TRADE WAR WILL HURT INDIA, WON’T SOLVE THE BORDER ISSUE
Reminiscent to the Swadeshi movement of pre Independence times, India is witnessing a new movement to boycott the Chinese goods. But the character and cultural implication of both the calls are quite different. While the earlier one was resorted to fight the hegemony and dictates of the British government the latest has a political dimension and has precisely been given to arouse the element of BJP’s nationalism which has been on the decline.
During these more than hundred years the political economy of India has changed and it is now a symbol of crony capitalism and not a colonial subject. In those days the people, irrespective of class, had taken the lead to burn the British made cloths, but now the supporters and cadres of BJP has been acting as the vanguard. The fact is in the backdrop of India’s insignificant share in global trade, banning trade will barely hurt China but it will adversely impact Indian consumers and businesses.
There is no denying the fact that the same people and organisations who only for political gains have been spearheading the movement would retreat dumping the interest of the country. By that time the people of the country would also have forgotten the inglorious treatment meted out to the country by China.
Though the government has tried to respond to the border dispute with China by training its guns on trade, the approach of the government towards the killed soldiers has been different. After Pulwama massacre the bodies of soldiers were brought to Delhi and Modi paid his respects by paying floral tributes to them. But in the case of soldiers killed by Chinese forces, the bodies were not brought to Delhi and Modi did not pay tribute. Their bodies were sent directly to their homes. This differential treatment meted out to the soldiers provides an insight into the minds and attitude of the BJP leaders.
In all fairness, they are aware that a massive intellectual investment in the current episode will not be productive to that extent as that helped in the case of Pakistan. How far this will have its impact on the trade relation with China is also not clear. In fact, the manner in which Congress leader Rahul Gandhi has been raising one question after another has turned the BJP, Modi and his government vulnerable. They are finding it a tough proposition come clean on the issue.
The idea resonating in Indian streets is that Indians should boycott Chinese goods and thus “teach China a lesson”. While one can understand the outrage that Indians feel but the fact remains that these actions are meant to convey the political message than the desire to uphold the sovereignty of the country. The fact of the matter is Modi and his government do not desire to turn this dispute into a trade war, A little further scratching will unravel that a large number of Gujarat trade houses have their high stakes in the trade with China. During his visit to Ahmedabad Xi Jingping was accorded a massive reception by the Gujarati businessmen and traders. Some time back a high-level delegation from the Gujarat government was in China “to strengthen the relationship”
One ought to clearly understand that in the prevailing political and economic situation turning a border dispute into a trade war is unlikely to solve the border dispute, even as Modi at the all-party meeting on June 19, officially stated that the Chinese had not intruded into the Indian territory. However, with analysts strongly countering the PM’s claim, which in turn counters a previous claim made by the MEA, the “dispute” though resolved would still remain a pressure point. Given India’s and China’s position in both global trade, any trade war will hurt India far more than China. The most important reason is banning all trade with China will be most poorly timed since the Indian economy is already at its weakest point ever and facing a sharp GDP shrinkage.
The economic condition of India has turned fragile due to the retreat of crores of labourers. No doubt some of them have started arriving, but their percentage is not enough to put the wheels rolling. Besides there is acute dearth of liquidity. Though the government had promised to feed the industrial houses, it is yet to receive major thrust.
Modi has been harping on “Atmanirbhar Bharat”, but the manner the things are moving it is a distant dream. The impact of protectionism and anti-globalisation sentiment since the start of the Global Financial Crisis of 2008 is well known. India has tried mantras like “self-reliance”, “import-substitution” and “protecting infant domestic industries” work but failed to make substantial gains. It cannot be denied that India is dependent on China for a wide array of goods, ranging from electronics to fertilisers; Chinese products often help Make in India.
After the Galwan Valley massacre some government departments, especially BSNL and Indian Railways, have announced cancellation of their contracts with the Chinese companies and gone for boycotting Chinese products. They have started using trade as an instrument of retaliation against China. True enough India is dependent on China for a wide array of goods, ranging from electronics to fertilisers. There is also the issue of Chinese investment in the Indian start-up space to contend with. The government will have to carefully think through the consequences of any policy action that it decides to pursue. Policy should flow from careful cost-benefit analysis, not be driven by knee-jerk reactions.
The Swadeshi Movement, now known as ‘Make in India’ campaign was officially proclaimed on August 7, 1905 at the Calcutta Town Hall, in Bengal. The movements included using goods produced in India and burning British-made goods. When Lord Curzon, then Viceroy of India, announced the partition of Bengal in July 1905, Indian National Congress, initiated Swadeshi movement in Bengal. Swadeshi movement was launched as a protest movement which also gave a lead to the Boycott movement in the country. The swadeshi movement has been classically studied in terms of its social constructiveness and its cultural productivity. But a view of the intellectual dimensions of productive nationalism is also needed. The BJP leadership, especially Modi should have a deep introspection, to what extent and in what way their action will help the Indian cause. It would not augur well if it is used simply for furthering the political goal of the party and especially Modi. Indian government officials said they plan to impose higher trade barriers and raise import duties on around 300 products from China. India currently has a $59.3bn (£47.7bn) trade deficit with China, with 11 per cent of India’s imports coming from China.
It appears that like politics, the Indian economics is getting radicalised. But this would not be in the interest of the country. But one thing should be crystal clear to the BJP rulers; Indian made products cannot replace them. Indian products have already been losing space in international market due to their low qualities. China is India’s largest trade partner, sending us goods worth US $61.7 billion in 2015-16. This means a sixth of India’s imports are Chinese, up from a tenth in just five years ago. And what of India’s exports? These have plummeted and so sharply that it is just half of what it used to be in 2011-12: a paltry US $9 billion. Obviously somebody has to own the responsibility for creation of this situation where India has been at the receiving end.