Is Increase in Tariff or banning Chinese Apps a Solution?

Indian Government retaliated to the border intrusion by banning Tiktok and 220 other Chinese apps. Since then there has been considerable pressure in the country to restrict goods from china. Chinese products, services, and investments are deeply rooted in India’s supply chain

Let us now understand the implication if there is a further export/ investment restriction. Let’s start by understanding the relation India and china share.

1. China is India’s largest trading ally and India has the largest trade deficit with China. We export organic chemicals and raw materials like iron ore, slag, cotton, natural pearls, etc. We import finished goods like machinery, power-related equipment, telecom, and fertilizers which veil raw material based exports.

2. The Chinese have entered the Indian market through venture investments in start-ups and penetrated the system with their popular smartphones and apps. Chinese tech investors have put an estimated $4 billion into Indian start-ups.

3. Chinese products are an integral part of our supply chain and any political aggravation between the two nations could impede  the recovery of the economy from the pandemic. Pharma, consumer durables, auto, telco, power, chemical are a few industries that would be impacted as a vast majority of the inputs/ Final products are imported from China

Indian start-ups have also started pivoting their fundraising strategies and are looking at other global investors for capital. But more than Covid-19, the Sino-India tensions, have put Indian start-ups in a fix.

India’s domestic manufacturing sector can replace as much as 25% of total imports from China, as per Acuité. This would lead to a reduced burden on the dollar reserve by $8bn in a single year. The handicraft industry for example imported $431m worth of goods from China in the 2020 financial year without any significant exports. China is not worried as India accounts for only 3% of its total exports.

Finding Indian or non-Chinese alternatives is not just a difficult task but also an expensive process. But this is a must for Atmanirbhar Programme. This could also be an opportunity for Indian start-ups to raise the bar and make India self-reliant #Atmanirbhar.