycott Chinese products. The Indian economy will take a massive hit and recovering from the same will become a nightmare in the proximate and foreseeable future. Why so? In order to answer this question, we need to take a look at some statistical data. Honestly, these data are quite disturbing and once we learn about the same, the only thing we will be left with is to condemn and criticize our previous governments, who did not shape India’s foreign and international trade policies with respect to China in a proper way.

In case you didn’t know, there is an organization which goes by the name IndiaSpend. The organization undertook a quick economic analysis and came to a conclusion that India boycotting Chinese products will harm India more than it will actually harm China. How so?

Let us take a look…

In year 2011-2012, India was the 10th largest importer of Chinese goods. In 2015-2016, India became the 6th largest importer of Chinese goods. On the other hand, the total exports India makes to China has actually declined! It has literally declined to half! The table below will give you a quick and clear picture of what has happened:

Trade 2011-2012 2015-2016
Import from China $55 billion $61 billion
Export to China $18 billion $ 9 billion

The above table shows that India buys over 6 times more products from China than she actually exports to China.

Now, what will happen if India boycotts all Chinese goods?

Here is a quick overview:

Once India stops buying Chinese goods, India will have to hunt for alternative markets for those goods or India will have to manufacture those goods on her own. If India purchases those products from other countries, the cost of acquisition will be higher because Chinese products are way cheaper than same products from other countries. There are three reasons for these:

  • Vast amount of raw materials.
  • Very cheap labor.
  • High efficient manufacturing market in China because of the market reforms that were introduced in 1980s.

Other countries do not have this advantage.

Again, if India decides to manufacture all these on her own, she will be stifled by the following problems:

  • Availability of raw materials – India will have to import raw materials from outside. This will increase production cost.
  • Bottle necked manufacturing units – the manufacturing segment in India is not well developed. In fact, there aren’t enough companies that can manufacture the products that are being imported from China. Even if there are some companies, they do not have enough manpower and capacity to deal with the demand.

So, India will have to experience serious price hikes and at the end of the day, we will fail accept high inflation. Once product costs increase in Indian markets, savings will fall and so will investments. This will directly impact the money market balance in India.

While this is an overly simplified view of how various markets of India will be impacted, let us take a look at few direct impacts we can expect once we boycott Chinese products.

  • China will stop her imports from India. This means that India will lose whatever money she earns from selling products to China. This will negatively impact the trade balance and will cause greater trade deficit over time as India’s expenses for importing goods from alternative sources will increase but her exports will not increase. On the contrary, exports will decrease and hence, India’s earnings will fall.
  • China can easily take up the issue to World Trade Organization and this will lead to sanctions on India. If this happens, India economy will be crippled even more.
  • Indian infrastructure development will be seriously affected because most of the instruments and machinery used for infrastructure development in India are made in China.
  • Come to power production, most of the power plants in India make use of Chinese expertise and machinery. This means, India’s power sector will take a major hit. Once the power sector takes a hit, other sectors that are heavily dependent on power sector will also take a major hit.

Most of the products that we use today are made in China. From cellphones to led lamps, from solar cells to laptops, from keyboards to display units, from earphones for various communication instruments, and even set top boxes to Ganesh idols – almost everything comes from China.

Worst part, these imports are all B2B imports. This means that India business buy these products from China and sell them to Indian consumers. If imports are banned and we boycott Chinese products, Indian business will be crippled and this will mean mass unemployment in India because those business will then start downsizing to deal with ever increasing costs and declining profits. Is that what we want?

Now, let us talk computers…

Name one company in India that manufactures computer parts like motherboards, ICs etc. There’s none! Banning Chinese products will mean, our IT industry will take a massive hit and interestingly, Indian IT sector takes a major share of global IT market. Our IT sector is our strength and banning Chinese products will mean, a complete collapse of that sector.

Companies like Wipro, HCL, Cognizant, TCS etc. will run massive losses overnight and that will all be caused by absence of computers because, you won’t find a computer that doesn’t have China-made parts.

Now talk of ourselves…

Most of the phone brands that dominate Indian market are Chinese or even if they are not, they make use of certain components that are made in China. So, banning or boycotting Chinese products will mean that our communications market will come spiraling down.

There is a lot to argue but we believe that the points we have mentioned so far suffice to help us understand that boycotting Chinese products will only harm us way more than it will harm China. India needs to stay competitive and there has to be an economic equilibrium. Cutting off China will disrupt that equilibrium and hence, India’s dream of becoming a superpower will remain a dream. China on the other hand will find more markets because it will be able to sell products at very cheaper costs and who doesn’t want cheaper products?

So, those politicians who are shouting and demanding the boycotting of Chinese products and showcasing nationalism are basically fools. It is okay to show and support nationalism but it is also important to understand the long term implications of the demands that are being made. If we are to boycott Chinese products, we need to take it slow. We need to first empower our indigenous companies and bring in more reforms in market that will help the development of new and highly competitive manufacturing units in India, which can directly compete with cheap Chinese products.

We need to support Make in India drive but at the same time, we need to give up the idea of boycotting Chinese products because by banning Chinese products, we will only invite our imminent doom.

Other Articles

Check Also

Your Credit Score Will Impact Your Home Loan EMI Cost

Your Credit Score Will Impact Your Home Loan EMI Cost

Your Credit Score Will Impact Your Home Loan EMI Cost Your credit score is about …

Leave a Reply

Your email address will not be published. Required fields are marked *