People keep discussing, debating questions such as 'What will happen if Indians do not buy Chinese products in India'? or 'If China did not let India be part of the NSG, then why can’t India ban Chinese products in India'? These are all valid questions, however, all these questions are driven by emotions rather than intellect. Therefore, we as a society need to put emotions aside and assess these kinds of questions purely from an economic point of view.
Firstly, we need to understand, what kinds of products we buy from China and what kinds of products we export to China. India and China have trade relations, however, these trade relations are heavily skewed in favor of China resulting in 60+ billion US $ of trade deficit with China.
Firstly, we need to understand, what kinds of products we buy from China and what kinds of products we export to China. India and China have trade relations, however, these trade relations are heavily skewed in favor of China resulting in 60+ billion US $ of trade deficit with China.
What do we import from China? mainly manufactured goods.
What do we export to China? mainly raw materials.
Now, we also know that India's sunshine sectors such as IT and pharma are not allowed to participate independently in the Chinese marketplace. However, as things stand today, Indian IT and pharma companies are increasing their presence in China through joint ventures. That's a welcome step. If Indian IT and pharma companies compete in the Chinese market, then, surely, the trade deficit could reduce partially.
However, Chinese manufactured goods will still continue to dominate the Indian market.
What is the solution to this issue?
The government of India has tried to raise the duty on some of these goods, however, this kind of action encourages black market. In other words, Chinese manufactured goods still continue to enter the Indian market through dubious routes. In other words, Indians pay extra for the same Chinese Goods.
So, what are the other solutions?
Ban Chinese goods in India as the question itself suggests. However, then, who will manufacture these goods? Indian consumers will still demand these goods, and if Chinese goods are banned, then, who will manufacture these goods? If Indian manufacturers were producing these goods already, then, we wouldn't have this situation in the first place itself. Since Indian manufacturers are not manufacturing these goods, therefore, traders across India procure these goods from China and sell them in India.
Instead of banning these Chinese goods, we need to become competitive. Therefore, the real solution lies in building our own manufacturing capabilities, especially in bottom-up manufacturing. Make in India program shall focus on bottom-up manufacturing. By focusing on bottom-up manufacturing, we will be able to manufacture simple daily household goods in India itself. Indian policymakers need to make a list of manufactured goods that are imported from China. From simple items to high-tech items. After preparing this list, we as a nation shall ask ourselves 'why can't we make these goods in India'? Wages are still lower in India compared to China. Therefore, what stops India from manufacturing these goods in India itself. The answer to these questions is simple, however, willingness is needed on the part of our policymakers.
The government of India did announce Make in India program in 2014. However, the program was focused on inviting foreign manufacturers in India and then make manufacturing goods in India. The Make in India program did not pay attention to the needs of our local manufacturers or entrepreneurs. There was no mention of developing manufacturing technologies in India. Make in India program simply focused on ease of setting up a business in India. However, the program failed to pay attention to details, especially manufacturing technical details.
If attention is paid to the manufacturing details, then, India can surely make daily household goods in India itself instead of buying these goods from China. That will not only reduce our trade deficit with China but also generate millions of manufacturing jobs in India. So, what are the manufacturing details that our policymakers need to focus on? It's not rocket science. Just involve entrepreneurs in manufacturing policymaking and things will improve. Within a matter of 2-3 years, the manufacturing industry can be turned around. Within a span of 2-3 years, our manufacturers can start manufacturing globally competitive daily household goods in India itself. Not just for the Indian market but also for the world market. Our manufacturing industry can truly become globally competitive.
Therefore, instead of asking the question 'why can't we ban Chinese goods in India', we shall be asking 'why can't we make these goods in India'? When this question becomes the mainstream question, then, surely, we will be able to find solutions and develop our own manufacturing capabilities.
'Compete' and 'not ban' is the real solution.
