The concept of economic complexity in a country refers to the production of domestically-based knowledge products as well as the volume and diversification of export goods by a country. Economic complexity means the emphasis on technical knowledge and its application in goods and services produced by a country.  It also means the intense application of technical knowledge in product diversification to encompass it in the domestic consumer markets on one hand and foreign markets on the other. However, the economic complexity of countries’ production is not limited to the ability to apply knowledge to the production process rather it encompasses much broader dimensions. Therefore, the more varied the country’s export basket is, it is considered more refined and more powerful in terms of economic interfaces at the international level. More exports bring in more economically viability with it.

In today’s global economy, consumers are used to seeing products from every corner of the world in their local grocery stores and retail shops. These overseas products come with imports which provide more choices to consumers. And because they are usually manufactured more cheaply than any domestically-produced equivalent, imports help consumers manage their strained household budgets.

When a country’s imports is bigger than the exports in terms of volume and it distorts a nation’s balance of trade and devalues its currency. The devaluation of a country’s currency can have a huge impact on the everyday life of a country’s citizens because the value of a currency is one of the biggest determinants of a nation’s economic performance and its gross domestic product (GDP). Maintaining the appropriate balance of imports and exports is crucial for a country. The importing and exporting activity of a country can influence a country’s GDP, its exchange rate, and its level of inflation and interest rates.

The Atlas of Economic Complexity is a 2011 economics book by Ricardo Hausmann, Cesar A. Hidalgo, Sebastián Bustos, Michele Coscia, Sarah Chung, Juan Jimenez, Alexander Simoes and Muhammed A. Yıldırım.  The book attempts to measure the amount of productive knowledge that each country holds, by visualizing the differences between national economies. The book’s originality is to go beyond standard statistics by making use of “complexity statistics” of 128 countries. The book concludes that it is difficult and a complex task for a country’s government planners to kick-start new industries, entrepreneurship development, new products, intellectual property rights etc. The book is accompanied by two websites that host interactive visualizations and expand upon data featured in the book.

The visualizations presented in The Atlas were created in the observatory of Economic Complexity (OEC), a data visualizations engine created by Alex Simoes and Cesar A Hidalgo in the Macro Connections group at the MIT Media Lab. The Observatory of Economic Complexity was launched in 2011. In 2013, Harvard’s Centre for International Development released an autonomous version of the platform, entitled The Atlas of Economic Complexity. The Harvard version builds on the original code base developed by Alex Simoes at the MIT Media Lab and uses a different method for cleaning the data than the OEC. The Atlas is distributed under a creative commons license which makes it free for non-commercial use.

The Economic Complexity Index (ECI) is a holistic measure for calculating the productive capabilities of large economic systems, usually cities, regions, or countries. Higher economic complexity as compared to country’s income level drives economic development. Countries that are home to a great assortment of productive know-how, particularly complex specialized know-how, are able to produce a great diversity of sophisticated products.

Countries that are able to sustain a diverse range of productive know-how, including sophisticated, unique know-how, are found to be able to produce a wide diversity of goods, including complex products that few other countries can make.

A prediction of how much a country will grow based on its current level of Economic Complexity, its Complexity Outlook or connectedness to new complex products in the Product Space, as compared to its current income level in GDP per capita and expected natural resource exports. Economic complexity alone helps explain the lion’s share of variance in current income levels. But the value of economic complexity is in its predictive power on future growth, where a simple measure of current complexity and connectedness to new complex products, in relation to current income levels and expected natural resource exports, holds greater accuracy in predicting future growth than any other single economic indicator.

A rank in ECI of countries is based on how diversified and large their export basket is. Countries that are home to a great diversity of productive know-how, particularly complex specialized know-how, are able to produce a great diversity of sophisticated products.

Highly ranked countries in EC tend to have these attributes: a high diversity of exported products, sophisticated and unique exported products, in short, the ranking hinges on the concept of “productive knowledge” or the implied ability to produce a product. The top 10 export countries are China, United States, Germany, Japan, Netherlands, Hong Kong, South Korea, Italy, France and Belgium. Collectively, those leading exports-based economies represent over half (52.3%) of total exports by value from all countries.

India’s biggest export products by value in 2020 were refined petroleum oils, diamonds, pharmaceuticals, jewelry and cars. India main imports are: mineral fuels, oils and waxes and bituminous substances, pearls, precious and semi-precious stones and jewelry electrical machinery and equipment, nuclear reactors, boilers, machinery and mechanical appliances, and organic chemicals.

More exports mean more production, jobs and revenue. GDP increases when the total value of goods and services that domestic producers sell to foreign markets exceeds. If a country exports more than it imports, there is a high demand for its goods, and thus, for its currency. The economics of supply and demand dictate that when demand is high, prices rise and the currency appreciates in value.

The Economic Survey says that while the government is already doing the “heavy lifting”, its India’s private sector that needs to step up. The Indian government already has tax incentives for corporates contributing to R&D. The Chief Economic Advisor KV Subramanian said that the tax incentives in the past have been more liberal than other countries but it didn’t bring about a great participation from India’s private sector.

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.