The customs duty for Chinese machinery should be kept at 10 per cent in the base year and then subsequently increased every year to encourage domestic manufacturing
Wanton Chinese aggression and the cowardly, premeditated attack on the Indian Army that led to the killing of 20 of our brave soldiers are episodes India can never forget. The time has come for the citizens to unite and for the Government to ensure that a single-minded resolve is visible to the world. China has a history of betrayal. It tends to covet the land of other countries and grab it under some pretext or the other. While it has grown its economy in the last 30 years, it has also shrunk in its status as a nation that can be considered as a responsible member of the global committee of nations. Sadly, for an economy and a country of its size, China has behaved like a bully with almost every neighbour. It has shown willful disregard for established norms of conduct.
China has shown disrespect to India’s sustained and mature outreach to settle pending issues with respect to border issues between both nations. It has not even exchanged maps with respect to the disputed boundary in many areas and has used that to try and intrude into the Indian territory. It has also supported and financed Pakistan to act as a terror proxy against India. Chinese arms have been utilised by Left-wing extremists through Nepal. Beijing has also created a red corridor from Pashupati to Tirupati. Mineral-rich areas, which lie in this corridor, have been disturbed for decades, leading to the misutilisation of India’s natural resources. The current pandemic is an example. A majority of the migrant labourers are from this corridor, proving that disturbance has led to high unemployment and economic degradation of the area.
In short, China has played double games. On the one hand, it has gained tremendous access to the Indian market and consumers since we opened up our trade and economy in the early 90s. On the other, it has tried to unsettle our nation through direct and indirect provocations. Prime Minister Narendra Modi has invested the highest amount of time in maintaining relations with China. He has visited that country several times and has repeatedly asserted the need to maintain “friendly” and “good relations.” Indian citizens, too, want to establish good economic and diplomatic relations with China. The two nations share a long history of cultural and religious relations and affiliations.
However, the Chinese State apparatus is afraid of India’s long-term economic rise, our democratic tradition and the use of “soft power” across the world. This myopic view has mistakenly led the Chinese authorities to conclude that India can be contained and restrained. But they forget the lessons in history. India has always been a beacon of renaissance, a messiah of peace and accommodation for the entire world. China needs to behave responsibly. It is a sad fact that five major global pandemics since 2002, including the severe acute respiratory syndrome (SARS) infection, avian flu, swine flu and COVID-19 have originated from China.
At a time when the entire world is suffering from the disastrous economic consequences of a virus, the People’s Liberation Army (PLA) is triggering hostilities with the Indian Army. Given the Chinese strategy and intent, it is time India acts to safeguard its interests. While several measures are currently under way, I support the call to reduce Indian dependence on Chinese products and reduce Chinese FDI. At the behest of the Communist Party of China (CPC) and the PLA, Chinese firms have outmanoeuvred FDI laws to take control of Indian companies.
Attempts to reduce Chinese FDI have not been successful so far. This because Chinese firms are creating SPVs in Hong Kong, Mauritius, Singapore and other tax havens to generate investment in India. Bilateral trade between India and China is around $100 billion. Trade is supposed to benefit both nations. However, the same is not the case with Indo-China trade. At the moment, India has a trade deficit of $67 billion with China. This means we are exporting considerably fewer goods in comparison to China. This is belittling our economy.
Coupled with the Chinese takeover of major Indian exporting and production houses, trade between the two nations is one as between two Chinese companies. Anti-dumping duty and minimum import price have been placed on 99 Chinese products. Despite this, India is heavily dependent on Chinese products. Around 73 per cent of the telecommunication equipment, 82 per cent semiconductor, 87 per cent antibiotic and 83 per cent active pharma ingredients are imported from China. Unknowingly, India has been promoting Chinese products through the facade of “Make in India” where major Chinese companies have set up their shops in India and have become a hindrance in the development of Indian companies.
Chinese companies such as Xinxiang, Shanghai Electric, Sics Motocorp Huawei and Alibaba are controlled by the PLA. They have all set up bases under the shelter of Make in India to control the Indian economy. Chinese firms have surpassed others in becoming leading players in mobile phones and other items in the Indian market.
The Atmanirbhar Bharat Abhiyan (self-reliant India) is very significant. India became a member of the WTO in 1995, much earlier than China, which joined the trade body in 2001. Since then, China has grown into a massive economy that rules global exports. It is time for India to undertake a new journey in a post-Corona world. Unless we develop strong manufacturing capacities, undertake higher exports of goods as well as services, we will not be able to take care of the welfare needs of our population. India needs to promote local manufacturing of imported items. To encourage the manufacturing of components, customs duty should be gradually increased — starting from 10 per cent from the base year to 40 per cent by the fourth year. For fully imported products, basic customs duty should be hiked to 75 per cent in the base year and further increased by the fourth year to 100 per cent to ensure that all such importers utilise the three years to set up manufacturing units in India. The machinery for the production of items should be kept at 10 per cent in the base year and then subsequently increased every year to encourage domestic manufacturing of the machinery.
Further, it is also important to clarify the definition of “importer”, “assembler” and “manufacturer.” The lack of a definition allows all importers and system integrators to falsely sell imported products as “Made in India.” The ICT and the defence sectors are areas where despite a huge domestic potential, most goods are imported. One of the reasons why India does not have a clear definition of who is a “manufacturer” is because importers/assemblers declare the imported equipment (hi-tech) by just changing the sticker and then declare it as “manufactured” in India.
Similarly, assemblers import the goods in semi-knocked down (SKD) condition and after assembling it locally, declare it as “manufactured in India.” Such importers, system integrators and assemblers promote foreign products and have no interest to invest in R&D within the country. Such firms enjoy a huge advantage over those few Indian firms who have tried to keep the flag of manufacturing alive all these years. These few, despite investing money in R&D and product development, lose out due to policy and bureaucratic approach that promotes traders over true manufacturers.
In the domestic front, for the sake of stability of the market, the Indian Government requires higher sovereign rating, which is needed to maintain or decrease interest rates and debts. Thus, this enables more borrowing by the Government and industries. Rating agencies are meant to provide investors with reliable information on the riskiness of various kinds of debts. However, these agencies have been adding to financial difficulties. After the 2008 financial crisis, the US revoked the first amendment rights of credit rating agencies. If India can create a similar policy and advance local credit rating agencies, similar to China and Russia, it can compete with China financially. Since the ratings on debts provided to investors will be fair, the economy will be boosted.
The Prime Minister’s call to make India aatmanribhar, a policy which looks to increase local manufacturing and consumption, can do just that. China, the largest source of FDI in India, is the largest hindrance to the successful implementation of this project. Due to numerous international regulations and India’s lack of mass manufacturing ability in proportion to its population’s consumption demands, it is heavily dependent on China for almost all consumer products.
In its attempt to make the Aatmanirbhar Bharat initiative successful, India needs to reduce its dependence on Chinese imports and FDI through both Chinese companies in the mainland and their SPVs in tax havens. Identifying Chinese controlled SPVs and prohibiting them from investing or participating in trade, we need to find the source of their revenues.
I presume the Prime Minister’s call for aatmanirbhar bharat is heading in the right direction to ensure employment, save hundreds of billions of dollars in foreign exchange and boost reserve capital accumulation in the Indian banking system. Transparent and democratic investment under “Make in India” will give a massive blow to the Chinese market. This initiative will also create an influx of Indian products in the South-East Asian market, thus increasing our export market and reducing Chinese influence over the South-East Asian region.
(The writer is a BJP MP in the Lok Sabha)
