Boycotting Chinese goods is not a good idea

The Diwali just got over. And, our stance of boycotting Chinese goods was without really understanding facts and figures.

One of the obvious global fact is that trade between countries increases economic wellbeing. I think the growing uproar for a ban on Chinese goods needs to be tackled reasonably. The Chinese embassy recently cautioned India about it. Our trade data shows that our bargaining power is narrow: India needs China more than China needs India. China accounts for nearly 20% of India’s imports. Toys, kite strings and crackers may be the most visible imports for consumers, but they don’t even make the top 10 by category. The big numbers are assigned to industrial goods, such as electrical machinery, nuclear reactors and organic chemicals and iron & steel. Among the top ten categories, in eight categories by value, India imports more from China than any other nation, essentially covering out the demand for a blanket ban.

The fact is that the boycott will cost the Indian traders selling Chinese goods a big loss. Chinese manufacturers have already earned their money from Indian traders. The boycott will be a tremendous loss for the Indian traders and ultimately it will be a loss for the Indian economy.

Due to cheap prices Indians can afford buying Chinese products such as jute bags. Chinese poly-bags might be a much better alternative. The middle class of Indian society will not face problems with the boycott. However, if there is a lack of availability of Chinese products, poor people will have to sacrifice the most.

Why are Chinese goods so cheap? Cost of a product depends upon the cost of raw materials, employees, infrastructure, transportation, energy and ease of starting a business to name a few major factors. Most of the raw materials for products that are cheaper when made in China, are readily available in China at a very good price quality index. Public infrastructure in China is very cheap. Goods can be transported efficiently, on-time and across country at a much lower cost than in India.

Comparatively, Indian manufacturers cannot rely on public infrastructure for reliable transportation.Cost and ease of starting a business in India is notoriously very high. It is relatively easier and cost efficient in China. Bribery in China is low; punishment when caught being bribed is too harsh. Therefore, Chinese products are cheap as compared to Indian products.

And, certainly a boycott on Chinese goods is not going to make Indian products cheaper and competitive. Lets’ get our facts right – due to the competition from the Chinese goods, Indian businesses are grounded, and they do not enjoy the monopoly. Our Government cannot support the boycott for two reasons: firstly, it will be against the decorum of the World Trade Organization. The costs of which may be heavy to bear for the Indian government. Secondly, Indian government’s developmental plans also depend on Chinese products. For example in the field of solar power generation, about 66% of the total imports of solar power panels were from China during the first three months of the fiscal year 2015.

China is the king of manufacturing. Let us think reasonably; the chances are extremely low that a modern commercial gadget or device does not have a single component that is not made in China. To what extent are we going to boycott Chinese goods? Let’s not behave ultranationalist.

It’s easy for social media loyalists to dissuade the common man in India from buying anything Chinese; they dissuaded us during Diwali. Since China has problems with India’s stand on Pakistan-based terrorist Masood Azhar, we must therefore stop using all things Chinese; this is certainly not the logic. As usual, the opinion generators on social media are high on provoking us, but rather poor on facts. The fact is – whatever be China’s position as far as India’s fight with terrorism is concerned, we cannot afford to ban Chinese goods imports. The matter must be handled subtly, using bilateral trade as a weapon suits ultra-nationalists but not India’s economy. Ultra-nationalists are people having the belief that their nation will benefit from acting independently than from acting internationally.

As per the website of Indian Department of Commerce last year, we imported more from China the highest value of goods, than the combined amount India spent on importing stuff from United States, UAE and Saudi Arabia last fiscal. India imported goods worth $61.7 billion from China last fiscal when we exported merely worth $9.05 billion to it. India is profoundly dependent on Chinese imports and any weakening of trade ties between the two countries will substantially hurt Indian businesses, not so much China.

Once again, why is India unable to compete with China when it comes to exports? According to a logical answer Commerce Minister Nirmala Sitharaman gave in Lok Sabha during the Monsoon Session earlier this year, trade deficit with China has been increasing as India relies on Chinese exports such as manufactured items to meet the demand of fast expanding sectors like telecom and power. Whereas. India’s exports to China, are characterized by primary and transitional products. The consequence of this is that we send products to China which are not high value-added, whereas China is sending products such as telecom instruments, computer hardware, peripherals, fertilizers, electronic components/ instruments, project goods, organic chemicals and drug intermediates, consumer electronics, electrical machinery and equipment, iron and steel etc. India’s trade deficit with China increased from $38.67 billion in 2012-13 to $48.45 billion in 2014-15. Trade deficit is an economic measure of a negative balance of trade in which a country’s imports exceeds its exports. A trade deficit represents an outflow of domestic currency to foreign markets.

So friends this Diwali our approach towards boycotting Chinese products was much of a misguided slant. Lets not jump into the social media bandwagon without thinking. Let’s behave maturely, let us understand our national priorities first.