India’s business landscape is going through a massive transformation as both the government and private sector scramble to cut ties with China and move away from decades-old trade arrangements. For India Inc, it’s a complex decision. Though the economic and political pressure to stand against China has grown, it’s not easy for companies to extricate themselves from business relationships with the Asian giant. In this article, we take a deep dive into the challenges associated with cutting ties with China and ask – Can India Inc extricate itself from the Chinese puzzle?
1. India’s Dependency on China — A Worrying Reality
India’s Dependency on China – A Worrying Reality
The world paused as India and China engaged in an unprecedented battle at the disputed border of their nations. While this struggle galvanized the nation’s sense of patriotism, little does the public realize the reliance India has on China for trade, technology and more.
For starters, India forms the world’s third-largest importer of Chinese goods, next to the USA and Japan. Goods such as cell phones, medical equipment, industrial parts and medical supplies feature high in the list of imports that the East Asian nation offers. Furthermore, Indian firms have outsourced a great part of their labour organizations to China. It is estimated that by 2025, India could potentially be China’s largest source of it’s imports of labour intensive products, such as clothing, knickknacks and phone accessories. Moreover, the nation is lagging behind when it comes to technology in many sectors, including defence. China is a step ahead, holding indisputable expertise in the tech industry and selling cyber-security software and surveillance cameras to India.
- India is the world’s third-largest importer of Chinese goods, such as cell phones and medical equipment.
- Indian firms have outsourced to China for labour intensive products.
- China is ahead in terms of defence technology, cyber-security software and surveillance cameras.
The reliance on China has evidently increased drastically in India over the years and it is not yet clear how the hostile tensions between the two countries will affect the economy. The next step is to create a self-reliant India and eliminate the dependency on the foreign country.
2. Examining the Challenges of Weaning Away India’s Economy from China
In recent years, India has been turning its attention towards weaning away its economy from its ties with China. As the world’s second most populous countries, a dissolution of those close ties has the potential to transform the global economic order. Although the potential benefits are clear, its realization is significantly complicated by a range of challenges.
Beginning with the sheer scale of India’s reliance on China, over a third of India’s imports come from the neighbouring country. Breaking away from this cycle of imports will require investment in new industries and rethinking of trade ties with other countries. India has been attempting to follow this path with the ‘Make in India’ campaign, and other industry specific initiatives, yet the obstacles faced are considerable. India’s ageing port infrastructure, labour shortages, and the need for capital investment are all barriers that must be overcome to open more diverse pathways to growth.
The challenges of breaking away from long established economic ties with powerful nations such as China are there for all to see. Achieving even a fraction of India’s potential in the coming years will require a brave new economic approach, and far-reaching change.
3. Alternatives to Chinese Goods – Leveraging The Possibilities
India’s economic growth has been remarkable in the last 2–3 years, and the need for new sources of income has become essential. However, depending solely on Chinese goods has been a major obstacle. Consumers have started to look for an alternative to Chinese goods, and with this have come a few possibilities.
One of the most effective measures for leveraging these possibilities is by opening up to global markets. This would open the supply chain to attain cheaper, foreign-made products. At the same time, it would promote an emphasis on quality and variety. Additionally, strengthening economic ties with other countries would enable India to diversify its economy, giving more employment opportunities and ensuring better capital returns in the long run. Let’s look at a few other alternatives to Chinese goods:
- Domestic Manufacturers: Engaging with domestic companies to manufacture goods can provide an alternative to foreign-made products. Not only will it offer support to local businesses, but it can also offer more variety and reasonable prices to consumers.
- E-commerce Platforms: The internet has become a powerful tool for trade, and it’s likely that India will make e-commerce a major part of businesses in the future. By promoting local companies and merchants, the cost of buying and selling products can become significantly lower.
- Small and Medium Enterprises: By encouraging and incentivizing Small and Medium Enterprises (SMEs), many of India’s economic needs can be met with reasonable prices. Not only can these companies provide insights and guidance into various industries, but they could also become an integral part of India’s export market.
India is on the right track to finding an alternative to Chinese goods, and leveraging the possibilities of new economic markets can help ensure sustainable development.
4. Putting India Inc at Better Ease with China – The Way Ahead
Taking Stock of Existing Trade Relations
The trade relations between India Inc and China have been strained in recent times, as the two sides struggle to put aside mutual distrust and re-establish a strong bond in business. In order to better understand the way ahead in this relation, it is necessary to take a long and hard look at the existing situation, with a special emphasis on:
- The geopolitical realities surrounding the two countries
- Economic policies governing imports and exports
- Growth drivers in each economy
- Current trade barriers
Ensuring Mutual Empowerment
The way ahead for India Inc and China is to create a relationship of mutual benefit. This would require both sides to recognize each other’s strengths even as they remain acutely aware of their differences. It is crucial that the two sides work to address existing trade barriers, while also exploring opportunities for collaboration. Some areas where progress can be made include:
- Fostering collaboration for mutually beneficial research initiatives
- Exploring avenues of trade and export
- Creating a level of trust between the two countries
- Building a broad-based partnership for future growth
The need of the hour is for India Inc and China to come together to create a strong, productive, and sustainable relationship, based on mutual respect and trust. This is the way forward in putting India Inc at better ease with China.
India is at a crossroads. The question remains: will India Inc move to extricate itself from its reliance on China and make strategic decisions to open new doors of opportunity? It will undoubtedly be a long, difficult, and arduous journey, but if India Inc is successful, it will undoubtedly lay the groundwork for a more prosperous India. Time will tell if India Inc will be up to the challenge.