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Anti-China sentiments and clarion call for self-reliance leave India's Chinese goods market.

Date: 06-06-2020
Subject: Anti-China sentiments and clarion call for self-reliance leave India's Chinese goods market
One of Delhi's oldest market areas, Karol Bagh, hasn't seen much activity for close to three months now. Otherwise buzzing with crowds who teem the wholesale market for affordable garments and electronics, shopkeepers in the area find the absolutely deserted look almost eerie.

Until recently, in the hundreds of shops spread across a maze of narrow corridors in Delhi’s Old Lajpat Rai market (just off Chandi Chowk) and in Gaffar Market in Karol Bagh, one could buy clones of the world’s sophisticated inventions after a good haggle: palm-sized iPods, sleek touch-mobiles, glitzy wristwatches.

These shops were filled with cheap unbranded Chinese goods, as were thousands of markets across India, part of the same onslaught of consumer goods that China made across the world.

"Coronavirus to ab hua hain. Dhanda to down pada hain kab se (Coronavirus just happened. Business has been down for long now)," said Rajinder Gupta who owns a shop in Karol Bagh.

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India was already in the middle of a slowdown. According to government data released in February, India's GDP grew 4.7 percent in the October-December quarter of 2019-20. GDP growth in the previous quarter had been revised to 5.1 percent.

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India’s GDP grew 4.5 percent in July-September 2019, the lowest since the fourth quarter of 2012-13. The economic slowdown came at the back of 5 percent GDP growth recorded in April-June and 7.1 percent in July-September last year.

"Pehle hi koi nahi khareed raha tha, paise nahi the. Ab to dhanda bhi pata nahi kab tak rahega (people weren't buying before, they didn't have money. Now we don't know till when business would remain)," Gupta said.

COVID-19 impact

Coronavirus now has taken the buzz out of these markets. The anxiety among the tens of traders that hawk mostly Chinese goods is too obvious to miss. They have seen their incomes collapse dramatically, as the lockdown shuttered down their shops. The future looks even darker, as people cut down on discretionary spend and cheap supplies from China get severely disrupted.

"Supply to kab se toonta pada hain. Saman hi kaha mil raha hain jo bechenge? (Supply chains are lying disrupted since when. Where are we getting supplies that we'll sell?)," said another shop owner, who has an electronics shop in Old Lajpat Rai market said.

COVID-19 originated in the Wuhan province of China, and its outbreak ravaged the Chinese economy, thereby disrupting the supply chain and putting Indian industries, which are heavily dependent on China in a lot of sectors, under duress.

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The outbreak of the virus and its consequent economic damages have put into sharp focus China-India bilateral trade, because of India's import dependency in some sectors.

India's dependence on China

China is one of India’s leading trade partners and constitutes 9 percent of India’s total exports and 18 percent of total merchandise imports.

Import dependency on China for a range of raw materials (APIs, basic chemicals, agro-intermediates) and critical components (auto, durables, capital goods) is skewed. Of the respective imports, 20 percent of the auto components and 70 percent of electronic components come from China. Similarly, 45 percent of consumer durables, 70 percent of APIs and 40 percent of leather goods imported are from China.

To address this dependence on China, prime minister Narendra Modi has announced a policy shift in making India self-reliant."India's industry leaders need to invest in building robust local supply chains that will strengthen India's position in the global chain," Modi said recently.

"The kind of dependence we have on China, if we start planning today, it will take a few years to walk down that path. So, it's clear we need to be prepared for at least a few years to decrease the dependence we have on China," trade expert Biswajit Dhar, professor at Jawaharlal Nehru University’s Centre for Economic Studies and Planning, said.

According to IDC (International Data Corporation), Chinese companies accounted for more than 70 percent of all smartphone that came into India in January-March quarter of 2019. Government data shows that the total size of India's trade with China was $87 billion in 2018-19, and electronics accounted for $20.6 billion of total imports from China.

Import substitution or not?

India has been raising import barriers in the last three Union budgets, in a bid to protect domestic industries. The Union Budget 2020-21 increased customs duty across a range of products accounting for over $8 billion of India’s imports. While this is about 2 percent of India’s overall imports, the signal that is being sent out are of building protectionist barriers and import substitution.

This was followed by the prime minister's fervent appeal for self reliance. However, some experts are not willing to read self reliance as import substitution.

"It's not import substitution and make in India for Indians, it's not that kind of self reliance. It's sort of in essence, encouraging make in India. And that will happen if you do the difficult things, like improving ease of doing business indicators. And once you improve doing business in India, then people will come automatically," said Rajat Kathuria, director and chief executive, Indian Council for Research on International Economic Relations (ICRIER).

Uncertain future

But for the shopkeepers dotting India's wholesale electronics markets in the capital city, it is about survival and for how long.

"Log to abhi anti-China hi bol rahe hain na. Sarkar ne kya bola hain, kis matlab se bola hain, isse humare dhande ko koi farak nahi padta. Apna to sentiment pe chalta hain. Aur ab mausam anti-China ka hain (People are now saying anti-China. What government is saying and from what concerns, that don't drive our business. Our business lives on sentiment. And now the weather is anti-China)," the shop owner who did not wish to be identified said.

Like so many sectors, Coronavirus has thrown into uncertainty the thriving business in Chinese electronic products. As Gupta said, the customer is the king in this segment and if customer sentiment against Chinese products don't change, even if demand picks up, their businesses are unlikely to reap benefits of it.

"Saman jo pada hua hain, woh bhi nahi bika, to hum kya karenge? Log zyada paise de kar mehngi khareedenge. lekin Chinese maal haath nahi lagana. To hum in saare saman ka kya karenge? (Whatever inventory we have, if that doesn't get sold, what will we do? People will pay more and buy expensive products, but won't touch Chinese goods. What do we do of the stock?)," Gupta said.

Source:- moneycontrol.com

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