The Narendra Modi government is unlikely to take any rash decision despite the recent military aggression by China over the Line of Actual Control (LAC), which left 20 Indian soldiers killed and over a billion Indians seething in anger.
Anger against China did result in some action. For instance, Dedicated Freight Corridor Corporation of India (DFCCIL) scrapped its contract with Beijing National Railway Research and Design Institute of Signal and Communication Group Co. Ltd. “In view of poor progress, it is decided by DFCCIL to terminate the contract with Beijing National Railway Research and Design Institute of Signal and Communication Group Co. Ltd,” the Indian Railways said in a statement.
However, the government’s overall response, military or economic, is set to be calibrated and well thought-out. Reason? India’s economy is largely linked to the dragon country. China is India’s second biggest trade partner, the first being the US.
India is dependent on supplies from China for critical raw materials, including active pharmaceutical ingredients or APIs required for production of drugs and antibiotics, components used by automobile and other white goods manufacturers.
Notwithstanding the clarion call by many associations including the Confederation of All India Traders (CAIT) to boycott Chinese goods, the government will not rush into taking any extreme measure.
That apart, there are many Indians who are operating out of China or have factories in the country.
India is likely to push the pedal on manufacturing so that the Make in India scheme takes off and replaces imports. “It is a wait-and-watch situation. The factories run by Indians in China have not been affected and it is business as usual for them as of now,” Anil Bhardwaj, secretary general, Federation of Indian Micro and Small and Medium Enterprises (Fisme) told IN. He added that the situation may ease soon.
A shortage of API could have far-reaching implications on the Rs 175 lakh-crore drug industry, especially at a time when the country has been hit by the spread of coronavirus. Not only will this make medicines more expensive but in many cases there could be shortages too. India’s exports of medicines could also be impacted.
Federation of Indian Export Organizations (FIEO) president Sharad Kumar Saraf, who has a factory in mainland China, said that work has not been interrupted.
Meanwhile, India’s trade with mainland China and Hong Kong showed a drop of 7 per cent in 2019-20 to $109.76-the sharpest fall in the last seven years. In 2018-19, trade between the two countries grew by only 3.2 per cent after a huge increase of 22 per cent in the previous financial year.
Indian consumers have been gradually turning away Chinese goods even before the spread of the virus and the border conflict.
There has been an unprecedented rise in anti-Chinese sentiment in the country after the spread of the coronavirus dented India’s economic activities leaving many jobless and others with lower wages. While India may not be able to choke imports of raw materials required for finished goods, demand for Chinese finished goods could see a huge drop in the coming months.