On Chinese Goods, Swadeshi And Trade Deficit

The latest flashpoint in the India-China border dispute started last month in the Doklam area at the Sikkim border, near the trijunction of India, China and Bhutan. Cue the Boycott-Chinese-Goods social media (SM) movement.
There is a rhythm to them, the boycotts. They aren’t called for when the border is cool. When things heat up, the SM warriors come out of their bunkers, get to every site and tell us why exactly we must refuse to buy “Made in China.” How our trade deficit is high, how by buying their goods we are sending money out to another country, how we are indirectly financing the same guys who have skirmishes with our soldiers on the border etc etc. The last reason is what gets bandied about the most, you know, anti-national and all that.

Let’s look at this boycott strategy a little more closely.

First up, a cold, hard fact :

India suffers a trade deficit with China which has increased over the years: from $38.7 billion in 2012-13 to $51 billion during 2016-17. 

As you can see above, we have a negative difference of trade with China that is increasing every year. And therein lies the root cause of the problem.

So, what could be done?

Well, Social Media Gyaan tells us that the way out of this mess is to boycott Chinese goods. If we refuse to buy them, they won’t be able to sell. And hence, that import stats would go down. Trade deficit erased. Problem solved. Voila!

Image Credit : Google Images

Let me take you through a sample of a conversation that might or might not happen after reading this far.

-Er, well, there is a small thing remaining. What should I buy if I don’t buy that Chinese product?

-What?

Buy Japanese, American, German, heck, buy Indian. We must bring in the New Swadeshi (of one’s own nation) Movement.

-I have to buy a phone. Any Indian brands that are better than the Chinese ones?

-All Indian brands are good enough. They will work well enough.

-But benchmarks don’t show any Indian brands up there. Its all Xiaomi, OnePlus, Oppo, Vivo and Apple there.

-The first four are Chinese. Never, never ever, buy them. Buy Apple.

-But that is way too costly. And isn’t it an American brand (assembled in China)? It isn’t Swadeshi either.

-Uh oh, you know nothing.

Continuing with phones, let me give you an example.

OnePlus was launched in 2013.

Micromax started selling phones in 2008.

Today the former is competing with Samsung and Apple for eyeballs and market share (although far from winning, as yet). Think about where is the latter is.

Buying a Swadeshi phone brand is all well and good. But if the phone doesn’t have good enough specs and performance, you aren’t going to get value for money. Why would you buy such a phone then?

Let’s take this point broader. Samsung is a Korean brand. Apple is an American one.

If we have to boycott foreign brands (goods), why not every single one? Why just Chinese? Where is the guarantee that America or Korea or Japan won’t be hostile towards us in the future? And how does using their goods count as Swadeshi?

WhatsApp gyaan also told me once that the Japanese people still remember the humiliation suffered at the hands of the USA in WWII and hence, they don’t use even an American-made needle. Ahem! Just lookup the highest grossing movies in Japan on Wikipedia. 5 American films in the top-10 and 13 in the top-20!

Nationalist sentiments aside, boycotting makes sense only when you have a viable local alternative available. We don’t need to buy Suzuki bikes because our Indian brands are good enough (Bajaj, Royal Enfield). And Patanjali has been riding the combined wave of Swadeshi-Ayurvedic sentiment for quite a few years now (and looks good for many more to come).

Economically, when a big foreign firm decides to come to India to set up factory and shop, it brings in a lot of Foreign Direct Investment (FDI) and goodwill. FDI plays a huge part in the growth of emerging economies. It showcases the country as an attractive investment destination in the eyes of other investors, besides creating many jobs itself. Importing finished goods doesn’t do either of these, yes, and is so, a part of the problem.

Secondly, in a globalized world, one can’t just stop others from selling their products in one’s own country. Of course, some measure of protectionism is applied (import duties etc) but you can’t outright refuse entry to a firm (unless blacklisted). That is, simply, bad policy. To put the boot on the other foot, recall the phobia that surrounds any US declaration of the reduction in or tightening of H1-B visas.

Image Credit : http://www.freepressjournal.in

Furthermore, trade also helps in indirect ways. It builds people-to-people relations and helps to defuse tensions. It brings the best business practices to the sectors concerned. It forces our local producers and manufacturers to up their game and improve their quality to compete with the international firms. The better the competition, the better, and more cost-effective, the end product. That is a win-win situation for everybody. What’s there not to like?

