The Confederation of All India Traders (CAIT)’s war cry to boycott Chinese goods runs the risk of traders scoring an own goal, as substituting many of those items with locally produced goods competitively might prove difficult, though not impossible, in an extremely value-conscious market in India. The confederation’s national general secretary Praveen Khandelwal says that the boycott Chinese product campaign will cut the value of imports from that country by Rs 1 lakh crore or $13 billion by the end of the calendar year 2021 – about 20-25 per cent reduction from the current level of imports from China. India imported goods worth $70 billion in the financial year 2018-19 and $62 billion in the April-February period of 2019-20, which is about 14 per cent of the merchandise imports of the nation.
The CAIT expects that the anti-China sentiments in the country following the incursions by Chinese forces in Ladakh recently together with the Prime Minister’s call for “Vocal for Local” as part of the Aatmanirbhar Bharat programme to help the campaign succeed. However, there is no certainty that anti-China sentiments will sustain beyond a few weeks among traders who make a living hawking affordable imported goods or among value-conscious consumers. Yet, Khandelwal is bullish that the CAIT’s campaign Indian Goods-Our Pride will succeed. He cites the drop in Indian’s imports from China from the peak of $76 billion in 2017-18, to $70 billion in 2018-19, to reinforce his argument that import of Chinese goods can be compressed by 20 per cent by December 2021.
The mobile-phone factor
That reduction in imports since the peak of 2017-18 had almost nothing to do with consumer sentiment. The key reason for the decline in India’s imports from China was a policy decision to increase in customs duty on mobile phones starting in July 2017. The Union government imposed a 10 per cent basic duty in mobile phones just as the goods and services taxation regime was being rolled out, in an attempt to tamp down imports and encourage local manufacturing. Duties were raised by another 5 per cent in December that year and again by 5 per cent when the Union budget for 2018-19 was presented on February 1, 2018.
India had imported mobile phones worth $11.3 billion from China in 2016-17, and that was about 68 per cent of all mobile phones (both push-button feature phones and smart devices) imports into the country that year. In 2017-18, even as the duties were imposed, the value of mobile phone imports from China climbed to $15.6 billion, or 71 per cent of the mobile phones imported. As the tax measure began to hurt and local manufacturing of mobile phones gathered momentum, imports of these devices from China halved to $7.4 billion and about 41 per cent of all mobile phone imports in 2018-19. Imports of phones, by value, from China declined further in 2019-20 but not the share, which remains at 40 per cent.
For the CAIT campaign to succeed, many such policy measures would be required for a set of products. India’s top imports from China include electronic components and instruments, computer hardware and peripherals, electrical goods including consumer goods, machinery, chemicals and pharmaceutical ingredients, automobile components and parts, and plastics. Many of these products will continue to be sourced from China for several years for reasons as China is the only source for certain products and the most competitive manufacturer for many items and specific parts used in assembling or manufacturing certain products. The factories in China are part of global supply chains that cannot be replaced quickly.
Other imports from China include toys, gift items, fabrics and garments, and thousands of small value items that are popular with consumers. CAIT estimates that there are some 3,000 items that can be easily substituted with India-made products in the first phase of the boycott of Chinese goods campaign. The list of China-made items popular with consumers includes fairy lights with tiny LED bulbs that are used to decorate homes during festivals, idols of deities, home decors, kite strings and even incense sticks (agarbattis). It is estimated that about 80 per cent of the incense sticks sold in India are imported from China.
Segregate Chinese products
CAIT realises that replacing Chinese made products with domestically made one will be a challenge. Therefore, it wants to use psychological pressure and patriotism to get consumers to shun goods made in China. It has advised the seven crore traders and 40,000 merchant organisations across India that the Chinese products should be identified and displayed separately in the stores. Some might comply, at least in the short term. However, in the long-term, when earnings take a hit, traders are bound to go back to the established practice of selling a mix of domestic and imported items that are popular with consumers. Affordable Chinese imports, most of which are priced below Rs 200, are also sold on street corners, pavements and weekly bazaars by lakh of hawkers, and this lot who have already seen their earnings disappear due to the lockdown is unlikely to heed the CAIT call.