India-China trade ties 2,000 years old: Boycotting dragon not easy; India imports this much from China

Every year, India earns over USD 15 billion by exporting its goods to China.

While a rage runs across the country against Chinese products, and calls to boycott imports from China get louder, it is important to note why it might be easier said than done for India to snap trade ties with the dragon, which go as far back as 2,000 years. China accounts for a significant portion of India’s overall trade. More than 14 per cent of India’s total imports come from China, from nuclear reactors, boilers, machinery, organic chemicals to mobile phones, decorative lighting and other household items. Out of the total import of $442 billion, India imported goods worth $62.3 billion from China during April-February FY20, according to the Department of Commerce.

Prime Minister Narendra Modi’s Atma Nirbhar Bharat plan is still in infancy, and there remains a long road to go before India comes close to becoming a self-reliant economy; Finance Minister Nirmala Sitharaman too recently remarked that production cannot start on the very next day the project has been started. In such a situation, finding an alternative to Chinese imports remains a herculean task for the Indian industry, especially in the face of the cost competitiveness of Chinese imports.

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Apart from imports, China is also a major destination for India’s exports. Every year, India earns over $15 billion by exporting its goods to China. During April-February FY20, India exported goods worth $15.5 billion to China, which was 5.3 per cent of India’s overall exports. Mineral fuel, mineral oil, and aquatic products are the main products that India exports to China. Considering the size of trade and cost competitiveness, a complete ban on Chinese products could end up raising costs for many products in India.

Chinese firms supply about 80 per cent of solar cells and modules to India. The country has been importing such large amounts of solar cells and modules because it gets much costlier to manufacture in India. Apart from the solar industry, the telecom sector may also have to pay the price of boycotting Chinese products and services. The 4G network of Bharti Airtel and Vodafone Idea is largely built by Huawei and ZTE, therefore, by not procuring telecom equipment from Chinese vendors would cost the domestic industry dear. Companies making automobiles, refrigerators, televisions, mobile phones, etc, also import components from China. Even in many cases where the product makers do not import parts from China, their vendors do import from the dragon nation.

The two countries have been involved in bilateral trade for more than 2,000 years. Even the epic Mahabharata has a mention of China. The records of economic ties between India and China date back to the 2nd century BC through the Silk Road. Both nations were deeply involved in silk and spices trade. India’s significance in the spices trade can be better understood by the fact that ‘Black Pepper’ produced in India was also known as the ‘Black Gold’ in the ancient era.

However, after 20 Indian troops, including an Indian commanding officer, were killed in the face-off in Galwan valley, India is witnessing a nationwide protest to ban Chinese products. Various states including Madhya Pradesh, Haryana, and Uttar Pradesh, have cancelled the deals that they closed with China before the face-off. These states have underlined that they have no intention to sign any further agreement with China.

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