The trade deficit, that’s what.

We must try to reduce, if not overturn, the trade deficits we have with countries like China, Nigeria and Switzerland, among others. How do we go about doing that? By increasing our own exports. Surely when you can’t stop imports completely, the best way to even the scales is to put more things in the export basket. How’d that happen?

Job creation.

A million people join our workforce every month. Number of jobs created –  Barely 100,000.

The large number of people going without a job would not appear so because quite a few people are either underemployed or work in the informal sector. Plus, we also have to think of the disguised unemployment in the agriculture sector, speaking of which :

The Agriculture sector is the largest employer in our country. And despite (or in spite of) those numbers, our productivity is low. Among other reasons, the ones I can knock off from the top of my head are :

a) Indirect unemployment. 

b) Use of outdated and inefficient irrigation practices. 

c) Small and marginal land holdings.

Each of these three require long-term remedial measures. But let’s limit our discussion to the first point here.

Image Credit : http://www.thebetterindia.com
The disguised unemployment in the sector is due in large part to the lack of jobs in the other sectors. If we have to grow, and grow fast, we must pull people out of primary sector (e.g., agriculture) and get them employed in the secondary and tertiary sectors. This doesn’t mean stop cultivating. No, no. That would be disastrous. But, go to any corner of the country and you’ll see that save for a handful of large landowners, most people who till the land are the ones who have no idea or way out of it, who do not know where they’d go if they had to leave their land. So despite farming being a hard and capricious work in our country (the dependence on mercurial monsoon winds, for example), people soldier on.
More manufacturing and growth of services would mean more production, and, in turn, more exports. Yes, exports! That would reduce the trade deficits.

I do agree that this does sound far easier on paper than in reality. I also agree that the government already knows this, far clearer than I do. We must also be honest and accept the fact that it’ll takes us a long time to achieve these goals, because even Rome wasn’t built in a day. And yet, it remains one of the better ways forward. 

Next, a huge chunk of our forex reserves goes towards payment for imported coal, crude oil and Gold. These are things we can all look at.

Image Credit : http://www.sarielpetro.com

Reducing our use of petroleum products is a great way to reducing our carbon footprint, paving the way for a cleaner environment. As for coal, we might not he using it directly, at least not for domestic consumption, but we are indirectly involved in its use. Majority of our power plants are coal-based. By not using electricity judiciously, we force a higher usage of coal in these plants. You can see where that argument leads.

As for Gold, honestly, I don’t get our fascination with the Yellow Metal. Or maybe it is because I myself don’t have that fascination. But yes, the point remains. If we don’t buy Gold, we wouldn’t have to import Gold. And this is not a swadeshi/videshi argument. We HAVE to import Gold because the amount of the ore mined in our country is grossly insufficient.

For the warmongers, who say that we should fight with either or both China and Pakistan, understand this. War is not a video game. India and China/Pakistan fighting is not in either party’s favour. A war is a costly thing. It’d mean crores of rupees that could, and should, have been spent on development but would be spent on ammunition and bombs. Not to say of the lives that would be lost. We might win both, or either, or neither. But either war would individually mean a huge economic burden. Putting up an honourable fight is good, but a two-front war would stretch our forces extremely thin. War is not the solution to any border problem, be it China or Pakistan.

Diplomacy is.

Flag meeting at the border. Image Credit : http://indiatoday.intoday.in

This isn’t the first time we’ve had skirmishes along the China border. Of late, these have become a rather unwanted, regular feature. But as with the past occasions, both the governments need to employ the diplomatic route. Talks have to be held. Envoys/ministers have to meet and discuss. We are all behind the army, but they can’t be expected to lead the fight and do the talks too. That is the duty of our bureaucrats and elected representatives, and they must fulfill it, as I believe they will.
In conclusion, if you want to boycott foreign goods, very well. Good luck. But do keep in mind whether you have competitive local options available or not. Because at the end of the day, it is your own hard-earned money.

Disclaimer: I’m no geopolitics or economics expert.
Thanks for reading.

Kindly share your thoughts in the comments section.

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