At one level, India is fighting a border dispute with China, with the events at Galwan in Ladakh in 2020 serving as a grim reminder that there are chances of military conflict with the giant, populous, opaquely authoritarian communist giant that fought a war with India in 1962. At the same time, chances are high that Indians are cribbing about Chinese expansionism on smartphones designed or made in or around Shanghai.
Indian Prime Minister Narendra Modi’s government is striving hard to attract global investors under his “Make In India” initiative which is aimed at making India an increasingly self-reliant manufacturing power under what is at a geopolitical level part of the “China Plus One” strategy. This week’s news is that laptop imports are getting costlier because India wants to encourage their domestic manufacturing. India wants to gain from the fact that multinational giants are aiming to diversify capabilities in other countries because Beijing now poses both economic and military threats to the West.
However, I learnt recently that China is unfairly dumping an increasing number of low-cost/low-quality goods into India, often unchecked — and sometimes deliberately overlooked by authorities — because the trouble of reducing imports is probably more than the advantage of a “Make In India” gain.
The World Trade Organisation refers to dumping, in general, as a situation where the price of a product sold in the importing country is less than the price in the market from where it is exported. This is often done to hoodwink competition into death or cash in on a consumption need in the importer market.
First of all, in a world where WTO monitors fair play, it is difficult for policy-makers and administrators to get sufficient, authentic data to prove that dumping is taking place so they can impose countervailing duties. This is further complicated by the fact that even when proven right, there is some cost-benefit analysis done by commerce and finance ministry officials in India that ends up with the Chinese getting away with pieces of India’s economy, much like some placid lake land in Ladakh.
In an increasingly interconnected world where globalisation has been a theme for close to four decades, one cannot wake up suddenly to nationalistic instincts without realising that you have been sleeping with someone who may be occasionally, if not frequently, described as the enemy.
I call it the Bollywood Climax Syndrome. Often in old Hindi movies, there is a fight scene in which the screen hero is fighting the bad guy and his goons, but it turns out that the villain has captured close relatives (often the heroine or his mother) and is blackmailing the handsome good guy. Picture China like a bad guy fighting whom can pose at least temporary setbacks to the Indian economy’s good guys.
China on its way to become Japan of 1990s
I was recently sent reports by a think-tank, the Centre for Digital Economy Policy Research, that showed that the commerce ministry and sometimes its big brother, finance, have been rejecting legitimate anti-dumping claims. Intrigued, I spoke to my ministry sources and was told that this may indeed be true but the problem is not easy to navigate because downstream industries that use Chinese products as raw materials or inputs tend to suffer due to higher costs when anti-dumping duties are imposed. Many downstream industries tend to be small and medium enterprises (SMEs) that spin jobs in an economy that badly needs to create more jobs and also keep inflation low.
India’s 5G telecom revolution is helped by Chinese inputs, just like YouTubers making money off home-made videos gain from Chinese smartphones.
There is good news this week for India’s domestic fibre optic manufacturers who have been cribbing about unfair Chinese imports. The finance ministry has upheld a recommendation from the Directorate -General of Trade Remedies in the commerce ministry to impose an import duty on Chinese, Korean and Indonesian optical fibres after DGTR conducted investigations. But you know how it is. If the optic fibre lobby is powerful, the telecom service provider lobby is at least as powerful if not more — as it is a more sentimental story when your Internet bills go up. Let us see how it goes.
Optic fibres may be a tip of the iceberg in the cat-and-mouse game India plays with Chinese dumping.
According to C-Dep’s research, as much as 61% of DGTR recommendations (on various goods facing its investigations on anti-dumping charges) were rejected between September 2020 and October 2022, while the figure was as low as 0.67% between 1991 (when India kicked off a liberalisation programme) and August 2020.
Sounds strange, isn’t it?
Typically, the Indian government approaches every case with a sense of pragmatism and precision — which is a good thing. But what is equally clear is that India needs a long-term strategy to deal with the China threat, and somebody has to feel the pinch. The government could with a workman-like approach to build a roadmap on how to go about taking on the Chinese dragon.
In Bollywood movies, there is always a smart manoevure by the hero or his associate to outwit the villain – and sometimes, there is a sacrifice made. That depends on the plot writers. But more often than not, there is a happy ending. What we need in the commerce and finance ministries are a bunch of options that they can borrow from Bollywood scriptwriters.
My easy guess: Try cushioning downstream industries with alternate incentives like cheaper finance or marketing support or higher depreciation or some direct tax benefit. It is a messy business involving too much data and detail. But you get the picture. The optic fibre story is hopefully a good beginning.
(Disclaimer: The views of the writer do not represent the views of WION or ZMCL. Nor does WION or ZMCL endorse the views of the writer.)
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