India and China’s growing trade and commercial relations have not been complicated by border disputes for decades.
But China’s killing of 20 Indian troops this week in a Himalayan border altercation could force Prime Minister Narendra Modi to impose retaliatory sanctions a popular outrage and political pressures mount for a firm response.
India’s imports from China grew to US$70 billion in 2019, a massive leap from the $1.3 billion received back in 2000. Modi’s government could conceivably order Indian companies to restrict Chinese investment and urge citizens to avoid Chinese products.
But China’s hold on various Indian markets with low-cost products means any such move will hit the Indian consumer at a time the economy is already in dire straits due to the coronavirus crisis.
After China’s surprise attack, where at least 20 Indian troops were killed with crude weapons and even rocks, Modi’s government is now moving to restrict the use of Chinese equipment and technology in sensitive areas.
Media reports suggest that restrictions could be extended to other state-run and private companies, as well as on imports of non-essential items.
The government has told state-owned Bharat Sanchar Nigam Ltd not to use Chinese equipment in the modernization of its 4G facilities, the Economic Times said. It is also considering tweaking rules to discourage the use of Chinese-made telecom equipment by private operators.
With more than a billion subscribers, India is the second-biggest mobile phone market worldwide. Most use more data than communications. The growing digitization of processes across industries is becoming critical for economic growth, and Indian companies are rapidly preparing for the next generation of systems.
Yet the market is dominated by Chinese smartphone makers such as Xiaomi, Oppo and Vivo, who sell the fastest-selling models. The share of Indian phone makers such as Micromax, I-Ball and Lava has shrunk over the years, as has that of Samsung and the erstwhile global leader Nokia.
Indian intelligence has red-flagged 52 mobile apps with links to China, the Hindustan Times said. The list includes video conferencing app Zoom, short-video app Tik-Tok and others such as Xender, SHAREit, Shein and Clean-Master.
In April, India put curbs on countries sharing land borders, including China, from investing in shares of local companies without approval. This came after People’s Bank of China acquired a 1.01% stake in India’s No 1 Housing Development Finance Corp. Other investors don’t require government approvals before investing.
Chennai-based Venture Intelligence data shows that Chinese companies have invested $5.8 billion in Indian technology startups. Chinese investors including Alibaba and Tencent have invested in food delivery services Swiggy Zomato and Big Basket.
Venture Intelligence data shows that Alibaba, Tencent, Shunwei Capital, Hillhouse Capital and Fosun Group are among the most active Chinese investors in Indian startups.
It would be hard to restrict such investments in an increasingly globalized and integrated world and would send a message that India doesn’t welcome investment from China.
India has been a ripe market, especially for China, since the beginning of the millennium as India pushed for growth after decades-long economic reforms began having an impact.
China is a major supplier of a variety of critical raw materials, including chemicals, steel and tires, that India uses in its manufacturing industries. China is also the world’s biggest producer of active pharmaceutical ingredients.
Its low prices and large volumes make it an attractive source for Indian drug makers, which in turn sell medicines across the globe. The Indian government could, some suggest, initiate measures to promote local industry to start making pharmaceutical ingredients.
Over the years, Chinese cheap consumer products flooded the Indian markets and drove out local brands. These ranged from Diwali lights, idols of Hindu gods, children’s toys, electronic gadgets and apps for mobile phones among thousands of others.
The New Delhi-based Confederation of All India Traders has also agitated to boycott Chinese products. It has given the government a list of 450 products imported from China which they want to be banned.