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Is India in the position to boycott Chinese products?

14-JUL-2017 16:24

    According to official figures, in the year 2015-16, India's exports to China was $ 7.56 billion and India's imports from China stood at $52.26 billion, which means India's trade deficit was $ 44.7 billion. Trade deficit between the two countries reached $ 48.48 billion in the year 2014-15. At present, the bilateral trade between India and China is approximately 70 billion dollars. Indians need to keep in mind that India sends 8% of its total exports to China, while China sends only 2% of its total exports to India.

    india china trade data
    Image source:Indpaedia
    Which products India imports from China:
    India imports mainly toys, lightings, electronics products, parts of computer, cars and motorcycle, milk products, fertilizers, antibiotics and mobiles etc.

    Boycott Chinese Products
    Image source:jingsourcing.com
    Which products are exported by India to china?
    Agricultural products, cotton textiles, handicrafts products, raw lead, iron ore, steel, copper, telecom content, and other capital goods etc.

    export india to china
    Why China's products are so Favourite in India:
    The basic reason behind the popularity of Chinese products in India is low price of products. There are two basic reasons behind the low price of Chinese products-
    1.Cost of production is China is low due to availability of cheap labour force.
    2.Manufacturing sector in China gets the subsidy from the government which reduces the cost of production of the goods.
    3.Chinese manufacturers produce huge quantity of the goods which reduces the cost of per unit(law of “Economies of scale” is applicable here)

    economies of scale
    Image source:Market Business News

    Why China is hiding these 13 secret from the World?
    The cost of production of Indian manufacturers is high due to costly raw material, old technique of production, higher fixed cost. Due to higher cost of production Indian products cannot compete with Chinese products in India and at international level.  
    India’s dependence on China
    In the financial year 2015-16, India's export to China was $ 3,833 million, which was only 3.59% of India's total exports. On the other hand, in the same period, India's import from China was $25,460 million, which was 15% of India's total imports. More interesting thing is that share of India’s total import from china is increasing every year. In the year 2010-11; China’s share in India’s total import was just 11.76% which rose to 15% in the year 2015-16.

    Boycott Chinese Products
    Image source:nusinessstandard.com
    India’s dependence on china in terms of medicines is a cause of concern for Indian policy makers. See the picture given below that how much Pharma ingredients is imported by India from China in the last 3 years.

    pharma import from china
    Which Indian sector is most affected by the China?
    Toy industry of India is badly affected by the cheap Chinese import. The cost of Chinese toys is so low that any Indian company is unable to compete with China. Last year only 20% of Indian toy market is captured by the Indian companies while rest of the 80% market is captured by the Chinese and Italian companies. According to a study by ASSOCHAM, 40% of Indian toy making companies have been closed in the last 5 years and 20% are on the verge of closure.
    China has broken the shoulders of the Indian electronic industry by dumping cheap electronic items (lightings used on the Diwali festival is the hot example of the same)
    China-based vendors continue to strengthen their grip in Indian Smartphone market. In the first quarter of 2017, China-based vendors captured 51.4 percent share of the Smartphone shipments in India with 16.9 percent sequential growth and impressive 142.6 percent growth over the same period last year. In contrast, share of homegrown vendors dropped to 13.5% in the Q1 2017 from 40.5 percent in Q1 2016.
    (A shop in India filled with made in China products)

    chinese products in india

    Image source:zade.wordpress.com
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    Can India prevent the supply of Chinese products in Indian Market?
    The answer is no; because as per the rules made by the World Trade Organisation, it is not possible to impose a full ban on imports from any country even if there is no diplomatic, regional and trade relations with that country.
    But government of India can ban some Chinese products on the basis of health and security issues.  Commerce and Industry Minister replied in the Lok Sabha that the government of India had banned Chinese mobiles which don’t have IMEI number. China has also banned Indian milk products on the basis of serious health issues.

    IMEI number
    Image source:Ubergizmo
    What India can do to restrict the entry of Chinese products in Indian Market?
    India can impose anti dumping duty and countervailing duty on the cheap Chinese products like electronic items and toys. After the imposition of these two duties the prices of Chinese products  increase in the Indian market, hence Indian manufacturer will have the chance to produce these products on Indian soil which will generate employment in India.

    anti dumoing duty
    Image source:YarnsandFibers
    Impacts of ban on Chinese products in India
    It is a well known fact that the Indian market is price sensitive market. Here a company has to keep the price low to penetrate the market. Indian consumers are more concerned about the price of the products not the quality of the products.
    So if Chinese products are banned/boycotted in India, it can raise the inflation rate in India because Indian products are costlier as compare to Chinese products. The people of lower income group in India will suffer a lot because they will not be able to purchase costly Indian products.

    chinese flag
    Image source:PhoneRadar
    So before taking any decision of banning/boycotting of Chinese products; the government of India must remember that China sends just 2% of its total export to India while India sends 8% of its total export to China. Hence Government of India needs to take a rational decision not the emotional one on this matter.

    13 parameters to compare India and China

    DISCLAIMER: JPL and its affiliates shall have no liability for any views, thoughts and comments expressed on this article.

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